DV Journal

When state Rep. John Lawrence read Delaware Valley Journal’s coverage of the City of Chester’s latest financial troubles last spring, one part of the story piqued his interest.

Receiver Michael Doweary was presenting the possibility that Chester might face disincorporation due to its calamitous finances. Chester’s Mayor Thaddeus Kirkland pushed back, saying he had offered the Receiver two plans to avoid such a disaster. Kirkland said both plans involved deals with the Chester Water Authority, including selling CWA to Aqua PA.

Lawrence, a Republican representing West Grove, wanted to see Kirkland’s plans, so he filed right-to-know (RTK) requests with Chester and with the Receiver.

Here’s where the story gets strange.

Doweary denied Lawrence’s RTK requests because the agency did not have those records. The City of Chester denied the request in part because it was “a record of an agency relating to a noncriminal investigation, including a record that, if disclosed, would…deprive a person of the right to an impartial adjudication.”

In a letter to Lawrence, Doweary said, “We do not know what documents that Mayor Kirkland is referencing when he refers to ‘two credible plans.’ My office has not received any plans from Mayor Kirkland. We suggest that you make this request of Mayor Kirkland, and in the event that you receive a response, we would appreciate it if you could please provide us with that information as well.”

Attached to the letter was an affidavit from Doweary attesting to the fact that “we have not identified any records within the Agency’s possession, custody and control that are responsive to Rep. Lawrence’s Request for copies of the ‘two credible Plans’ allegedly provided by Chester City Mayor Thaddeus Kirkland.”

In addition to interfering with an investigation, Chester officials also claimed the request for the two plans would be part of “internal, pre-decisional deliberations of an agency, its members, employees or officials.”

“That’s baloney,” Lawrence told DVJournal. “Somebody’s lying. Either the records exist, or they don’t exist. That’s deeply problematic.”

Last week, Lawrence appealed Chester’s denial to the Office of Open Records (OOR).

Lawrence said the two plans mentioned by Kirkland are not exempt under the law. The two credible plans are “not deliberations themselves,” Lawrence wrote.

“Even more likely, these ‘credible plans’ include estimates, projections, actual budget figures or comparisons. In such cases, OOR has concluded that such materials are not deliberative in nature.”

And if the plans do contain some deliberative information, redacting that is the appropriate response, not denial, Lawrence said. He suggests the OOR privately review the documents to determine that issue.

As for Chester’s response regarding an investigation, Lawrence was more vehement.

“It strains the credulity for the local agency to assert that the disclosure of the Mayor’s ‘two credible plans’ for fiscal recovery of the city transmitted to the Receiver relates to a noncriminal investigation or would somehow deprive a person of their right to an impartial adjudication,” Lawrence wrote.

“As there is no investigation or probe, it bears mentioning that the local agency is equally unable to assert that providing these records would deprive the Mayor (or anyone employed by the City) of an impartial adjudication,” Lawrence wrote to the OOR.

Frank Catania, a lawyer for CWA, said one plan was likely the offer by CWA of $60 million for the city not to sell CWA, and the other plan was to sell CWA to Aqua PA. Catania said the latter would only transfer the financial burden from taxpayers to ratepayers.

Kirkland confirmed that the two plans he handed over to the Receiver early in his tenure were related to CWA. However, he said, the city’s solicitor told him they were confidential and could not be released in response to Lawrence’s RTK request. Kirkland did not know why Doweary would claim he had received no plans from Kirkland.

“That’s not true,” said Kirkland. “I gave the Receiver two plans as soon as he got here. Once again, he’s not being truthful and honest.”

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The City of Chester is in danger of dissolution due to its dire financial situation.

It has been in Pennsylvania’s Act 47 Financial Recovery Program since 1995. That law allows the commonwealth’s Department of Community and Economic Development (DCED) to monitor Chester’s books, come up with a recovery plan, and offer financial aid that will be repaid.

So imagine Mayor Thaddeus Kirkland’s surprise when the city was told the state expected it to pay more than half a million dollars in fees to attorneys looking over its retirement system. He expressed his outrage at the August 9 city council meeting.

“Now, all of a sudden, we done hit the lottery y’all,” he told the council. “We couldn’t get any of these services, and you know why? Because they didn’t want us to provide you with the help that you needed. And they convinced people in this city to attack us and then turn around and give their behinds to kiss.”

The Receiver for the City of Chester, Michael Doweary, said the city has the ability and the duty to make those payments. Doweary’s critics point out he put Chester into Chapter 9 bankruptcy last November, repeatedly insisting the city’s finances were a disaster.

A judge accepted the bankruptcy filing in March, but Doweary went even further, suggesting the city could be dissolved. Doweary’s chief of staff previously told DVJournal that Chester needs $5 million to make payrolls in January 2024.

Now he wants Chester to pay up.

Chester’s biggest financial anvil? Retiree benefits. Federal bankruptcy court documents list the city’s unfunded pension plan balance at $127 million. It also owes the retirees $232 million in healthcare benefits.

A Retiree Committee was formed in February that quickly hired Flaster/Greenberg and Jenner & Block, two high-profile law firms, as representatives. Those lawyers racked up approximately $520 thousand in bills. The Committee sent it to Doweary. He turned to outgoing Chester Mayor Thaddeus Kirkland, telling him the cash would have to come from the city.

“The City is legally required to pay these legal fees subject to a reasonableness test,” said Doweary in an email to Kirkland. The mayor relayed the message to the city council last week. “I am, therefore, at this time, approving the payment of $100,000 per month going forward to the retiree professional group as a whole for the payment of fees.”

Kirkland feels otherwise, vowing the city never promised any money. He said it was Doweary who made the offer.

The Kirkland-Doweary relationship runs the gamut between heated (Doweary went to court over city officials’ salaries) and downright hostile (Kirkland once used a racial slur toward Doweary).

So, where did Doweary come up with the cash in his offer to the Retiree Committee in May? That is what Kirkland wants to know, given all the predictions of Chester’s fiscal doom.

Chester’s Official Retiree Committee hopes a federal bankruptcy judge will step in. Its attorneys asked the judge this week to tell the city and Doweary to show them the money.

“The Receiver represented to the Retiree Committee that the City could pay the fees and expenses of the Retiree Committee’s professionals and, implicitly, made the same representation to the Court by filing the Compensation Procedures Motion.,” said court documents filed Monday in bankruptcy court. “The Receiver was undoubtedly aware of what the City’s 2023 budget provided for when the Receiver filed the Compensation Procedures Motion. Whatever constraints there may be in that budget, these are not new developments. Therefore, the City’s bait-and-switch should be prohibited under the doctrine of judicial estoppel, as well as equitable estoppel and similar doctrines.”

The Committee’s attorneys accuse Doweary and his staff of not answering certain questions regarding the payments.

“On July 12, 2023, the Retiree Committee’s Professionals met via video conference with Ballard Spahr and Vijay Kapoor of Kapoor & Co. (the Receiver’s chief of staff) to discuss the issues raised in the letters… On July 27, 2023, the lead financial advisor to the Retiree Committee further discussed the issues with Mr. Kapoor and proposed a potential solution. To date, the Receiver has not responded to the proposal.”

The committee’s lawyers suggest Pennsylvania’s government may need to pony up funds. “If the City cannot fund the Chapter 9 process, it must look to the Commonwealth to meet its obligations in this case. The Commonwealth cannot properly avail itself and the City of the benefits of Chapter 9 bankruptcy while simultaneously failing to provide for the payment of the professionals who have been administering this case for the benefit of the City’s stakeholders.”

Their suggestion involved asking the Pennsylvania government to provide “debtor-in-possession financing” to Chester, specifically tied to “a liquidity or monetization occurs” involving the city’s water and sewer assets. Court documents claim Doweary and DCED balked at the suggestion.

“Initially, the Receiver refused to even broach the subject with the Commonwealth, opting instead to file the Compensation Procedures Motion,” said Committee attorneys in their filing. They contend that Doweary and DCED discussed their proposal last month but decided to play legal games. “It is unclear how enthusiastically the Receiver advocated for this concept (neither the Retiree Committee nor its Professionals were invited to participate in that discussion), but the DCED flatly rejected the proposal without offering any other solutions.”

Kirkland is pretty sure that Doweary is the one doing bait and switch. “I said it then, and I’ll say it now,” he told the City Council last week. “They said that we were going to be disincorporated…and all of a sudden, we got money to pay these bills. Legal fees for the retirees…over a half million dollars. But, some people fell off the okey-doke when they said that disincorporation stuff.”

He noted that disincorporation hadn’t been mentioned since he lost the Democratic primary in May.

The Receiver’s Office declined to respond to multiple requests for comment.

A spokesperson for Pennsylvania Governor Josh Shapiro referred questions on how much money Chester needs to clear out its debt to the Receiver’s Office. The spokesperson gave the same answer when asked where Doweary found the money.

Doweary remains in good favor with the state. “The Shapiro Administration supports the extension of Michael Doweary as the Receiver,” said a DCED spokesperson in a statement. “The Department of Community and Economic Development’s Secretary filed the application with Commonwealth Court on July 25, 2023, to extend Chester’s receivership and Michael Doweary’s term as receiver for an additional two years.”

“How much money have they brought to this city to help this city financially?” asked Kirkland during last week’s city council meeting as he unloaded a rhetorical machine gun at Doweary. The Receiver did not appear before the council. “But we listen to this crap…to these folks that come in here and shove garbage down your throat, and we eat it. And they say it’s the truth when they’re lying to your faces.”

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The official charged with overseeing the City of Chester’s dismal finances is predicting the city might reach the point where it will be disincorporated or dissolved.

Michael Doweary, the receiver appointed three years ago by former Gov. Tom Wolf to help pull the cash-strapped municipality out of insolvency, blamed elected city officials who filed appeals to block a bankruptcy and who also appealed court-approved modifications to the receiver’s plans.

Chester needs a plan by the end of 2023, or it will cease to exist as a municipality, Doweary said.

Vijay Kapoor, Doweary’s chief of staff, called the situation “sobering.”

“Chester is really running out of time,” Kapoor said. “There needs to be a focus right now on solving Chester’s problems. If a comprehensive solution is not found by the end of the year, there may be no alternative for Chester but disincorporation.”

If that were to happen, all municipal employees would be fired while the city’s elected officials would be dismissed. A state administrator would then oversee the municipality as a disenfranchised territory.

Kapoor claimed that if a bankruptcy lawyer had not brokered a bargain with bondholders, the city would be out of money by this September.

The city’s newly completed 2019 audit showed a $6.8 million loss and a negative $27.7 million fund balance. Also, the city has not made $40 million in payments to its pension fund.

Kapoor said Chester would need a $5 million loan in January to make its payroll.

And in 2025, Chester faces “a significant fiscal cliff,” said Doweary.

“If you’re out of money, you can’t keep the lights on. Chester’s financial situation is critical, and it is running out of time to find a solution,” he said.

When Kapoor said city officials had not devised their own plan, Mayor Thaddeus Kirkland objected.

“We provided the Receiver with two credible plans,” said Kirkland. Both involved deals with the Chester Water Authority (CWA), including selling it to Aqua PA.

“Offers to monetize (that asset) are not a comprehensive plan,” Doweary countered. “Those were just offers for the system, not a plan.

“Bankruptcy is the only thing to bring all of the creditors to the table.”

Elected officials have been unwilling to cut back on pensions, one of the biggest items of bloat in the city budget. Kirkland said one former employee, whose husband died, told him: “How am I going to make it if you cut my pension?”

CWA lawyer Frank Catania said CWA is the only entity that has offered to help Chester, proposing in 2019 to give the city $60 million in exchange for dropping any efforts to take over or sell the authority.

“It’s not a solution to sell (CWA) to Aqua,” he said of the city’s current fiscal crisis. Doing that “shifts the burden from Chester to the ratepayers.”

“The city (Chester) is in a bad spot (financially),” Catania said. He asked why the state has not given Chester a deal like those it gave to Philadelphia, Harrisburg, and Pittsburgh, which have also run into financial difficulties over the years.

Last year, the legislature and Wolf approved an extension of the Pennsylvania Intergovernmental Cooperation Authority’s oversight of Philadelphia until 2047.

“The state has overseen Chester for more than 25 years,” said Catania. “I think they have an obligation to help it, and rather than offer to help, they let the problem get much, much worse.

“It’s hard to conclude anything other than it was done on purpose.”

Catania also cited recent remarks by Philadelphia mayoral candidate Jeff Brown, saying many people in state government share his attitude.

A spokesperson for Gov. Josh Shapiro did not respond when asked about state help for Chester.

The state Supreme Court has agreed to hear appeals on the Chester cases. In the meantime, said Kapoor, elected officials have resumed their control of various city departments after a Commonwealth Court judge had ousted them.

In that ruling, Judge Ellen Ceisler blasted city officials for nepotism and self-dealing.

Also, federal grant programs that came online due to COVID are ending, so Chester may have to lay off some 20 people in January.

“We need to have a plan in place by the end of the year,” said Doweary.

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Commonwealth Court Judge Ellen Ceisler unloaded on Chester city leaders in a ruling expanding the state Receiver’s power over the financially-strapped government, accusing elected officials of nepotism and incompetence. While she did not grant Receiver Michael Doweary everything he wanted, she extended his authority to include the right to remove city council members from their city jobs and “put experienced professionals in their place.”

One example noted by the receiver was Councilman William Morgan, who fell for a phishing scheme that lost $400,000 in city funds. He failed to tell the Receiver about the loss for months.

“Councilmember Morgan can no longer serve as the head of finance and human resources,” the judge ruled. Ceisler also pointed to nepotism in her ruling, saying, “At the hearing, Receiver recounted that, at one point, the mayor’s former son-in-law, Ronald Starr, was placed in charge of economic development.”

While city officials and the Receiver all recognize the need for economic development, Ceisler wrote, “By all accounts, the only progress Mr. Starr made on that front during his tenure was to obtain a liquor license for one of his businesses.”

The state appointed Doweary to help the financially troubled city regain footing.  But he appealed to the Commonwealth Court, which has jurisdiction over him, for more control, claiming that city officials are not cooperating.

Ceisler agreed, vehemently.

“The Court concludes that all of this evidence, viewed together, demonstrates the city officials’ continued lack of transparency and lack of cooperation with (the) Receiver and his team. Even worse, Mayor Kirkland has verbally – and publicly –threatened and disrespected Receiver on more than one occasion,” Ceisler wrote.

According to testimony and court findings, Mayor Thaddeus Kirkland called Doweary the “N” word, told him to “watch your back” and “your days are numbered.” And Councilwoman Elizabeth Williams called Doweary “slave master.”

Other issues that arose during the three-day hearing included payments to a former employee in jail on child rape charges and a police chief who allowed his friends to work excessive overtime in the last year before retirement to increase their retirement pay.

The judge also agreed with Doweary’s request to have the city’s chief operating officer become its chief administrator to provide a “clear chain of command” for employees.

“We are grateful for the court’s decision which we believe brings desperately needed clarity to city operations and the ability to ensure professional management all to the benefit of City residents,” said Vijay Kapoor, chief of staff to the Receiver for the City of Chester.

Kirkland referred all questions to township solicitor Ken Schuster.

Schuster said, “The city and the elected officials are carefully reviewing the Court’s decision.”

Doweary has also filed a separate bankruptcy case on behalf of the city, which is ongoing.

Frank Catania, the lawyer for Chester Water Authority, said his organization is watching the Receiver’s actions closely after attempts to pull the authority’s assets into a resolution of the city’s financial crisis. He said he does not know if the allegations about city officials are true, but he found the timing curious.

“If the Receiver’s description is correct, then this has been a problem for months — years, really. But they get this ruling now, just weeks before the filing period opens to get on the ballot for the upcoming municipal elections?”

The first day to circulate and file nomination petitions is February 14.

“You can’t ignore the fact that this is an election year, and the judge isn’t doing these city officials any favors. The timing is curious, at least,” Catania said.

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