How Years Of Financial Chaos Brought Chester To Bankruptcy

By Daniel Payne, Delaware Valley Journal

April 17, 2023

“Chester’s financial situation is critical, and it is running out of time to find a solution.”

That grim analysis was given last week by Michael Doweary, the receiver put in charge of the City of Chester to manage the municipality’s crumbling finances.

Doweary was first appointed to that position in July of 2020. Announcing his intent to see the city out of insolvency, Doweary told residents: “Everything is on the table.”

That, ironically, has been Chester’s problem for years: A bloated budget with considerably more expenditures than revenue. The city has also struggled to accurately keep track of its finances, with officials often unable to produce correct and timely financial reports.

Like many cities in the northeastern United States, Chester had years before enjoyed a boom stretch as a manufacturing and distribution hub. The decline of those industries led to years of a shrinking local economy and dwindling tax receipts

Chester first entered Pennsylvania’s Act 47, the Municipalities Financial Recovery Act, in 1995. Years of participation in that program left the city no better off. By 2006 city officials had to take out a major deficit-backed loan merely to pay employees and keep basic services running.

The city’s financial future looked modestly improved by 2007, when the construction of Harrah’s Philadelphia Casino and Racetrack at the site of the former Sun Shipbuilding & Drydock manufacturing facility. Yet the city still failed to pull enough revenue to meet its obligations. An amended recovery plan in 2015 projected yearly budget shortfalls ranging from $4 million to nearly $10 million through 2020.

The lion’s share of the city’s massive budgets came from personnel costs. Of the roughly $56.5 million the city projected for the 2016 fiscal year in its 2015 recovery plan, about $45 million went to categories such as “salaries and wages,” “overtime” and “healthcare.”

Its overtaxed budget and cratering revenues pushed the city to shortchange its financial obligations. Doweary’s report from August of 2020 noted that Chester “[had] not made its full minimal municipal obligation to [its] three pension plans since 2013, leading to a severely underfunded pension situation.”

The receiver called the city’s underfunded pensions “the largest and most severe” of its financial crises. By April of 2020, when then-Gov. Tom Wolf announced a Declaration of Fiscal Emergency for the city and implemented an Emergency Action Plan, the city’s police pension fund had “less than six months of beneficiary payments” in its coffers.

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The Delaware Valley Journal provides unbiased, local reporting for the Philadelphia suburbs of Bucks, Chester, Delaware and Montgomery Counties. For more stories from the Delaware Valley Journal, visit DelawareValleyJournal.com