Chester bankruptcy enters fifth year with no set end date

The City of Chester marked its fourth anniversary in Chapter 9 bankruptcy on Tuesday without a scheduled exit date. The municipality, which filed for protection in 2022, has spent four years in a legal process that state-appointed receiver Vijay Kapoor described as moving with due speed but lacking a specific deadline.

A financial analysis presented to the bankruptcy committee on Tuesday detailed the city’s path forward. Gordon Mann, managing director of Public Financial Management Group Consulting, projected that Chester will need $45.7 million to cover funding needs in 2027. Approximately 90 percent of that total is allocated for continued coverage of pension deficits.

Mann’s report indicates that even if the city erased all pension shortfalls, annual budget deficits would grow to $36.8 million over the next decade. Current revenue sources include a casino and an incinerator, which together provide about 20 percent of the town’s income. Chester also levies a 3.75 percent earned-income tax, the highest rate in Pennsylvania.

Kapoor stated that the city is now ready to begin discussions with stakeholders, including creditors and pensioners. He emphasized that the receiver’s office remains open to any solution, except for the privatization of the city’s water assets. This stance has fueled a contentious legal battle with the Chester Water Authority.

The dispute centers on water assets projected to generate more than $60 million in revenue next year. The receiver’s office argues that the city lost control of the authority through legislative changes and seeks to sell it to a public entity. In contrast, Noel Brandon, chair of the water authority board, called the receiver’s plan magical thinking. He argued that the city’s 45,000 water customers, most of whom live outside Chester, should not subsidize the municipality’s fiscal problems.

Chester’s financial distress dates back to 1995, when the city entered a state-designated distressed status. It moved to receivership in 2020 as pension deficits deepened. At one point, the police fund held enough money for only two months of payments, raising fears that checks might bounce. The subsequent Chapter 9 filing in 2022 was a rare legal step, according to Laura Coordes, a municipal bankruptcy law professor at Arizona State University.

John Caskey, an economics professor at Swarthmore College and a director of the Chester Community Improvement Project, noted that the current Democratic control of the Pennsylvania legislature could influence funding options. He cited Michigan’s intervention to help Detroit exit bankruptcy as a comparable scenario. Caskey described Chester’s situation as more extreme than other postindustrial cities due to its eroded tax base and high poverty rates.

Government spokesperson Rosie Lapowsky said Gov. Josh Shapiro views the bankruptcy as a long road ahead but has confidence in the city’s recovery. Mayor Stefan Roots said the past four years have shifted public perception from survival to possibility. He pointed to a 45 percent increase in the market value of city real estate, adjusted for inflation, over the last two decades.

The city faces a fundamental challenge in attracting large taxable businesses to expand its revenue base. Roots and Caskey both highlighted the administration’s fiscal responsibility as a key asset in the ongoing recovery process.