CHESTER, Pa. (KYW Newsradio) — Facing deficits and significant debts, the cash-strapped City of Chester filed for bankruptcy protection on Thursday.
Michael Doweary, the state-appointed receiver in charge of overseeing Chester’s finances, filed for Chapter 9 bankruptcy protection in the Eastern District of Pennsylvania. Chapter 9 is specifically for financially distressed municipalities.
A big pile of debt that Chester has on its plate is nearly $40 million in past-due pension payments and penalties as of the end of 2021. Officials say that figure does not even reflect the full amount, which would include interest.
If the city were to pay off the debt and the $14.1 million due to the pension fund next year, then the nearly $54 million payment would account for 88% of the city’s budget in 2023, according to the receiver’s office.
Doweary prepared the city for the possibility that bankruptcy would be filed. In a September PowerPoint presentation, he wrote that bankruptcy would give the city a chance to reduce pension and retiree health care costs. They would also be able to negotiate with creditors “so that the city can have a fresh start, which it desperately needs.”
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Doweary warned bankruptcy could affect city services, as some city employees may choose to leave and vacancies would be difficult to fill.
“Members of the Receiver’s team have worked in many other financially distressed communities in Pennsylvania and with communities that have severely unfunded pension plans,” the office wrote in that presentation. “Without a doubt, Chester’s financial situation is by far the worst that we have encountered.”
The state has had financial oversight over the City of Chester, under Act 47, since 1995. At the beginning of the pandemic, in April 2020, Gov. Tom Wolf declared a fiscal emergency in the city. Doweary was appointed in June of that year.
His office has expressed frustration at city officials for what is described as a lack of cooperation while trying to get finances in order. That includes one official waiting three months before he publicly reported a phishing scam that cost the government $400,000 over the summer.
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