The latest financial recovery plan for the City of Chester paints a bleak picture of the oldest city in Pennsylvania.
Prepared by the Philadelphia-based Econsult Solutions, the report begins by highlighting that Chester remains one of Pennsylvania’s poorest cities, “with high unemployment, no economic growth and a population increasingly reliant on government services.”
“After over 20 years in Act 47, Chester’s economy is still not able to support its municipal government or to provide minimal services to its desperately poor population,” reads the report.
The city’s operating deficit is expected to be $9.2 million in 2016 with an accumulated deficit of $16.3 million. If no changes are made to Chester’s current expenditures and revenues, it will continue to experience annual operating deficits.
Chester has been in Pennsylvania’s Act 47 for 21 years. According to the report, the city’s dire financial situation peaked in 2006, when it was necessary to obtain a deficit-funded loan to meet payroll and deliver basic services.
The city’s financial condition improved in 2008 with the opening of Harrah’s Philadelphia Casino and Racetrack and the new source of revenue allowed Chester to operate within its budget for several years including establishing a reserve fund with excess revenues. The addition of PPL Park (now Talon Energy Stadium) also played a positive role.
Unfortunately, over the past few years, the city has reverted back to distress status. Other revenue sources have stagnated, and economic growth has been slow.
While Harrah’s offered an additional source of revenue, the city’s other revenues have been stagnant. The report indicates that salaries of city personnel have risen, especially in the fire and police departments. Bad arbitration is also mentioned as a reason for increased labor costs.
However, the report does mention that the city has begun to take some positive action since the January 2016 swearing in of Mayor Thaddeus Kirkland.
“The City has begun to take action to grow the city’s economy, to increase employment opportunities and to stimulate the growth of its various tax bases to generate revenues to fund service provision. Mayor Kirkland and City Council have also taken steps to reduce costs, including overtime costs, which hit historically high levels in 2015.”
The city has only two years to reverse the overall downward cycle, because Act 47 expires in 2018.
Recovery suggestions include growing the tax base and strengthening and further centralizing the city’s financial management oversight.
The report clearly indicates serious issues with the handling of financial matters and suggests the city hire a full-time professional chief financial officer as well as a part-time deputy chief financial officer.
“Under the current structure, one Council person, who is part-time, serves as the director of the Accounts and Finance Department, and employees within that department, including the city accountant, handle the city’s financial matters. The city has been unable to produce timely and regular financial reports, and the reports can be inconsistent. This has made it difficult to get a true understanding of the city’s fiscal situation and presents opportunities for mismanagement of retiree and dependent insurance coverage, among other items.”
Also cited was the city’s weak and infrequent financial reporting and poor audit preparation, which has delayed a bond refinancing and put a Tax Revenue Anticipation Note (TAN) at risk of default.
“Chester’s financial reporting procedures need to be improved, review needs to occur often and be regularly recurring, staff needs additional training for audit preparation, and the city has an immediate need for technical assistance in its Accounts and Finance Department,” reads the report.
A suggestion was also made to contain personnel costs by reducing the workforce, namely in the police department, where the report suggests returning to a three-platoon structure and eliminating specialty assignments and minimum supervisory staffing requirements. Reduction in the fire department was also suggested by using one fire company and eliminating minimum manning supervisory requirements.
“We also recommend an overall complement reduction of 10 percent in the non-uniform ranks.”
The report discusses major operation functions, fund forecasts, elected officials, infrastructure and maintenance, long term indebtedness, healthcare, insurance, and pension obligations, among others.
A public meeting to present and discuss the Act 47 recovery plan will take place 7 P.M., Tuesday, Aug. 2nd at Chester City Hall.