Chester’s retirees balk at the state receiver’s plan for rescuing pensions and ending the city’s bankruptcy

The Chester receiver’s plan to sell the city’s water assets to replenish pension funds and speed up the city’s exit from a rare municipal bankruptcy is getting pushback from the group that would stand to benefit most — retirees.

Officials with the Bankruptcy Court-appointed Retiree Committee — which represents what by far is the bankrupt city’s largest creditor group and has the largest financial stake in the bankruptcy’s outcome — said in a statement Wednesday they were “deeply disheartened” by state-appointed receiver Michael Doweary’s failure to consult with them before he filed his proposal with U.S. Bankruptcy Court.

Under Doweary’s plan, the receiver’s office would seek “requests for proposals” for applicants to buy, manage, and operate the city’s three water systems — two of which serve multiple towns in Chester and Delaware Counties — “with the requirement that it be publicly owned.”

The committee argued in a court filing Tuesday that the bidding also should be open to private companies and that the receiver’s plan would “sell the City’s assets for dramatically less than fair market value … and shortchange the city.” Within the last five years, Aqua Pennsylvania has offered nearly $700 million for two of the entities.

The receiver’s office said in a statement Wednesday that it was “surprised” by the filing and that the Doweary plan to keep the assets in public hands “is the best way to ensure reasonable rates, preserve public jobs, and generate sustaining annual revenue.”

The office said while it disagreed “with many” of the points raised in the filing, it would “look forward” to “engagement” with the committee.

Once an industrial powerhouse and international shipbuilding center, the city saw its economic decline begin 70 years ago, and its population, 34,000, is half of what it was in 1950. About 20% of its annual $70 million revenue is coming from slot machines and trash burning, and the receiver’s office holds that the city’s tax base is inadequate to sustain city services and pay off debts.

After being in the state’s distressed status for 25 years, the city was placed in receivership by Gov. Tom Wolf in 2020. As the state-appointed receiver, Doweary took Chester into bankruptcy in 2022 after it had missed several years of pension payments and had accumulated a shortfall approaching $50 million. Of the nation’s 35,000-plus municipalities, only about 30 have filed for bankruptcy in the 90 years Congress has offered the option.

According to Chester’s Retiree Committee chairs, Alan Davis, a 26-year police veteran, and Charles Bolgunas, a former Chester Fire Department battalion chief, the unfunded benefits for the city’s retired workers amount to about $300 million, the majority of that to police alumni.

Under Doweary’s plan, a buyer likely would put up a significant up-front payment and agree to pay substantial annual fees.

The three entities involved would be the Delaware County Regional Water Quality Control Authority (DELCORA), which treats wastewater for 46 towns in Chester and Delaware Counties; the Chester Water Authority, which serves 34 towns in the two counties; and the Stormwater Authority of Chester, which levies the controversial “rain tax” on Chester residents.

While the stormwater authority has been left out of any talks, according to its executive manager, Horace Strand, the receiver’s office has been negotiating with DELCORA and the water authority.

In their court filing, officials with the nine-member, court-appointed Retiree Committee, which includes professionals who were involved in negotiations during the Detroit and Puerto Rico bankruptcies, say they should have been invited to the table in Chester and could have provided expertise.

Les Neri, who is representing the interest of Chester’s current and former Fraternal Order of Police members in the bankruptcy proceedings, said that the FOP also objects to excluding private bidders.

“We’re looking at this strictly financially,” he said. “We’re saying that whatever the best deal is or the best buyer is, we think all options should stay on the table.”

In its filing, the Retiree Committee said that it “stands ready to oppose any Plan that does not provide fair value to the city and its Retirees and residents.”

Neri and others involved say that tapping the water systems for money is absolutely necessary for Chester to emerge from bankruptcy.

“We all agree monetization has to occur,” he said.