Receiver says Chester has to ‘walk before it can run’
“While the 2020 results were still a significant feat, the city’s dire financial position was and is nowhere near the position it needs to be for Chester to thrive financially. The challenges we encounter every week reinforce a simple truth — Chester needs to walk before it can run.”
— Chester Receiver Michael T. Doweary stated in the 108page document
In his Amended Recovery Plan, Chester Receiver Michael T. Doweary outlined the successes the city experienced last year — but warned that several critical issues need to be addressed for it to be fiscally responsible.
The receiver filed the amended plan with Commonwealth Court on April 7 in anticipation of a hearing before the same court 9:30 a.m. Monday.
“While the 2020 results were still a significant feat, the city’s dire financial position was and is nowhere near the position it needs to be for Chester to thrive financially, “Doweary said in the 108-page document. “The challenges we encounter every week reinforce a simple truth — Chester needs to walk before it can run.”
Since 1995, Chester has been under commonwealth oversight under the Pennsylvania’s Municipalities Financial Recovery Act, Act 47 of 1987. The Pennsylvania Department of Community and Economic Development appointed recovery coordinators who created the first recovery plan in 1996, with amendments made in 2006, 2013 and 2016.
On April 13, 2020, Gov. Tom Wolf declared a fiscal emergency in Chester according to Act 47, citing the coronavirus impact. State officials were concerned the city would run out of money by the end of 2020.
In June, the governor appointed Doweary as receiver, responsible for crafting a recovery plan to bring the city out of financial distress.
Vijay Kapoor, chief of staff for the receiver, pointed out some of the accomplishments since Doweary’s appointment.
“To start with, although these cash crises are nowhere near being fully resolved, neither the city nor the police pension fund ran out of money in 2020,” Kapoor said. “That wasn’t a given when Chester entered receivership last spring. Next, the city passed a budget for 2021 that did not carry over millions of dollars of unpaid bills as had been done in the past.”
Last June when Doweary was appointed, the city was operating with only two full-time and six part-time employees in its streets department, Kapoor said.
“Since then, the separate streets and parks (and public property) departments have been merged into a 20-member full-time public works department and a chief operating officer position has been established who is responsible for coordinating functions across departments,” he added.
He also spoke of movement made in the retiree benefit spectrum.
“On the retiree benefits front, the receiver and the city worked to move over 100 retired employees from a city self-insured medical plan to a lower cost Medicare supplemental plan without a reduction in benefits,” Kapoor said. “Finally, we have a better understanding for how deep Chester’s financial and operational problems run and what it will take to fix them.”
The receiver has also set a June 30 deadline for the city and the William Penn Lodge of the Fraternal Order of Police, Lodge 19 and the International Association of Firefighters Local 1400 to develop consolidated bargaining units. Receiver documents say right now it is a collection of arbitration awards, side letters and documents, which can be difficult to determine if the contract is being followed correctly.
In addition, the receiver continues with the analysis of the fire company operations, including the consideration of combining the East and West End companies, and also plans to do an evaluation of police scheduling to identify ways to increase police patrols.
In presenting the work that had been done, the receiver’s office also laid out what needs to be addressed.
“The city had less than seven days of cash on hand entering into 2021 - the standard is 60 days - and that was without being able
to make its 2020 required pension contribution,” Kapoor said. “We project that the city will face multi-million dollar deficits arriving in a couple of years even with the city’s reduced staffing level and higher earned income tax rate.
“Even this year, we expect the city to only have around five days’ worth of cash in October,” he continued. “The city had to raise the earned income tax on residents in order to comply with the distressed pension law making Chester’s rate the second-highest in Pennsylvania behind Philadelphia. The police pension fund is still within a couple of months of completely running out of cash until we begin to receive the distressed pension tax revenue from residents and we have concerns that the city’s pension problem is even worse than we initially thought. Finally, there is more that needs to be done to ensure that Chester residents receive the level of services that they deserve.”
Among the issues on the receiver’s radar continues to be the pension, with the receiver saying it’s actually worse than it appears.
“The city’s police pension fund situation still remains critical,” Kapoor said. “Last year, the city could not afford to make its full contribution to its pension funds. Chester has the lowest aggregate funding level for its three plans of any Pennsylvania city with the police plan being around 33 percent funded in the actuary’s report.
“As bad as those funding levels appear on paper, they actually understate the problem,” he emphasized. “The actuary treats the contributions that the city did not make in prior years, and still owes, as if the money is already in the
“We project that the city will face multi-million dollar deficits arriving in a couple of years even with the city’s reduced staffing level and higher earned income tax rate.”
— Vijay Kapoor, chief of staff for the receiver
plan because it is considered a ‘receivable.’ The police plan’s 33 percent funding percentage is largely based on $27 million that is not actually in the plan. If you look at what money is actually in the police plan, the funding level is closer to 3 percent. How we address the pension situation is something that we need to talk to our employee groups about.”
That will no doubt come up in bargaining sessions as both the police and fire contracts expire this year and will be negotiated with a receiver’s representative on the city’s side of the table.
The receiver said all options must be considered to address the retiree benefit situation.
In the court documents, he wrote, “The receiver shall explore the potential benefit of a federal bankruptcy filing to address reduction of retiree benefit costs if other options are not successful.”
In February, the receiver noted his intention to join with the city in a lawsuit with the intent to terminate the contract with parking manager, PFS VII LLC.
In April 2018, the city entered a contract with PFS to install 1,500 parking meters in three locations, including 500 on the campus of Widener University. PFS agreed to pay for the parking meters, install them and operate them for 10 years, then the city would own them.
Part of the agreement was that the city would receive $1 million - $300,000 initially, then $350,000 each when 1,000 and 1,500 meters had been affixed. According to the receiver documents, the city has only received the initial $300,000.
The city was also to receive a percentage of the annual revenues collected from the meters, although a minimum amount was not outlined and no cap was put on PFS’s costs.
The agreement also had a provision that if the city were to terminate the contract with PFS, the city would be liable for $12.1 million.
In January 2019, Widener University petition Delaware County Common Pleas Court for an injunction to have the meters installed on and around its campus. Judge Barry Dozor granted it on a temporary basis.
In February, the receiver formally intervened and is seeking to terminate the contract under the powers of Act 47 due to the oppressive and unfair nature of the deal, vagueness, indefinite term and public policy, according to court documents.
Regarding the $31 million earmarked for Chester as part of the American Rescue Plan, that also needs to be worked out.
“At the moment, cities are awaiting guidance from the federal government as to how this money can be spent and the receiver and the city are already having conversations as to how it can be best put to use for Chester residents,” Kapoor said. “There is no shortage of needs in the city.”