Chester bankruptcy receiver resigns, as the city’s ‘fiscal emergency’ approaches year five

The state official who took the City of Chester into a rare and often-contentious bankruptcy in all likelihood won’t be around for the conclusion of a process that has generated an avalanche of court filings and shows no evidence of ending imminently.

Five years after former Gov. Tom Wolf declared a “fiscal emergency” in Delaware County’s only city and appointed Michael Doweary the receiver, the state announced Thursday that Doweary has resigned, effective July 1.

His successor, pending an expected court approval, will be Vijay Kapoor, who has been Doweary’s chief of staff since the city went into receivership, when its police pension fund was so depleted that it had cash on hand for only two months’ worth of checks — $1.9 million — according to the Department of Community and Economic Development. It now has funds to cover the next three years.

Doweary, who will become the chief financial officer at his alma mater, York College, said during a Facebook presentation that while the departure was “bittersweet … this is an opportunity I couldn’t pass up” and was a chance for him to “go home.” Doweary is a former York city administrator. He added that he hadn’t anticipated being in Chester for five years, and “didn’t expect this process to take this long.”

He was unavailable for further comment.

Mayor Stefan Roots praised Doweary for becoming “engaged” in the city. He remembered Doweary telling him, “if I don’t understand the community I’m trying to fix, I cannot do my job effectively.”

Roots added that Kapoor would be taking over in a “critical time” in the city’s struggles to emerge from bankruptcy.

The city’s future fiscal health may hinge on a court decision that is expected later this year.

Doweary was appointed in April 2020 when Chester became only the second city in the state — Harrisburg was the other — to go into receivership under a “fiscal emergency” law passed in 2011.

When Doweary arrived in Chester, the city, which has an annual budget around $65 million, owed over $40 million to its pension fund and was running annual deficits. Doweary filed for bankruptcy in November 2022 after he learned that a key financial officer had lost $400,000 in a phishing scam.

Of more than 35,000 municipalities in the nation, only about 30 have filed for bankruptcy, among them Detroit.

Doweary had an acrimonious relationship with the former city administration, but Roots, elected in November 2023, has been a staunch supporter of the receiver, who brought in some professional managers. The city now has a balanced budget, and with no service cuts expected in 2025.

However, the state has spent $11.5 million on the bankruptcy, and with Chester’s depleted tax base, the receiver’s office says the only way to ensure long-term solvency would be for the city to sell its water assets. Doweary has insisted they remain in “public hands,” lest rates spike as a result of pressure from investors.

But the question of whether the city has the power to sell those assets is mired in litigation involving the receiver, the Chester Water Authority, and two other entities. That issue is before the state Supreme Court, and attorneys are awaiting word on oral arguments.

At stake is hundreds of millions of dollars. Aqua Pennsylvania offered over $400 million for the water authority, which has tens of thousands of customers, most of them outside of Chester, in 2021.

Water is an enormous business in the United States. The Environmental Protection Agency estimates that, conservatively, U.S. residents spend $100 billion a year on water.

The city holds that the infrastructure and the authority, itself, belong to Chester and that it was pirated from city control in a well-executed, and well-concealed, legislative maneuver.

The water authority counters that the city is engaging in a “conspiracy” and “hostile takeover.” In messages to prospective bidders, the authority asked, “Why would you be involved in such an effort?”

At a hearing in U.S. Bankruptcy Court, the judge called the language “over the top, over the top,” and ordered the authority to cease and desist.

For now, waiting.

The change in receivership should be seamless, given that Kapoor will be taking over. He has said that in the long run Chester has to find new revenue streams, and that without the sale of the water assets, it’s unclear what else would fill those streams.

Once an industrial powerhouse during the two World Wars, Chester began to see slippage in its economy in the 1950s, and the deterioration accelerated frighteningly in the next two decades.

In 1995, when it entered Act 47 “distressed” status for communities in trouble, state officials found that “Mandated pensions and daily bills were not paid. … The press, the public and the courts viewed Chester as an object of ridicule.”

In a statement announcing his nomination, Kapoor said, “Chester is a community that has had to fight simply to survive, enduring decades of disrespect in the process.” He said he is committed to making sure that “Chester is a great place to live and do business.”