THE GENERAL ASSEMBLY OF PENNSYLVANIA

SENATE BILL

INTRODUCED BY PICCOLA, PILEGGI, EARLL, VANCE, GORDNER, WAUGH, ALLOWAY, BAKER, ERICKSON, ORIE, BROWNE AND TOMLINSON, JUNE 17, 2011

SENATOR CORMAN, APPROPRIATIONS, RE-REPORTED AS AMENDED, JUNE 26, 2011   

AN ACT

Amending the act of July 10, 1987 (P.L.246, No.47), entitled "An

act empowering the Department of Community Affairs to declare

certain municipalities as financially distressed; providing

for the restructuring of debt of financially distressed

municipalities; limiting the ability of financially

distressed municipalities to obtain government funding;

authorizing municipalities to participate in Federal debt

adjustment actions and bankruptcy actions under certain

circumstances; and providing for consolidation or merger of

contiguous municipalities to relieve financial distress,"

further providing for purpose and legislative intent and for

<--

Commonwealth agency payments or assistance; providing for 

review of coordinator, for the establishment of a management

board for distressed third class cities and for powers of

management boards; prohibiting distressed third class cities

from filing Federal bankruptcy petitions; and making

editorial changes.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  Section 251(a) of the act of July 10, 1987

<--

(P.L.246, No.47), known as the Municipalities Financial Recovery

Act, is amended and the section is amended by adding a

subsection to read:

Section 1.  Section 102(b)(1) of the act of July 10, 1987

<--

(P.L.246, No.47), known as the Municipalities Financial Recovery

Act, is amended and the subsection is amended by adding a

paragraph to read:

Section 102.  Purpose and legislative intent.

* * *

(b)  Legislative intent.--

(1)  It is the intent of the General Assembly to:

(i)  Enact procedures and provide powers and

guidelines to ensure fiscal integrity of municipalities

while leaving principal responsibility for conducting the

governmental affairs of a municipality, including

choosing the priorities for and manner of expenditures

based on available revenues, to the charge of its elected

officials, consistent with the public policy set forth in

this section.

(ii)  Enact procedures for the adjustment of

municipal debt by negotiated agreement with creditors.

(iii)  Provide for the exercise of the Commonwealth's

sovereign and plenary police power in emergency fiscal

conditions to protect the health, safety and welfare of a

municipality's citizens when local officials are

unwilling or unable to accept a solvency plan developed

for the benefit of the community.

* * *

(3)  The General Assembly recognizes that the financial

conditions of certain distressed municipalities are so severe

and the policies of those municipalities so ineffective that

the nonviability of those municipalities threatens the fiscal

condition and credit stability of other communities. In such

cases, additional methods of protecting citizens must be

implemented, including:

(i)  Instituting more direct Commonwealth oversight

pursuant to the Commonwealth's power to provide for local

government under Article IX of the Constitution of

Pennsylvania and through the creation of public

authorities as instrumentalities of the Commonwealth.

(ii)  Judicial intervention when necessary to ensure

the compliance of the distressed municipality with the

provisions of this act.

Section 1.1.  Section 251(a) of the act is amended and the

section is amended by adding a subsection to read:

Section 251.  Commonwealth agency payments or assistance.

(a)  Withholding of certain Commonwealth funds.--Except as

provided in section 302(b), upon certification by the

[secretary] department that a financially distressed

municipality has failed to adopt a plan or implement an adopted

plan as proposed under this act or has adopted a plan which is

inadequate to address the municipality's financial distress, the

municipality shall not receive a grant, loan, entitlement or

payment from the Commonwealth or any of its agencies. Moneys

withheld shall be held in escrow by the Commonwealth until the

[secretary] department has rescinded the certification.

(a.1)  Disposition of assets.--Subsection (a) shall apply to

the failure of a distressed city or a management board

established under section 603(a) if the city or management board

fails to identify, sell, lease or otherwise dispose of assets in

accordance with section 605.

* * *

Section 1.1 1.2.  The act is amended by adding a section to

<--

read:

Section 254.  Review and investigation of coordinators.

(a)  Initial review.--The department shall conduct a review

of all coordinators appointed or serving during 2010. The review

under this subsection shall be conducted by October 1, 2011.

Within 30 days of the completed review, the department shall

determine if the coordinator has failed to develop an adequate

plan or to implement the plan in an appropriate or adequate

manner. If the coordinator has failed to develop or implement

the plan in an appropriate or adequate manner, the department

shall remove the coordinator and appoint a new coordinator.

(b)  Additional reviews.--The department shall conduct a

review of all coordinators appointed for service or serving

during 2011 and each year thereafter. The review under this

subsection shall be conducted by June 30. Within 30 days of the

completed review, the department shall determine if the

coordinator has failed to develop an adequate plan or to

implement the plan in an appropriate manner. If the coordinator

has failed to develop an adequate plan or to implement the plan

in an appropriate manner, the department shall remove the

coordinator and appoint a new coordinator.

(c)  Investigations.--In addition to the review under

subsection (a) or (b), the department shall investigate a

complaint as to the failure of the coordinator to develop an

adequate plan or to implement the plan in an appropriate or

adequate manner. The complaint must be brought by:

(1)  a petition from at least two members of the

governing body of the municipality; or

(2)  a petition signed by 30 residents of the

municipality.

Section 2.  The act is amended by adding a chapter to read:

CHAPTER 6

CITIES OF THE THIRD CLASS

Section 601.  Definitions.

<--

"City."  A city of the third class which:

<--

(1)  has opted to be governed by a mayor-council form of

government under:

(i)  the act of July 15, 1957 (P.L.901, No.399),

known as the Optional Third Class City Charter Law; or

(ii)  53 Pa.C.S. Pt. III Subpt. E (relating to home

rule and optional plan government); and

(2)  has a population in excess of 45,000.

"Business with which he is associated."  The term shall have 

<--

the same meaning as defined in 65 Pa.C.S. § 1102 (relating to

definitions).

"City."  A city of the third class which has opted to be

<--

governed by a mayor-council form of government under the act of

July 15, 1957 (P.L.901, No.399), known as the Optional Third

Class City Charter Law, and has a population in excess of

45,000.

"Controlled authority."  A municipal authority, parking

authority or other authority or corporate entity which is

directly or indirectly controlled by a distressed city or to

which a distressed city has powers of appointment.

"County."  The county in which a distressed city is located.

"Distressed city."  A city which has been determined to be

financially distressed under section 203(f). The term includes

any controlled authority which is directly or indirectly

controlled by the city or to which the city has direct or

indirect power of appointment or has pledged or designated the

city's revenues or the city's credit.

"Immediate family."  The term shall have the same meaning as

<--

defined in 65 Pa.C.S. § 1102 (relating to definitions).

"Management board."  The city management board.

Section 602.  Applicability.

A distressed city shall be subject to the provisions of this

chapter and Chapters 2 and 3. If a conflict between this chapter

and any other provision of this act occurs, the provisions of

this chapter shall prevail.

Section 603.  Management board.

(a)  Establishment.--A management board shall be established

if a distressed city fails to adopt or the secretary determines

<--

that the distressed city if the secretary determines that a

<--

distressed city has either failed to adopt or has not

implemented the coordinator's plan in accordance with sections

245 and 247(a). A distressed city shall be deemed to have failed

to adopt the coordinator's plan if it takes any action to

approve an alternative plan under section 246.

(b)  Composition.--A management board established under

subsection (a) shall be comprised of the following:

(1)  Two members appointed by the Governor, one of whom

<--

must be a resident of the distressed city for which the board

is being appointed.

(2)  One member appointed by the board of commissioners

of the county who shall be a resident of the county at the

time of appointment and shall maintain county residence while

a member of the board.

(b.1)  Public officials, political party officers; conflicts

<--

of interest prohibited.--

(1)  Members of the management board shall not:

<--

(i)  Seek or hold a position as any other elected or

<--

appointed public official within this Commonwealth or as

a political party officer while in the service of the

<--

management board.

(ii)  Seek election as public officials or political

<--

party officers for one year after their service with the

management board.

(2)  Members of the board may serve as appointive public

<--

officials any time after their periods of service with the

management board.

(3)  (i)  No member of the board may:

(2)  The following apply:

<--

(i)  No member of the management board may:

(A)  Directly or indirectly be a party to or have

an interest in any contract or agreement with the

<--

authority or with the distressed city. The

<--

prohibition under this clause shall extend to a

member's immediate family or a business with which he

or a member of his immediate family is associated.

(B)  Use his office or any confidential

information received through his office for the

private pecuniary benefit of himself, a member of his

immediate family or a business with which he or a

member of his immediate family is associated.

(ii)  Any member who willfully violates this

paragraph shall forfeit his office and shall be subject

to any other criminal and civil sanctions as may be

imposed by law. Any contract or agreement knowingly made

in contravention of this paragraph shall be void.

(c)  Experience and residence.--

(1)  All members and their designees shall have

experience in finance or management.

(2)  All members and their designees shall be residents

of this Commonwealth.

(3)  At least one member under subsection (b)(1) shall be

<--

a resident of the distressed city for which the board is

being appointed.

(d)  Term.--Members shall be appointed within seven days of

the a determination by the department that the requirements of

<--

subsection (a) have occurred secretary under subsection (a).

<--

Members shall select a chairperson who shall serve for a term of

two years. Members appointed by the Governor shall have a term

coterminous with the appointing authority. A member appointed by

the county commissioners shall have a term coterminous with the

chairman of the board of commissioners. If a vacancy occurs, the

appointing authority who originally appointed the management

board member whose seat has become vacant shall appoint a

successor member within 30 days of the vacancy. A member

appointed to fill a vacancy occurring prior to the expiration of

a term shall serve the unexpired term.

(e)  Organization.--

(1)  The Governor shall set a date, time and place for

the initial organization organizational meeting of the

<--

management board within five days of the appointment of the

members of the management board. The initial organizational

meeting shall be held within 15 days of the appointment under

subsection (d).

(2)  Members shall elect other officers as they deem

necessary.

(f)  Meetings.--Following the initial organizational meeting,

the management board shall meet as frequently as it deems

appropriate but at least once during each quarter of the fiscal

year. A meeting of the management board shall be called by the

chairperson if a request for a meeting is submitted by the other

two members of the management board. A majority of the

management board shall constitute a quorum. All actions of the

management board shall be taken by a majority of the management

board. The following statutes shall apply to the management

board:

(1)  65 Pa.C.S. Chs. 7 (relating to open meetings) and 11

(relating to ethics standards and financial disclosure).

(2)  The act of July 19, 1957 (P.L.1017, No.451), known

as the State Adverse Interest Act.

(3)  The act of February 14, 2008 (P.L.6, No.3), known as

the Right-to-Know Law.

(g)  Expenses.--A member shall not receive compensation or

remuneration but shall be entitled to reimbursement for all

reasonable and necessary expenses.

(h)  Employees.--The department shall provide administrative

and other support to the management board. The management board

may contract for or receive the loan of services of other

individuals employed by other government agencies.

(i)  Commonwealth agency.--A management board established

under this chapter shall constitute a public authority and

instrumentality of the Commonwealth, exercising the powers of

the Commonwealth. The exercise of the powers of the management

board shall be deemed to be an essential government function.

(j)  Sovereign immunity.--Members of the management board

<--

shall not be liable personally for any obligations of the

management board. It is declared to be the intent of the General

Assembly that the management board and its members shall enjoy

<--

sovereign and official immunity as provided in 1 Pa.C.S. § 2310

(relating to sovereign immunity reaffirmed; specific waiver) and

shall remain immune from suit except as provided by and subject

to the provisions of 42 Pa.C.S. Ch. 85 Subchs. A (relating to

general provisions) and B (relating to actions against

Commonwealth parties).

(k)  Term of existence.--

<--

(1)  The management board shall exist for an initial term

of at least seven years. The management board shall be

renewed for seven-year terms by the department unless:

(i)  the city has maintained a surplus over a three-

year period and the city's revenues have exceeded

expenditures for a period of at least three-years; or

(ii)  the department determines that the city has

implemented the coordinator's plan.

(2)  Upon termination of the management board, records

and documents of the board shall be transferred to the

director of finance of the city. Within 60 days of

termination, the management board shall submit a final report

on its activities and the city's fiscal condition to the

Governor, the Secretary of the Senate and the Chief Clerk of

the House of Representatives.

Section 604.  Powers and duties.

Notwithstanding any other provision of law, the management

board shall have the following powers and duties:

(1)  To require the distressed city to implement the

<--

coordinator's plan.

(2)  To require the coordinator to make changes to the

<--

coordinator's plan as necessary to achieve financial

stability of the distressed city.

(3)  To require the distressed city to negotiate

<--

intergovernmental cooperation agreements between the

distressed city and other political subdivisions in order to

eliminate and avoid deficits, maintain sound budgetary

practices and avoid interruption of municipal services.

(4)  To make annual reports for submission to the

department within 120 days after the close of the distressed

city's fiscal year.

(5)  To have all powers necessary or appropriate require

<--

the distressed city to cause the sale, lease or other

disposition of the distressed city's assets under section

605.

(6)  If necessary to implement the coordinator's plan, to

<--

exercise all of the powers and authority of the distressed

city and its elected officials in the management of the

distressed city's financial affairs.

(7) (6)  To approve or disapprove the execution of

<--

contracts and agreements by the distressed city in accordance

<--

with section 606(a)(2).

(7)  To direct the distressed city to take any other

<--

action to implement the coordinator's plan.

Section 605.  Sale of assets.

(a)  Authority.--The management board shall have the

authority to determine that it is in the best financial

interests of the distressed city to sell, lease or dispose of

assets determined by the management board to be nonessential and

owned by the distressed city or a controlled authority.

<--

(b)  Sale, lease or other disposition.--The management board

shall:

(1)  Identify appropriate assets for sale, lease or other

disposition and direct the appropriate officials of the

distressed city or controlled authority to take all action

<--

necessary or appropriate for the consummation of the sale,

lease or other disposition of assets.

(2)  Direct the sale, lease or other disposal of assets 

<--

distressed city to sell, lease or otherwise dispose of assets 

<--

in conformity with all applicable competitive bidding

requirements.

(3)  Undertake Direct the distressed city to undertake a

<--

competitive bidding process, determine the winning bidder and

enter into an agreement of sale, lease or other disposition

with the winning bidder.

(4)  Take Direct the distressed city to take all action

<--

necessary to complete the sale, lease or disposition of the

assets.

(c)  Approval.--The approval of the governing body or chief

<--

executive officer of the distressed city or controlled authority 

shall not be required to complete a sale, lease or other

disposition under this section.

(5)  Direct the distressed city to take all action

<--

necessary to complete any pending agreement for the sale,

lease or disposition of the assets, subject to approval by

the management board.

(d) (c)  Proceeds.--The proceeds of the sale, lease or other

<--

disposition of assets of a distressed city or controlled

<--

authority shall be applied to the payment of any unpaid debt

obligations owed by the distressed city, as determined by the

management board. Any proceeds remaining after the payment of

these obligations shall be applied at the discretion of the

management board to restructure or to provide escrow for the

payment of the distressed city's future debt obligations.

(e)  Enforcement.--Notwithstanding any other provision of

<--

law, the management board may, if necessary to implement the

coordinator's plan, exercise all the powers and authority of the

distressed city and its elected officials in the management of

the distressed city's financial affairs and the implementation

of the coordinator’s plan, including the power and authority to

sell, lease or otherwise dispose of the distressed city's assets

under this section. The management board may direct the

officials of the distressed city or controlled authority to

perform any act deemed necessary by the board to properly manage

the distressed city's financial affairs and implement the

coordinator's plan. The management board's directives may be

enforced by order of mandamus in the court of common pleas where

the distressed city is situated.

(d)  Enforcement.--Notwithstanding any other provision of

<--

law, if the distressed city fails to implement the coordinator's

plan as directed by the management board, the management board

may take any action necessary to implement the coordinator's

plan. The management board may issue written directives to the

officials of the distressed city requiring them to perform any

act deemed necessary by the management board to properly manage

the distressed city's financial affairs and to implement the

coordinator's plan. The management board may bring an action in

mandamus in the court of common pleas where the distressed city

is situated to compel compliance with its directives. The court

shall grant the petition for mandamus if the court finds that

the distressed city has failed to abide by any of the written

directives of the management board.

(f) (e)  Removal.--If a management board determines that a

<--

controlled authority is not taking the action necessary to sell,

lease or dispose of assets, the management board may remove the  

board members of the controlled authority and appoint new board 

members of the controlled authority.

<--

Section 606.  Effect on contracts.

<--

(a)  Contracts and collective bargaining agreements.--

(1)  A contract or collective bargaining agreement in

existence in a distressed city prior to the approval of a

coordinator's plan or the establishment of a management board

shall remain in effect after approval of the plan until the

contract or agreement expires.

(2)  Following approval of the coordinator's plan, a

distressed city shall execute contracts and collective

bargaining agreements in compliance with the plan. If a

management board has been appointed, the distressed city

shall execute contracts and agreements only with the approval

of the management board.

(b)  Arbitration.--Following approval of the coordinator's

plan or the appointment of a management board, a determination

of a board of arbitration established under the act of June 24,

1968 (P.L.237, No.111), referred to as the Policemen and Firemen

Collective Bargaining Act, providing for an increase in wages or

fringe benefits of any employee of a distressed city shall, in

addition to considering any standard or factor required to be

considered by law, take into consideration and accord

substantial weight to:

(1)  The coordinator's plan or the determination of the

management board.

(2)  Relevant market factors, such as the financial

situation of the distressed city, inflation, productivity,

size of work force and pay and benefit levels in economically

and demographically comparable political subdivisions.

(c)  Determination.--A determination shall be in writing and

a copy shall be forwarded to each party to the dispute and to

the board of arbitration. A determination of the board of

arbitration which provides for an increase in wages or fringe

benefits of an employee of an assisted city shall state with

specificity in writing all factors which the board of

arbitration took into account in considering and giving

substantial weight to the factors referred to under subsection

(b)(1).

(d)  Parties.--A party to a proceeding before a board of

arbitration or the management board may appeal to the court of

common pleas to review:

(1)  Consideration under subsection (b)(1).

(2)  Failure of the board of arbitration to issue a

determination under subsection (c).

(e)  Appeal.--An appeal under subsection (d) must be

commenced not later than 30 days after the issuance of a final

determination by the board of arbitration.

(f)  Decision.--The decision of the board of arbitration

shall be vacated and remanded to the board of arbitration if the

court finds:

(1)  That the board of arbitration failed to take into

consideration and accord substantial weight to the factors

referred to under subsection (b).

(2)  That the board of arbitration has failed to issue a

determination under subsection (c).

(g)  Proposed revision.--If, after exhaustion of all appeals,

the final arbitration award is not in compliance with the

approved coordinator's plan or is unacceptable to the management

board, the award shall be void.

Section 607 606.  Limitation on bankruptcy.

<--

Notwithstanding any other provision of law, including section

261, no distressed city may file a petition for relief under 11

U.S.C. Ch. 9 (relating to adjustment of debts of a municipality)

or any other Federal bankruptcy law, and no government agency

may authorize the distressed city to become a debtor under 11

U.S.C. Ch. 9 or any other Federal bankruptcy law.

Section 3.  The heading of Chapter 6 and section 601 of the

act are renumbered to read:

CHAPTER [6] 20

TECHNICAL PROVISIONS

Section [601] 2001.  Repeals.

Section 2501-C(e) and (f) of the act of April 9, 1929

(P.L.177, No.175), known as The Administrative Code of 1929, are

repealed insofar as they are inconsistent with this act.

The act of June 11, 1935 (P.L.323, No.146), entitled "An act

designating the Department of Internal Affairs as the agency of

the Commonwealth to approve or disapprove petitions to courts,

and plans for the readjustment of debts of political

subdivisions, under the act of Congress relating to the

bankruptcy of political subdivisions; and defining the powers

and duties of said department in relation thereto," is repealed

insofar as it relates to a municipality as defined in section

103 of this act.

Section 4.  Section 602 of the act, amended December 19, 1988

(P.L.1272, No.157), is renumbered to read:

Section [602] 2002.  Expiration.

Section 203(a)(5) shall expire upon publication in the

Pennsylvania Bulletin of the notice required under section

121(f).

Section 5.  Section 603 of the act is renumbered to read:

Section [603] 2003.  Effective date.

This act shall take effect in 60 days.

Section 6.  The provisions of this act are severable. If any

provision of this act or its application to any person or

circumstance is held invalid, the invalidity shall not affect

other provisions or applications of this act which can be given

effect without the invalid provision or application.

Section 7.  This act shall take effect immediately.