1Amend Bill, page 1, lines 1 through 21, by striking out all
2of said lines and inserting

3Amending Title 53 (Municipalities Generally) of the Pennsylvania
4Consolidated Statutes, in indebtedness and borrowing, further
5providing for definitions, for classification and authority
6to issue bonds and notes, for cost of project and for
7exclusion of other self-liquidating debt to determine net
8nonelectoral debt or net lease rental debt; providing for
9preliminary approval by the department of the issuance of
10certain debt; further providing for small borrowing for
11capital purposes, for debt statement, for submission to
12department, for fees for filing, for certificate of approval
13of transcript, for effect of failure of timely action by
14department and for records of department; providing for
15duties of participants in Local Government Unit Debt Act
16transactions; and making a related repeal.

17Amend Bill, page 1, lines 24 through 27; pages 2 through 22,
18lines 1 through 30, by striking out all of said lines on said
19pages and inserting

20Section 1. The definition of "self-liquidating debt" in
21subsection (b) of section 8002 of Title 53 of the Pennsylvania
22Consolidated Statutes is amended and subsection (c) is amended
23by adding definitions to read:

24§ 8002. Definitions.

25* * *

26(b) Exclusions from debt.--With respect to exclusions from
27any particular category of debt and subject to additional
28definitions contained in subsequent provisions of this subpart
29which are applicable to specific provisions of this subpart, the
30following words and phrases when used in this subpart shall have
31the meanings given to them in this section unless the context
32clearly indicates otherwise:

33"Self-liquidating debt." Debt payable solely from rents,
34rates or other charges to the ultimate users of the project, to
35be financed in whole or in part by that debt, or payable solely

1from special levies or assessments of benefits lawfully
2earmarked exclusively for that purpose. The term also includes
3debt or any portion thereof at the time qualified as self-
4liquidating pursuant to this subpart, whether or not solely
5payable from those sources. The term "ultimate users" includes
6the local government unit itself only where its use of the
7project is incidental to the use of the project by other users.
8A debt with respect to which debt service payments have been 
9made under a guaranty of the debt shall not be considered self-
10liquidating.

11* * *

12(c) Other definitions.--Subject to additional definitions
13contained in subsequent provisions of this subpart which are
14applicable to specific provisions of this subpart, the following
15words and phrases when used in this subpart shall have the
16meanings given to them in this section unless the context
17clearly indicates otherwise:

18* * *

19"Financial advisor." A person who for compensation engages
20in the business of advising a local government unit, either
21directly or in writing, as to the value of securities, bonds or
22notes or as to the advisability of investing in, purchasing or
23selling securities, bonds or notes. The term does not include an
24attorney, accountant or engineer whose performance of such
25services is solely incidental to the practice of his profession.
26The term does not include a lender, underwriter or other entity
27purchasing the bonds or notes of a local government unit.

28* * *

29"Working capital." An amount which constitutes, under
30generally accepted accounting principles, the cost of the day-
31to-day operations of the project as well as a proper allowance
32for contingencies. Reimbursements under a guaranty or amounts to
33be used to address budgetary deficits of a local government unit 
34or for other purposes not related to the construction or 
35operation of the project do not constitute reasonable working 
36capital in connection with the incurring of debt under this 
37subpart.

38Section 2. Sections 8005(c) and (d), 8007 and 8026(a)(5) of
39Title 53 are amended to read:

40§ 8005. Classification and authority to issue bonds and notes.

41* * *

42(c) Authority to issue bonds and notes and lease rental 
43debt.--Notwithstanding any other law to the contrary, every
44local government unit shall have full power and authority to
45issue bonds or notes, and make guaranties, leases, subsidy
46contracts or other agreements evidencing the acquisition of
47capital assets payable out of taxes and other general revenues,
48to provide funds for and towards the cost of or the cost of
49completing any project or combination of projects which the
50local government unit is authorized to own, acquire, subsidize,
51operate or lease or to participate in owning, acquiring,

1subsidizing, operating or leasing with others, to issue tax
2anticipation notes and funding bonds or notes as provided in
3this subpart and to contract for insurance covering the risks of
4nonpayment of principal, interest and premium of bonds, notes,
5tax anticipation notes and guaranties.

6(d) Nature of guaranty procedure for issuance and 
7prohibitions.--The following shall apply to a guaranty:

8(1) For the purpose of this subpart, unless debt
9evidenced by a guaranty has been approved as electoral debt
10in accordance with Subchapter C (relating to procedure for
11securing approval of electors), the guaranty shall be deemed
12to be nonelectoral debt if the local government unit
13guaranties its own bonds or notes and shall be deemed to be
14lease rental debt if it guaranties the bonds or notes of an
15authority or another local government unit. For the purpose
16of all other statutes, the guaranty shall be deemed to create
17debt or indebtedness of the local government unit making the
18guaranty.

19(2) A local government unit may only issue a guaranty of
20debt of another local government unit or an authority after
21the initial local government unit has conducted its own due
22diligence to determine the risks involved in the transaction,
23including the impact of the guaranty on the future financial
24condition of the local government unit, the financial
25condition of the entity seeking the guaranty, the sources and
26reliability of revenue to cover the underlying obligation and
27the likelihood of default of the entity seeking the guaranty.
28A guaranty may only be made by vote of the governing body
29after a public meeting at which the initial local government
30unit demonstrates the foregoing due diligence. A local
31government unit may only issue a guaranty to an authority or
32other local government unit for projects which are expressly
33authorized by statute, including projects under section 5607
34(relating to purposes and powers). Notwithstanding the
35foregoing, a local government unit may not issue a guaranty
36to an authority or other local government unit for sums due
37under a qualified interest rate management agreement, nor may
38guaranties be issued for projects which involve untested
39technology or experimentation.

40(3) A local government unit is prohibited from
41collecting a fee to guaranty the debt of an authority or
42another local government unit.

43§ 8007. Cost of project.

44The cost of a project includes the amount of all payments to
45contractors or for the acquisition of a project or for lands,
46easements, rights and other appurtenances deemed necessary for
47the project, fees of architects, engineers, appraisers,
48consultants, financial advisors and attorneys incurred in
49connection with the project financing costs, costs of necessary
50printing and advertising, costs of preliminary feasibility
51studies and tests, cost estimates and interest on money borrowed

1to finance the project, if capitalized, to the date of
2completion of construction and, if deemed necessary, for one
3year thereafter, amounts to be placed in reserve funds, if any,
4a reasonable initial working capital for operating the project
5and a proper allowance for contingencies and any amount which
6constitutes, under generally accepted accounting principles, a
7cost of, and which has been determined by an independent actuary
8or other expert to be required for the purposes of, a reserve or
9a contribution toward a combined reserve, pool or other
10arrangement for losses or liabilities covered by a self-
11insurance arrangement established by one or more local
12government units. Costs paid, from sources other than the debt 
13that is to be refunded, more than two years before an issuance 
14of new debt to finance the costs may not be included in the 
15costs of a project financed by the new debt. Reimbursements 
16under a guaranty or amounts to be used by a local government 
17unit to address budgetary deficits or other purposes not related 
18to the project do not constitute a cost of a project in 
19connection with the incurring of debt under this subpart. Costs 
20that qualify for funding of unfunded debt under section 8130 
21(relating to approval by court to fund unfunded debt) may only 
22constitute a cost of a project if the local government unit 
23complies with the requirements of section 8130.

24§ 8026. Exclusion of other self-liquidating debt to determine
25net nonelectoral debt or net lease rental debt.

26(a) Filings with department.--Self-liquidating debt shall
27not be excluded in determining net nonelectoral debt or net
28lease rental debt for the purpose of establishing net debt of
29either category where the debt is evidenced by general
30obligation bonds or notes, by bonds, notes or other obligations
31of an authority or of another local government unit or by a
32guaranty until there has been filed with and approved by the
33department a report to the local government unit from qualified
34registered engineers or architects or other persons qualified by
35experience appropriate to the project, setting forth:

36* * *

37(5) The estimated net revenues of the project for each
38year of the remaining life of the bonds, notes or obligations
39with a justification for any assumed increase and a
40computation showing, in reasonable detail, that the net
41revenues, together with other available funds to be received
42in respect of the project, will be sufficient in each year to
43pay the annual debt service, other than capitalized debt
44service, on the bonds, notes or obligations or a specified
45aggregate principal amount thereof.

46* * *

47Section 3. Title 53 is amended by adding a section to read:

48§ 8102.1. Preliminary approval by the department of the
49issuance of certain debt.

50(a) General rule.--Prior to the enactment of an ordinance
51authorizing the sale or issuance of any general obligation bonds

1or notes or guaranteed revenue bonds or notes constituting
2nonelectoral debt or any agreement evidencing lease rental debt,
3a local government unit shall obtain a preliminary authorization
4to incur debt from the department. The following debt
5transactions shall be exempt from the requirement to obtain
6preliminary approval under this section:

7(1) Small borrowing for capital purposes as provided in
8section 8109 (relating to small borrowing for capital
9purposes).

10(2) Transactions under Subchapter C of Chapter 82
11(relating to refunding of debt) which consist exclusively of
12the issuance and sale of obligations, the proceeds of which
13are to be used solely for the payment or redemption of
14outstanding obligations upon or prior to maturity and the
15costs of issuing the obligations. A refunding transaction
16which includes a qualified interest rate management agreement
17shall not be exempt from the requirements of this section.

18(b) Authorization.--Authorization shall be obtained by
19filing a notice with the department in the form of a certificate
20signed by two officers of the local government unit. The
21department shall prescribe the form of the certificate which
22shall include a basic description of the intended financing and,
23as applicable, the following:

24(1) Evidence that the local government unit is current
25in the filing of its annual financial statements with
26Commonwealth agencies under applicable State law.

27(2) A description of the intended type and amount of
28payment or performance bond, letter or credit or other
29financial security proposed to insure the completion of the
30project.

31(3) Information that the local government unit is up to
32date on all of its municipal securities disclosures required
33under 17 CFR § 240.15c2-12 (relating to municipal securities
34disclosure).

35(4) If the local government unit intends for the
36proposed debt to be self-liquidating or subsidized,
37information satisfactory to the department that the debt will
38qualify as self-liquidating or subsidized debt, including
39filings required under section 8024 (relating to exclusion of
40subsidized debt from net nonelectoral debt or net lease
41rental debt), 8025 (relating to exclusion of self-liquidating
42debt evidenced by revenue bonds or notes to determine net
43nonelectoral debt) or 8026 (relating to exclusion of other
44self-liquidating debt to determine net nonelectoral debt or
45net lease rental debt), as applicable.

46(5) If the local government unit has existing debt which
47was previously approved by the department as subsidized or
48self-liquidating, information satisfactory to the department
49that the debt continues to be treated as subsidized or self-
50liquidating and that no decrease in the amount to be excluded
51is required by any change in circumstances, other than

1resulting from the payments of the debt, or, if there has
2been a change in circumstances, information demonstrating to
3the satisfaction of the department the amount of debt that
4should continue to be treated as subsidized or self-
5liquidating.

6(6) Schedules demonstrating the estimated net debt
7service impact of the transaction and a certification that
8the local government adopted or approved a plan to provide
9the tax or other revenues necessary to pay the debt service
10on the debt.

11(7) The debt statement required by section 8110
12(relating to debt statement).

13(8) A statement of the intended manner of sale of the
14bonds or notes.

15(9) A project cost statement detailing the intended uses
16of debt proceeds.

17(c) Additional information.--As part of the department's
18review of a filing by a local government unit under subsection
19(b), the department may request and the local government unit
20shall provide additional information regarding any of the
21following:

22(1) justification for costs of issuance exceeding 2% of
23the principal amount of the proposed debt;

24(2) justification for the use of more than 10% of the
25proceeds of the debt for working capital; and

26(3) if bonds or notes are to be sold at private sale by
27negotiation, the basis for the local government unit's
28finding that the bonds or notes are in the best financial
29interests of the local government unit.

30(d) Action by department.--If the department, upon review of
31the filing made by the local government unit under subsection
32(b) and any additional information provided under subsection
33(c), if applicable, finds that:

34(1) The requirements are satisfied in connection with
35the proposed debt, the department shall issue a preliminary
36approval of the debt.

37(2) The requirements are not satisfied in connection
38with the proposed debt, the department shall issue a
39preliminary disapproval of the debt and the local government
40may not proceed to incur the debt until the requirements are
41satisfied.

42(e) Timely action required.--The department shall have 30
43days after receipt of the filing required under subsection (b)
44to issue a preliminary approval or disapproval of the debt. If
45the local government unit has submitted a certificate for
46preliminary approval to the department by certified mail, return
47receipt requested or otherwise has an official receipt from the
48department and the local government unit has not, within 30 days
49of the date of receipt of the filing by the department, received
50the certificate of preliminary approval, disapproval or
51notification of correctable error, the filing shall be deemed to

1have been preliminarily approved for all purposes unless the
2local government unit has extended the time within which the
3department may act by written communication to the department or
4by failure to object to a written communication from the
5department requesting the extension. No extension shall exceed
615 days.

7(f) Incurrence of debt.--Upon issuance of preliminary
8approval of the department, the local government unit shall have
9one year to incur the debt under this subpart. The bonds or
10notes shall be sold, or instruments evidencing lease rental debt
11delivered, not more than two years following the date of the
12preliminary approval.

13(g) Review.--All determinations by the department under this
14section are reviewable as provided under 2 Pa.C.S. Ch. 7
15(relating to judicial review).

16Section 4. Sections 8109(a)(1) and 8110(b) of Title 53 are
17amended to read:

18§ 8109. Small borrowing for capital purposes.

19(a) General rule.--Any local government unit may incur debt
20by resolution rather than by ordinance to be evidenced by notes
21to provide funds for a project as defined in this subpart
22without complying with the requirements of Subchapter A of
23Chapter 82 (relating to Department of Community and Economic
24Development) if:

25(1) The aggregate amount of the debt outstanding at any
26one time shall not exceed the lesser of [$125,000] $250,000
27or 30% of the nonelectoral debt limit as authorized in
28section 8022(a) (relating to limitations on incurring of
29other debt).

30* * *

31§ 8110. Debt statement.

32* * *

33(b) Previously excluded self-liquidating or subsidized 
34debt.--Where debt has previously been excluded as self-
35liquidating or subsidized debt, the debt statement shall be 
36accompanied by a certification that indicates one of the 
37following:

38(1) no decrease in the amounts to be excluded is 
39required by any change of circumstances [or ,if there has 
40been a change, other than decreases resulting from the 
41payments of bonds or notes, so that less debt is to be 
42excluded. If it has become possible to exclude a greater 
43amount of debt and the local government unit desires to do 
44so, the debt statement shall be accompanied by appropriate 
45certificates supporting the revised amount to be excluded, 
46and a revised approval shall be obtained from the 
47department.];

48(2) a decrease in the amounts to be excluded is required
49due to a change in circumstances, in which case:

50(i) The change in circumstance must be described. If
51it has become possible to exclude a greater amount of

1debt and the local government unit wants to do so, the
2debt statement shall be accompanied by appropriate
3certifications supporting the revised amount to be
4excluded and a revised approval shall be obtained from
5the department.

6(ii) No debt service payments have been made under a
7guaranty of debt previously established as self-
8liquidating. Debt service payments that have been made 
9under a guarantee of the local government unit shall no 
10longer be considered self-liquidating unless and until 
11the local government unit files with the department a new 
12report satisfying the requirements of section 8025 
13(relating to exclusion of self-liquidating debt evidenced 
14by revenue bonds or notes to determine net nonelectoral 
15debt) or 8026 (relating to exclusion of other self-
16liquidating debt to determine net nonelectoral debt or 
17net lease rental debt), as the case may be.

18Section 5. Section 8111(a) of Title 53 is amended by adding
19paragraphs to read:

20§ 8111. Submission to department.

21(a) General rule.--Before delivering any bonds or notes
22other than notes representing small borrowings issued under
23section 8109 (relating to small borrowing for capital purposes),
24the local government unit shall apply for and receive or be
25deemed to have received the approval of the department under
26section 8204 (relating to certificate of approval of transcript)
27or 8206 (relating to effect of failure of timely action by
28department). The application, in such form as the department
29prescribes, shall be accompanied by a transcript of the
30proceedings consisting of certified copies of any of the
31following, not previously filed, which are applicable:

32* * *

33(8) A written statement with regard to the manner of
34compliance or intended compliance with the requirements of
35the act of December 20, 1967 (P.L.869, No.385), known as the
36Public Works Contractors' Bond Law of 1967.

37(9) An itemized statement of all estimated disbursements
38for costs to be made from the proceeds of the borrowing.

39* * *

40Section 6. Sections 8203, 8204, 8206 and 8207(a) and (c) of
41Title 53 are amended to read:

42§ 8203. Fees for filing.

43Every filing under this subpart with the department shall be
44accompanied by a filing fee [as determined in section 605-A of 
45the act of April 9, 1929 (P.L.177, No.175), known as The 
46Administrative Code of 1929.] of $250. In addition, the filing 
47shall be accompanied by an additional fee of 1/32 mill on each 
48dollar of the aggregate principal amount of the debt relating to 
49the filing. No submission shall constitute a filing until the
50proper fee is paid. All fees received under this section shall
51be [paid by the department into the State Treasury through the

1Department of Revenue.] deposited into the Local Government Unit 
2Debt Act Administrative Account, established as follows:

3(1) There is hereby established a restricted receipt
4account within the General Fund of the State Treasury which
5shall be known as the Local Government Unit Debt Act
6Administrative Account.

7(2) All moneys in the Local Government Unit Debt Act
8Administrative Account shall be held in trust solely for the
9purpose of defraying the costs of the administration of this
10subpart and shall be earmarked for the use of and annually
11appropriated to the department for disbursement solely for
12that purpose. The account shall be subject to audit by the
13Auditor General.

14(3) The fee shall be waived for borrowings in connection
15with a plan or recovery plan under the act of July 10, 1987
16(P.L.246, No.47), known as the Municipalities Financial
17Recovery Act.

18(4) Fees paid in connection with a filing under section
198102.1 (relating to preliminary approval by the department on
20the issuance of certain debt) shall constitute payment of
21fees due under section 8204 (relating to certificate of
22fiscal approval).

23§ 8204. Certificate of final approval [of transcript].

24The department shall, upon receipt of a submission under 
25section 8111 (relating to submission to department) containing 
26an application for final approval and any bond or note
27transcripts or other filings, carefully examine them to
28determine whether the debt outstanding and to be outstanding is
29within the applicable limitations imposed by this subpart and
30whether the proceedings for incurring the debt, for issuing and
31selling the bonds or notes and for excluding self-liquidating
32and subsidized debt have been taken in conformity with the
33Constitution of Pennsylvania and this subpart. If, upon
34completion of its examination, a transcript or other filing is
35found by the department to be in conformity with the
36Constitution of Pennsylvania and this subpart, the department
37shall certify its approval to the local government unit if
38required under other provisions of this subpart. If the debt 
39requires preliminary approval under section 8102.1 (relating to 
40preliminary approval by the department of the issuance of 
41certain debt), the certificates and filings related to 
42preliminary approval shall be part of the transcript and a 
43requirement for final approval under this section. If the debt 
44has received preliminary approval under section 8102.1, the 
45department shall provide for a procedure to expedite the 
46processing of final approval.

47§ 8206. Effect of failure of timely action by department.

48If the local government unit has submitted [a filing] an 
49application for final approval to the department by certified
50mail, return receipt requested, or otherwise has an official
51receipt from the department, and the local government unit has

1not, within 20 days of the date of receipt of the filing by the
2department, received the certificate of final approval or
3disapproval or notification of correctable error, the filing
4shall be deemed to have been approved for all purposes unless
5the local government unit has extended the time within which the
6department may act by written communication to the department or
7by failure to object to a written communication from the
8department requesting the extension. Extensions shall not exceed
9one additional period of 20 days.

10§ 8207. Records of department.

11(a) Retention period.--The department shall keep all
12proceedings including all applications and statements by a local 
13government unit under sections 8102.1 (relating to preliminary 
14approval by the department of the issuance of certain debt), 
158111 (relating to submission to department) and 8201 (relating 
16to certification to department of bond or note transcript or 
17lease, guaranty, subsidy contract or other agreement) on file
18for a period of not less than [four months after issuance of its
19certificate of approval or disapproval and thereafter as long as
20any appeal respecting the proceedings is pending and not finally
21determined.] five years after the debt issuance has been paid 
22off by the local government unit. The department shall also keep 
23copies of all documents filed with the department relating to a 
24qualified interest rate management agreement for as long as the 
25qualified interest rate management agreement is in effect.

26* * *

27(c) Records open for inspection.--[The records of the
28department shall be public records available for examination by
29any citizen of this Commonwealth or any bondholders or
30noteholders.] All submissions, determinations and records of the 
31department under this subpart, including those related to 
32qualified interest rate management agreements and including 
33correspondence with the interested parties to any debt 
34proceeding, shall be public records available for examination by 
35any citizen of this Commonwealth, any interested parties or any 
36bondholder or noteholder, including holders of tax anticipation 
37notes, of the local government unit.

38Section 7. Chapter 82 of Title 53 is amended by adding a
39subchapter to read:

40SUBCHAPTER G

41MISCELLANEOUS PROVISIONS

42Sec.

438291. Duties of participants in Local Government Unit Debt Act
44transactions.

45§ 8291. Duties of participants in Local Government Unit Debt
46Act transactions.

47(a) Declaration of representation.--With regard to each
48transaction under this subchapter, each attorney or financial
49advisor involved in the transaction shall provide a written
50declaration to the local government unit as to which party is
51being represented by the attorney or financial advisor, the

1source from which the attorney or financial advisor will receive
2compensation for services related to the transaction and whether
3the compensation is dependent upon the issuance of debt by the
4local government unit. A full time employee of the local
5government unit shall not be required to file a declaration
6under this subsection.

7(b) Fiduciary duty.--An attorney or financial advisor
8retained by or who in subsection (a) purports to represent a
9local government unit with regard to a transaction under this
10subpart shall stand in a fiduciary relationship to the local
11government unit and shall perform loyally, in good faith and in
12a manner the attorney or financial advisor reasonably believes
13to be in the best interests of the local government unit. The
14attorney or financial advisor shall act with such care,
15including reasonable inquiry, skill and diligence that a person
16of ordinary prudence would use under similar circumstances and
17provide opinion both as to positive and negative possible
18impacts of the transaction. An attorney or financial advisor in
19the course of the representation is entitled to rely on
20reasonable representations and certifications made to the
21attorney or financial advisor by architects, engineers and other
22persons retained by and the officers and employees of the local
23government unit in connection with the transaction. For
24attorneys licensed to practice law in this Commonwealth, this
25duty shall be interpreted to be consistent with Supreme Court
26rule of professional conduct pertaining to attorney fiduciary
27relationships. For financial advisors retained by a local
28government unit, this duty shall be in addition to any fiduciary
29duty which may be imposed by Federal law.

30(c) Ultra vires acts.--An officer or member of the governing
31body of a local government unit or a financial advisor or
32attorney may not knowingly participate in an ultra vires act.
33For purposes of this subsection, an act is ultra vires when:

34(1) the local government unit is without authority to
35perform the act; or

36(2) the act is in excess of the authority granted to the
37local government unit.

38(d) Materially false or misleading certifications.--An
39officer or member of the governing body of a local government
40unit or an attorney or financial advisor may not knowingly file
41a materially false or misleading certification or statement with
42the department under this act.

43(e) Penalties.--

44(1) An officer or member of the governing body of a
45local government unit or an attorney or financial advisor who
46aids or participates in the commission of an act prohibited
47in subsection (c) or (d) commits a misdemeanor of the second
48degree and shall, upon conviction, be sentenced to pay a fine
49of not more than $5,000 or to imprisonment for not more than
50two years, or both.

51(2) Notwithstanding paragraph (1), a local government
 

1may seek civil judicial redress for a violation of this 
2section that results in damages to the local government unit 
3not caused by the local government unit or its agents. A 
4local government unit shall prohibit or restrict the future 
5participation in transactions under this subpart of an 
6individual attorney or financial advisor who violates this 
7section and may also prohibit or restrict participation of a 
8firm that employs the attorney or financial advisor for a 
9period not to exceed two years.

10Section 8. Repeals are as follows:

11(1) The General Assembly declares that the repeal under
12paragraph (2) is necessary to effectuate the amendment of 53
13Pa.C.S. § 8203.

14(2) Section 605-A of the act of April 9, 1929 (P.L.177,
15No.175), known as The Administrative Code of 1929, is
16repealed.

17(3) All acts and parts of acts are repealed insofar as
18they are inconsistent with the amendment or addition of 53
19Pa.C.S. §§ 8002(b) and (c), 8005(c) and (d), 8007,
208026(a)(5), 8102.1, 8111(a), 8203, 8204, 8206, 8207(a) and
21(c) and 8291.

22Section 9. This act shall take effect in 60 days.