Photo: Brad Youtz
Last Tuesday WHYY reported that the City of Chester now may face not only bankruptcy but actual disincorporation under Act 47.
That Chester is a city in economic distress is obvious through the windows of Philadelphia Union fans’ cars, buses, or trains every time they travel to Subaru Park. Those paying attention also know that city government’s finances have been troubled for a long time.
General background
Those finances have been supervised by the state under Pennsylvania Act 47 for the last 28 years. The Pennsylvania Department of Community and Economic Development (DCED) oversees the supervising. Twenty municipalities have undergone Act 47 oversight and successfully rescinded it. Eleven have not. Chester’s tenure ranks fifth among the eleven.
The underlying cause is the intertwined duality of shrinking population and departed traditional manufacturing. The municipality has more government than it can afford because absent the political will to make disinterested choices government defends itself from cutting its benefits to itself or its very existence.
Chester recently
On April 13, 2020, Governor Tom Wolf declared a fiscal emergency in Chester. Consequent of that declaration the Pennsylvania Commonwealth Court appointed a receiver to implement a recovery plan for the municipality’s finances. It is the sixth plan.
Chester’s city government pushes the annual deficit from a specific year’s operations into the next year’s budget. If the revenue for the following year does not cover the addition and the budget and the practice continues, the problem expands. The receiver states that absent change, by 2025 the annual deficit will be “insurmountable,” and that he needs a year beforehand to put change in place.
Insurmountable means city government will not be able to borrow any more money anywhere.
Chester’s primary revenue source is an earned income tax paid by residents and commuters. When work cratered because of the pandemic’s shutdown, so did city revenue triggering the crisis.
A municipality bankruptcy is rare. A municipality disincorporation is almost unheard of.
During the denouement of the movie Hunt for Red October, Scott Glenn’s character says that the hardest part about playing chicken is knowing when to flinch. A game of “chicken” is now underway in Chester.
City government is resisting the steps demanded by the receiver, delaying through lawsuits and appeals against court rulings. Money will run out before the various legal claims reach final determinations.
Although the receiver is on record as not wanting to carry out bankruptcy and disincorporation, he has the legal authority to do so. Chester’s leadership is betting that Pennsylvania will not uphold him against a poor black city chronically mismanaged for nearly three decades.
What we think we know
Were it disincorporated the City of Chester would lose its charter and would no longer exist as a legal entity. City government would cease to exist. City employees would be laid off. Elected officials would be removed from office. Pennsylvania’s DCED would appoint an administrator to handle vital services for the area. But the appointment would be temporary since the department’s purpose is not to govern a municipality indefinitely.
If disincorporation became permanent, probably Delaware County would absorb Chester’s former territory as well as its asset and liabilities. Zoning, land use, and taxing decisions would devolve to it.
Residents of the former Chester might face increased taxes to fund vital services. Businesses will have to forge new relationships with the new government. Property values for both would become less certain, a troubling development since property values often underpin credit sought by residents or businesses.
The school district would not be impacted since it is a municipality separate from city government.
An unincorporated business district can thrive within a containing municipality. Within Upper Merion Township of Montgomery County, King of Prussia thrives. Private business in Chester should continue including the Philadelphia Union, Union II, and the Academy.
What we assume for the Union
Water and streets should continue to function, so Subaru Park, the WSFS Bank Sportsplex, and Seaport Drive headquarters should do likewise. Trash collection might have to become private if it is not already.
Contracts already in place for the Union’s announced WSFS Bank Sportsplex should move forward, both those building it and those adjusting Subaru Park’s parking.
Uncertainties
Can any contracts still in negotiation for the WSFS Bank Sportsplex be completed absent a conventional municipal government? Can the planned construction move forward? Monday’s announcement sketched a timetable. The announcement and the timetable suggest hope.
If Keystone Sports has any special tax status from the City of Chester itself, would that status continue? Since DCED is charged to restore the municipality’s finances as soon as possible, it might not. Tax statuses granted by other governmental authorities should continue.
How fast and by whom would necessary traffic and other public safety maintenance work be carried out? How many municipal employees would agree to work under DCED’s or Delaware County’s new conditions? Fan expectations of traffic into and out of the stadium might face adjustment, but Chester’s residents and businesses would face significantly greater uncertainty.
Expectations
Keystones Sports & Entertainment has made a major long-term bet on Chester. It located there in the first place. It is moving its academy there from the suburbs. It is creating athletic facilities that it says will be made available to local youth and community organizations.
Philadelphia Union has said for a long time it wants to contribute to Chester’s growth and success. There is no question that the financial meltdown of October 2008 delayed those contributions. Three recent actions indicate actualization of the words.
- In 2019, the Chester waterfront was designated a Qualified Opportunity Zone offering long-term investors big tax incentives to develop real estate and equity in lower-income communities. The WSFS Bank Sportsplex fits those parameters.
- On February 14, Union president Tim McDermott sent a letter supporting a RAISE grant to the Chester Economic Development Authority for Chester transportation improvements. He addressed his letter to U. S. Secretary of Transportation Pete Buttigieg. Among many other things he suggests remediating the cyclone fences that “separate” residential homes from I-95’s noise and pollution,
- This past Monday the Union executed formal groundbreaking for the WSFS Bank Sportsplex. Indoor and outdoor training fields and indoor facilities of other types will be available not only to Union teams but to local youth and community organizations. We should expect Union teams’ schedules to take priority. But plenty of time should be available for everyone else as it has been since 2012 at YSC sports in Wayne. Terms of use for others were not announced. Hopefully they will be encouragingly generous when they cannot be free.
The Union trumpeted the long-term nature of its commitments to Chester during the roll-out of its partnership with Subaru of America. Similar comments came Monday from McDermott, alongside WSFS CEO Rodger Levenson.
Whoever wins the game of financial chicken between Chester’s city government and the state of Pennsylvania, the Philadelphia Union are unlikely to leave.
The plan is to teach and play soccer under the Commodore Barry Bridge, no matter who flinches.
Wow. I had no idea about this complex situation. I really appreciate the report. I have hoped for a long time as a Union fan that the community would benefit. As you point out, it’s clear they need it. Knowing now the context in which these bigger investments are taking place, it seems clear that the Team are serious about working with the township to improve things for residents.
Thanks, Deez Nuggs. It helps to know someone reads this stuff!
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Full credit to Chris Gibbons of our editorial staff who suggested I dig into the WHYY story he had noticed. At the risk of being nerdily wonky, I would amend your term “township” to “municipality” since the City of Chester is classified a third class city by Pennsyklvania’s legal system not a “township,” and since “township” itself is one of the entities grouped together under the broader term “municipality.”
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Yes, I am incurably and terminally academic. But precision is necessary to follow the documents I consulted. And that lack in presentation and discussion can potentially create confusion, hence my suggested amendment.
I always read every article, and yours, without exception.
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Each author has their unique perspective and style. Since we are talking about you at the moment, I appreciate your care for the details, wanting to get it right, and the apparent desire to make sense of it all (and sharing it for the benefit of others).
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Thank you, Tim.
Nothing wrong with being a wonky nerd. Good journalism. Thanks for going in-depth
Pretty sure if the Union wanted to improve the lives of the residents, they could just do it, and stop talking about it.
Union been a shady deal since day 1.
Nick S. and the city were always at war, to the point where the Union owed the city ‘lots’ of unpaid taxes.
Not sure if that was ever cleared up, always hoping our season Tix money would assist the solution for Chester, not just a money grab like the MLS Commissioner “Grabmoremoney” displays all the time.
The unwillingness of previous governments to help Chester is a disgrace. Maybe now more conservative minds will prevail and business will continue to grow along the river and into the city, finally.
This situation started and snowballed well before anyone even thought about building a stadium in Chester. I don’t think the Union could do much to help what appears to be years of financial mismanagement by Chester leadership.
TBF the Union has provided employment opportunities for residents. Hopefully the Sports Complex will also be beneficial for the community.
Can someone explain why they don’t just sell the water authority? That seems to solve everything. Yes, I don’t want my water bill to go up, but I don’t own it, the city seems to.
Such a sale is discussed in the official documents and other news reporting I found, but you probably understand more about the ins and outs of such a sale that I do. The receiver cites the water authority as an asset that could be sold. That’s all I know.
Upon further reflection would not selling the water authority asset only postpone rather than solve?
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The core problem seems to be continuing to run deficits.
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An injection of cash will not change that behavior but enable it to continue for however many more years only to have the problem re-emerge when the asset has been exhausted.
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To solve the problem with any permanency, the underlying behavior has to be changed.
Agreed
obviously MLS I mean Apple should just buy Chester it could be their Disneyworld if not them maybe Peter Thiel
much appreciated. Anything related to our beloved Union is read with gusto. This situation, while not surprising, is surprisingly dire for the city. Union? Not so much. Play on. However, I’ve always hoped our investment and our visits help the community.
What a mess! I would not like to work for Chester. Sounds like most employees will lose their jobs soon.
Only if disincorporation is implemented and remains permanent, and even then … .
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Work the problem from the perspective of a new employer. who knows where everything is and the quirks of the equipment?
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After the Russian revolution the Bolsheviks cleaned out the top levels of the Tsarist secret police but not the bottom ones. Same pattern applied under the Bolsheviks every time there was a “reform” of what informally has always been known as the cheka.
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Bosses got shot and names were changed. But the lower levels survived.
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I suspect the same can be said for the transition from the Bolsheviks to the Russian Federation and the Federal Security Bureau, but I have never studied it.
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New bosses, different pay and benefits, new procedures, certainly. But who knows how to manipulate the traffic lights around Subaru Park?
A century ago US presidents walked the boulevards of Chester,PA. The city was a manufacturing hub with a ship yard and a Ford car manufacturing plant. Just ask Lee Iacocca, who worked for Ford, frequented the Chester,PA, plant, met and married the plant’s receptionist. They were married at St. Robert Catholic Church, which became the Blessed Catherine Drexel parish. Chester city had a thriving downtown with numerous shops. Then the de-industrialization of Chester began.
Harrahs Casino arrived claiming it would bring many jobs to Chester. However, Harrahs Chester became Harrahs Philadelphia several years ago. Wonder why the name change was made…
Chester is a food desert there are no grocery stores in Chester city.
Crozier Chester Medical Center , which is owned by the Prospect Company of California, houses the only crisis center in Delaware County. The facility was sued by Delaware County government officials to keep the crisis center opened.
I am acutely aware that near the soccer stadium there are blocks of burned out buildings. In between those buildings people are trying to survive.
I offer this information because it is easy to attend a soccer game, hop back into your car and leave a city and its citizens on their own.
I am sad the Union Soccer team is called the “Philadelphia Union.” Yet the team plays in Chester, PA.
Thank you for the opportunity to vent.
Respectfully, Edie Berstler