DV Journal

Chester’s new mayor wants a better relationship with the Pennsylvania government-appointed receiver overseeing the city’s finances.

On the Delaware Valley Journal podcast, Mayor-elect Stefan Roots acknowledged disincorporation is a real threat to the city’s existence, but he sees the state receiver and “getting through bankruptcy” as the solution. Roots sees Receiver Michael Doweary and his team as potential partners for the city to turn its fiscal fortunes around.

“One of the things that is going to help bankruptcy move along is to reduce the amount of challenge that we have brought to the receiver and his team… we’re going to get through this,” said Roots.

That would be a major political reversal in Chester City Hall. Mayor Thaddeus Kirkland has regularly clashed with Doweary, who was appointed in 2020 by then-Gov. Tom Wolf. The pair have gone to court over city salaries, and Kirkland once used a racial slur towards Doweary. Pennsylvania government attorneys accused Kirkland of “intentionally vexatious and obdurate behavior…which has wasted taxpayer dollars and…time that the City of Chester does not have.”

Roots’ strategy is to embrace the financial resources the receiver can bring to Chester while protecting the city’s autonomy.

“There’s been a lot of talk that he’s coming here to change the form of government or run the city, and that’s not the case at all,” Roots said.

“Working with the receiver, in my mind, does not mean falling into line with everything he wants to do. This is our city. This is my city,” Roots said. “We expect to come to terms on most things, but he’s not going to run over me.”

Chester’s fiscal books are full of red ink. The city lost $400,000 meant for the city employee workers’ compensation insurance fund after soon-to-be former Councilman William Morgan fell for a phishing scam. He was later removed from overseeing the city’s finances and voted out of office in this year’s Democratic primary. Other issues involve $127 million in unfunded pension benefits and $232 million owed for retiree healthcare.

Doweary warned the city could be dissolved if it didn’t get its house in order. Doweary’s chief of staff later told DVJournal it needed $5 million to make payroll in January 2024. Chester was put into Chapter 9 bankruptcy earlier this year.

Roots wants an equal partnership between the city and Doweary. “I’m bringing experts to the table as well, with the receiver. His emphasis is on finances…but the city definitely has to have input” on whatever financial changes might happen.

The state Department of Community and Economic Development (DCED)has defended Doweary’s time as Chester receiver, praising him for working with Chester elected officials and taking “many positive steps on the road to financial recovery.” That included hiring a chief of staff to run the government and suggesting that a chief financial officer (CFO) be hired in the future.

The DCED wants Doweary to remain on the job for a few more years. There is still a case before the Pennsylvania Supreme Court on whether Doweary overstepped his bounds.

“We’re the oldest city in the Commonwealth of Pennsylvania,” says Chester Mayor Thaddeus Kirkland. But, as he was painfully aware, it is also the only one in danger of being wiped off the map.

Founded in 1682, Chester was where William Penn first disembarked into the province that still bears his name. The city’s courthouse is the oldest public building still standing in the United States. It saw action during the Revolutionary War. It was known as a “Saloon Town” in the early 20th century. Its Sun Shipbuilding was at one time the largest shipyard in the world.

But after decades of financial chaos and mismanagement, Chester now teeters on the edge of insolvency, with the state-appointed receiver suggesting that dissolution may be the inevitable fate of the 350-year-old city.

Kirkland is determined to avoid that outcome.

“For them to even mention disincorporation is simply wrong,” he said.

Kirkland began his tenure as mayor of Chester in 2016. A former state representative for 23 years starting in 1993, he took the city’s reins after it had been financially struggling for years.

Chester first entered state financial oversight under Pennsylvania’s Act 47 in 1995. Kirkland said when he came aboard as mayor, “We worked with [state officials] hand in hand. Everything was fine. We were moving in the right direction.”

“Then COVID hit,” he said. “When it hit, it changed everything for the worse.”

Other officials have disputed the narrative that COVID changed things. Receiver Michael Doweary has noted the city lost nearly $7 million in 2019, which Doweary said was “the seventh annual loss in eight years.”

Kirkland said the city was promised, “serious financial support to help us with our pension problems.”

“At the onset, there was a lot of work that was done together between myself and the receiver,” he said. “But then things started getting a little dicey. During that period, I took offense to some things; he took offense to some things.”

Tensions persisted between city officials and the state’s appointee. Kirkland said the receiver sought to remove the authority of city council members to head up departments, something the council was unwilling to concede.

Still, “we reduced staff at the receiver’s request. We reorganized in various departments.”

Kirkland said during his time as mayor, he had overseen deliberations for selling the Chester Water Authority to the private company Aqua PA. That controversial proposal has been ensnarled in court proceedings for many months.

Both Chester residents and CWA itself have opposed the plan, with residents fearing that Aqua would greatly increase rates once it acquired the water system. CWA, meanwhile, has argued the city council lacks the authority to sell off CWA’s assets.

“We’ve also talked of bringing developers in to develop housing in downtown Chester,” Kirkland said. He added the city “just did some groundbreaking” on “a $55 million expansion of Philadelphia Union’s facility” in the city. “It would draw people from all across the country to that area.”

Kirkland said the city has also worked to address its massive outlay crisis, specifically its pension obligations, which he said were “the biggest headache” on the city’s budget.

“We’ve modified some things so folks don’t walk out of here with these huge pensions anymore,” he said.

The city’s pension struggles have also resulted in downstream personnel decisions.

“Some police officers are retiring or walking away because of the pension situation,” he said. “They don’t feel like the future looks bright. It’s now difficult to retain police officers.”

Kirkland said the receiver’s office has indicated that the city may be disincorporated as early as “the end of the year.”

“I will credit them with saying that’s not what they want to do,” he said. “But if things don’t turn around, that’s what will happen.”

To try and stave off further financial collapse, Kirkland said he and a delegation from Chester planned to travel to Harrisburg this week to petition the Pennsylvania government for relief using the state’s “Rainy Day Fund” of nearly $8 billion.

“I’m going to meet with the governor’s office,” Kirkland said. “My goal is to meet with the members of the appropriations committee, the Pennsylvania Legislative Black Caucus, and the Speaker of the House. Hopefully, I’ll have the chance to meet with members of the [Department of Community and Economic Development] to talk to them about the needs of Chester, how they can be helpful, if they can be helpful, to the city of Chester.”

The mayor said that nearly a quarter-century as a state representative has given him relationships in Harrisburg he hopes will see Chester through the crisis.

“I want to be able to talk to the legislators,” he said, “to make my pitch and plea for a community that I love and a community they should not leave behind, cannot leave behind.”

“There’s $8 billion in the state’s Rainy Day Fund,” he added. “Well, it’s storming right now, and we could use that umbrella.”

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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