The receiver overseeing the City of Chester’s finances wants a bankruptcy court to approve a plan to sell the independent Chester Water Authority (CWA).
Speaking during a lecture event hosted last week by Chester Mayor Stefan Roots, Receiver Michael Doweary said the city has reached a financial point of no return where neither tax hikes nor spending cuts work.
“The current tax base cannot support basic city operations,” he declared.
Doweary said the city was stuck in a “vicious cycle” where people move out to avoid paying higher taxes. Those who can’t leave end up seeing a larger tax bill.
“That cycle has been tried. It doesn’t work,” he said.
Chester’s financial history is a long and sordid tale of millions of tax dollars lost via mismanagement and allegations of graft.
The Receiver accused former Mayor Thaddeus Kirkland of pushing through a one-sided parking contract for a lobbyist friend. Doweary sued in Jan. 2022 after city officials gave themselves a raise in their 2022 budget.
It was also discovered the city lost $400,000 in 2022 in a phishing scheme involving then-Councilman William Morgan, who mistakenly transferred the cash to someone posing as an insurance broker. Last year, the city’s former Recreational Services Manager was accused of taking $100,000 in a ghost employee scheme.
An even bigger financial anchor was Chester’s retiree benefits. Federal bankruptcy documents said the city had $127 million in unfunded pension benefits and $242 million owed for retiree healthcare. Doweary said last week there were also $39 million in past due payments. He promised that any solution on pension and retiree benefits will be figured out later through mediation.
Doweary suggested CWA monetization could help reduce the pension financial burden. He said the city’s stormwater, sewer, and water assets are “the only substantial assets that can be monetized.”
CWA officials say, “No way.”
CWA attorney Frank Catania told DVJournal any sale would be a temporary solution to Chester’s intractable financial problems. “The way that the pension plan benefits have been promised over the years, the city can’t fund.”
The CWA insists it’s an independent entity that’s not beholden to the whims of city leadership.
Pennsylvania Department of Community and Economic Development guidelines appear to agree. Its 2020 handbook for Municipal Authorities in Pennsylvania said an authority is “not the creature, agent, or representative of the municipality” but an independent agency. While local governments help create the authority and appoint board members, the handbook said the authority “is not part of the municipal government.”
That has not stopped Doweary and the city from seizing on the CWA as a potential financial savior. In 2017 – three years before Doweary was appointed to the receivership by then-Gov. Tom Wolf – Aqua Pennsylvania attempted to buy the authority. The offer was rejected.
The city council later agreed to a $410 million sale to Aqua in 2022 – shortly after a divided Commonwealth Court said Chester was CWA’s sole owner.
The CWA appealed to the state Supreme Court. The case has been stayed due to Chester’s bankruptcy.
It is unclear how CWA would be monetized outside of a sale.
Doweary floated selling CWA to someone but maintaining some public control.
“Under regionalization and entity or authority is created by municipalities or other public entities joining together to provide services with the entity, the authority remaining publicly owned,” he said.
Catania scoffed at the notion that the CWA could be sold but remain under public control. Saying that most people consider ‘public control’ to be a nonprofit, Catania said Doweary only promised it would be publicly owned.
“What does that even mean?” Catania rhetorically asked. “That means it could be any of the for-profit companies. They’re all publicly owned. They’re publicly traded.”
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