Relevant Document:Modified Amended Recovery Plan
Judge Ashely M. Chan appointed Judge Mary F. Walrath as mediator for the chapter 9 bankruptcy of the city of Chester, Pa., during a hearing today, granting Judge Walrath “absolute discretion” to handle the mediation “in whatever way she sees fit.” Judge Chan overruled the
requests of various parties to become official mediation parties or amend the mediation procedures. As a result, although any party may attend an initial mediation session later this month, Judge Walrath will have ultimate discretion to frame the issues, name the parties and appoint additional mediators, if necessary.
Further, although an ad committee of retired municipal employees had
requested that the mediation be postponed until the U.S. Trustee can form an official retiree committee, Judge Chan said that the presence of counsel for the ad hoc retiree committee at the initial mediation session would be sufficient to raise issues relevant to retirees until Judge Chan can determine in the new year whether an official retiree committee is eligible to be appointed.
At today’s hearing, Judge Chan also denied without prejudice
Aqua Pennsylvania’s motion to lift the stay on the Chester Water Authority litigation.
Separately, during a regular meeting held earlier this week by the Municipal Financial Recovery Advisory Committee, or MFRAC, Vijay Kapoor, chief of staff for receiver Michael Doweary, presented a series of proposed modifications to the receiver’s amended recovery plan, which is being adjudicated in the Pennsylvania state court. The recovery plan proceedings are separate from Chester’s
chapter 9 bankruptcy proceedings pending in federal court. The receiver’s proposed modifications are aimed primarily at addressing management and operational issues, including problems related to financial reporting and budget processes.
The Pennsylvania Commonwealth Court in Philadelphia is set to begin its hearing to consider confirmation of the modifications to the amended recovery plan on Monday, Dec. 19. The modified amended plan was filed in the state court on Nov. 8. The receiver subsequently revised the plan, based on a compromise offered by a lone Chester city council member, and filed the revised plan on Dec. 9. Under Pennsylvania’s receivership law, Act 47, the court has 60 days from the filing date to render a decision on recovery plan confirmation.
MFRAC Presentation
Kapoor explained during the Tuesday, Dec. 13, meeting that the recovery plan modification is divided into several sections and includes initiatives in each section aimed at overcoming operational impediments that the receiver has encountered in performing his duties under Act 47. Kapoor outlined a series of initiatives, which relate to the following sections of the amended modified recovery plan.
- Administrative duties and professional management;
- Core internal administrative functions and ethics;
- Parking;
- Stormwater Authority of the City of Chester; and
- Economic development.
Discussing finance issues and initiatives contemplated under the core internal administrative functions section, Kapoor stressed the need for financial transparency and sound data and tied it to Chester’s chapter 9 proceedings, noting that creditors are going to rely on such financial information, which he characterized as being key to getting the city out of bankruptcy.
Among the issues identified in the modified recovery plan are repeated payroll problems, a lack of basic financial reports such as budget-to-actual reports, “extremely late” annual audited financials, lax budget processes, an inability to produce expenditure reports and a backlog of bills.
Kapoor anticipated that Chester’s 2019 audited financials would be released soon and noted that work continues on a 2023 budget that is still marked by a $2 million gap between revenue and expenses. “Chester remains in a very precarious fiscal condition,” he said, adding that the receiver is trying to close that “real deficit” in part through chapter 9.
Kapoor stressed the receiver’s hopes that the federal bankruptcy court will appoint a mediator and his aim to reach consensual settlements in mediation.