HOUSE AMENDED

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

AS AMENDED ON SECOND CONSIDERATION, HOUSE OF REPRESENTATIVES, SEPTEMBER 27, 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

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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. further providing for purpose and

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legislative intent; providing for fiscal emergencies in third

class cities and for receivership for third class cities; and

making editorial changes.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

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

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(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 1.2.  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.

"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.

"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 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)  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

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.

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

a determination by the 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 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 require the distressed city to cause the sale,

lease or other disposition of the distressed city's assets

under section 605.

(6)  To approve or disapprove the execution of contracts

and agreements by the distressed city.

(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.

(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 to take all action necessary or appropriate

for the consummation of the sale, lease or other disposition

of assets.

(2)  Direct the distressed city to sell, lease or

otherwise dispose of assets in conformity with all applicable

competitive bidding requirements.

(3)  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)  Direct the distressed city to take all action

necessary to complete the sale, lease or disposition of the

assets.

(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.

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

disposition of assets of a distressed city 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.

(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.

(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.  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.

Section 1.  Section 102 of the act of July 10, 1987 (P.L.246,

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No.47), known as the Municipalities Financial Recovery Act, is

amended to read:

Section 102.  Purpose and legislative intent.

(a)  Policy.--It is hereby declared to be a public policy of

the Commonwealth to foster fiscal integrity of municipalities so

that they provide for the health, safety and welfare of their

citizens; pay due principal and interest on their debt

obligations when due; meet financial obligations to their

employees, vendors and suppliers; and provide for proper

financial accounting procedures, budgeting and taxing practices.

The failure of a municipality to do so is hereby determined to

affect adversely the health, safety and welfare not only of the

citizens of the municipality but also of other citizens in this

Commonwealth.

(b)  Legislative intent.--The General Assembly finds and

declares as follows:

(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.

(2)  [The General Assembly further recognizes that

changing] Changing and deteriorating economic conditions,

developing technologies and attendant unemployment erode

local tax bases and threaten essential municipal services.

Under such circumstances, [the General Assembly believes

that] such distressed governmental units may no longer be

viable and that the citizens of those communities should be

granted the opportunity to voluntarily consolidate or merge

their municipalities with other municipalities in an effort

to allow municipal boundaries to reflect the geographic and

economic realities of a distressed area, to merge a common

community of interest, to take advantage of economies of

scale in providing services and to create an expanded revenue

base to provide necessary public services to the citizens of

financially distressed municipalities.

(3)  Policies of certain municipalities are so

ineffective and the financial conditions so severe that the

provision of vital and necessary services is threatened.

(4)  Sustained failure of a municipality to enact or

implement a fiscal plan to adequately address or prevent

insolvency after repeated opportunities to do so:

(i)  constitutes a fiscal emergency; and

(ii)  signifies:

(A)  a breakdown in the function of municipal

government;

(B)  a dereliction of its elected officials'

paramount public duty to safeguard the health, safety

and welfare of its citizens; and

(C)  a threat to the fiscal stability of

neighboring communities.

(5)  The Governor must act, in the face of a fiscal

emergency under paragraph (4)(i) and dereliction of official

duty under paragraph (4)(ii)(B), pursuant to the

Commonwealth's paramount right and duty to maintain law and

order and protect and preserve the health, safety and welfare

of its citizens and ensure compliance with this act under

Article IX of the Constitution of Pennsylvania.

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

CHAPTER 6

FISCAL EMERGENCIES IN CITIES OF THE THIRD CLASS

Section 601.  Definitions.

The following words and phrases when used in this chapter

shall have the meanings given to them in this section unless the

context clearly indicates otherwise:

"Authority."  A municipal authority, parking authority or any

other authority or corporate entity that is directly or

indirectly controlled by a distressed city or to which a

distressed city has power of appointment.

"City."  A city of the third class.

"Debt obligations."  Any obligation to pay money, including

amounts owed for payments relating to lease rental debt, debt

service, bonds, notes, guarantees for bonds or notes, trust

indentures or other agreements.

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

financially distressed under section 203(f).

"Fiscal emergency."  A determination made by the Governor

under section 602(b).

"Insolvent."  Unable to meet all financial obligations as

they become due, including payment of debt obligations.

"Vital and necessary services."  Basic and fundamental

municipal services, including any of the following:

(1)  Police and fire services.

(2)  Ambulance and rescue services.

(3)  Water supply and distribution.

(4)  Wastewater services.

(5)  Refuse collection and disposal.

(6)  Snow removal.

(7)  Fulfillment of financial obligations necessary for

the continued provision of one or more basic and fundamental

municipal services, including payroll and pension

obligations, lease rental debt and all other debt

obligations.

Section 602.  Declaration of fiscal emergency.

(a)  Fiscal emergency.--A fiscal emergency exists if the

distressed city:

(1)  (i)  is insolvent or is projected to be insolvent

within 180 days or less; or

(ii)  is unable to ensure the continued provision of

vital and necessary services; and

(2)  (i)  has failed to adopt or fully implement the

coordinator's plan; or

(ii)  has failed to adopt or fully implement an

alternative plan that the secretary has approved under

section 246.

(b)  Governor.--Upon making a determination that a state of

fiscal emergency exists, the Governor may declare a state of

fiscal emergency within the distressed city. Immediately upon

making the declaration, the Governor shall:

(1)  Provide written notice of the declaration to the

governing body of the distressed city along with a concise

statement of facts supporting the determination.

(2)  Direct the secretary to, within ten days of the

Governor's declaration, develop an emergency action plan to

ensure that vital and necessary services are maintained

within the city during the state of fiscal emergency.

(c)  Secretary.--In developing the emergency action plan, the

secretary shall consider the financial plan prepared by the

coordinator under Subchapter C of Chapter 2 and any other

available plan or information the secretary deems appropriate

and may employ financial or legal experts to assist in

addressing the fiscal emergency. Notwithstanding any law to the

contrary, the employment of such experts shall not be subject to

contractual competitive bidding procedures.

Section 603.  Notification by the secretary.

(a)  Notice.--Upon completion of the emergency action plan,

the secretary shall cause the plan to be posted on the

department's Internet website and shall provide written notice

of the emergency action plan by overnight delivery service,

providing proof of receipt, to all members of the governing body

and the chief executive officer of the distressed city.

(b)  Publication.--The secretary shall publish once in a

newspaper of general circulation notice that the emergency

action plan has been completed. The notice shall specify the

Internet address of the department's website where the plan is

posted.

Section 604.  Powers of the Governor.

(a)  Powers.--During the state of fiscal emergency, the

Governor may exercise the authority of the elected or appointed

officials of the distressed city or authority as necessary to

ensure the provision of vital and necessary services and may

delegate the authority to the secretary or a designee of the

secretary. The emergency powers of the Governor shall include

the following:

(1)  The power to collect funds payable to the distressed

city and authority and use those funds to pay for vital and

necessary services.

(2)  The power to obtain emergency financial aid for the

distressed city and authority under Chapter 3 to pay for

vital and necessary services.

(3)  The power to enter into contracts and agreements on

behalf of the distressed city and authority to pay for vital

and necessary services.

(4)  The power to modify the emergency action plan as

necessary to ensure the provision of vital and necessary

services.

(5)  Any other power of the elected or appointed

officials of the distressed city or authority to ensure the

provision of vital and necessary services.

(b)  Orders.--The Governor may issue an order to an elected

or appointed official of the distressed city or an authority to

implement any provision of the emergency action plan or refrain

from taking any action that would interfere with the powers

granted to the Governor or the goals of the plan. An order

issued under this subsection shall be enforceable under section

606.

(c)  Authorization prohibited.--Neither this chapter nor the

emergency action plan shall be interpreted to authorize the

Governor to:

(1)  unilaterally levy taxes;

(2)  unilaterally abrogate, alter or otherwise interfere

with a lien, charge, covenant or relative priority that is:

(i)  held by a holder of a debt obligation of a

distressed city; and

(ii)  granted by the contract, law, rule or

regulation governing the debt obligation.

(3)  Unilaterally impair or modify existing bonds, notes,

municipal securities or other uncontested contractual or

legal obligations of the distressed city or authority.

(4)  Authorize the use of the proceeds of the sale,

lease, conveyance, assignment or other use or disposition of

the assets of the distressed city or authorities in a manner

contrary to section 707.

(5)  Pledge the full faith and credit of the

Commonwealth.

Section 605.  Elected and appointed officials.

During a fiscal emergency, the authorities and elected

officials of the distressed city shall continue to carry out the

duties of their respective offices, except that no decision or

action shall conflict with an emergency action plan, order or

exercise of power by the Governor under section 604.

Section 606.  Mandamus.

The Governor may petition Commonwealth Court to issue a writ

of mandamus upon any elected or appointed official of the

distressed city or authority to secure compliance with an order

issued under section 604(b). The court shall grant the relief

requested within 14 days of the filing of the petition if it

determines that the order was issued in compliance with this

chapter.

Section 607.  Consent agreement.

(a)  Negotiations.--Within eight days of the declaration of a

fiscal emergency, the governing body and chief executive officer

of the distressed city shall convene a special public meeting to

negotiate a consent agreement. The meeting shall be attended by

the secretary or secretary's designee. Negotiations among

creditors and any of the parties in this subsection shall be

conducted in accordance with section 223(b).

(b)  Contents.--

(1)  The consent agreement shall incorporate a plan

setting forth measures designed to provide long-term

financial stability to the distressed city after the

termination of the fiscal emergency.

(2)  The consent agreement shall include all of the

following:

(i)  Continued provision of vital and necessary

services.

(ii)  Payment of the financial obligations of the

distressed city and authority. This subparagraph

includes debt obligations, municipal securities, lease

rental obligations, uncontested legal obligations and

consensual modifications of existing obligations.

(iii)  Timely deposit of required payments to the

pension fund for the distressed city and each authority

or the fund in which the distressed city and each

authority participates.

(iv)  Legislative and administrative actions to be

taken by the elected or appointed officials of the

distressed city during the term of the consent agreement.

(3)  The consent agreement may include:

(i)  The sale, lease, conveyance, assignment or other

use or disposition of the assets of the distressed city

or authority.

(ii)  Approval, modification, rejection,

renegotiation or termination of contracts or agreements

of the distressed city or authorities.

(iii)  Execution of new contracts or agreements.

(4)  The consent agreement may not include any of the

following:

(i)  Projections of revenue from a tax or tax rate

not currently authorized by law.

(ii)  Provisions that unilaterally abrogate, alter or

otherwise interfere with a lien, charge, covenant or

relative priority, that is:

(A)  held by a holder of a debt obligation of a

distressed city; and

(B)  granted by the contract, law, rule or

regulation governing the debt obligation.

(iii)  Provisions that unilaterally impair or modify

existing bonds, notes or municipal securities.

(iv)  Provisions that authorize the use of the

proceeds of the sale, lease, conveyance, assignment or

other use or disposition of the assets of the distressed

city or authorities in a manner contrary to section 707.

(v)  Any increase in the rate of an earned income tax

imposed on nonresident workers.

(c)  Ordinance.--Notwithstanding any law to the contrary, the

following shall apply:

(1)  Upon approval by a majority of the governing body of

the distressed city, the consent agreement shall be presented

to the secretary within 20 days of the declaration of fiscal

emergency.

(2)  The secretary shall approve or disapprove the

consent agreement within three days.

(3)  If the secretary determines that the consent

agreement is sufficient to overcome the distressed city's

financial distress and approves the agreement, the governing

body shall enact the consent agreement in the form of an

ordinance within seven days of approval by the secretary.

(4)  The ordinance shall provide that, in the event of a

breach or unilateral modification of the consent decree by

the governing body or an elected or appointed official, the

Governor may institute or reinstitute proceedings under

Chapter 7.

(d)  Consent to proceedings under Chapter 7.-–In addition to

breach or modification of the consent agreement under subsection

(c), the following shall be deemed consent to proceedings under

Chapter 7:

(1)  Failure of the governing body of the distressed city

to convene, or the failure of a quorum of the governing body

to participate in, a special public meeting required by

subsection (a).

(2)  Failure of the governing body or chief executive

officer to enact a valid ordinance under subsection (c).

(3)  Failure of the distressed city to comply with the

consent agreement or provision of an ordinance enacted under

subsection (c).

(4)  Enactment by the distressed city of an amendment to

the ordinance enacted in subsection (c) in violation of

subsection (e).

(e)  Amendment.--The ordinance may be amended upon the

approval of the secretary.

(f)  Collective bargaining.--A collective bargaining

agreement or arbitration settlement executed following enactment

of an ordinance under this section is void to the extent that it

violates, expands or diminishes the provisions of the consent

agreement.

Section 608.  Termination of fiscal emergency and suspension of

powers.

(a)  Financial emergency.--A fiscal emergency shall end upon

certification by the secretary that the city is no longer

financially distressed.

(b)  Governor's powers.--The emergency powers of the Governor

under this chapter shall be suspended upon the enactment and

continued implementation of an ordinance under section 607 or

entry of a judicial order appointing a receiver under section

702.

Section 609.  Restrictions.

(a)  Earned income tax on nonresidents.--A distressed city

subject to this chapter or Chapter 7 may not petition a court of

common pleas for an increase in the rate of an earned income tax

imposed on nonresident workers under section 123(c) until the

secretary terminates the distress status of the city under

section 253.

(b)  Municipal debt adjustment.--A distressed city subject to

this chapter or Chapter 7 may not file a municipal debt

adjustment action under Federal law except to the extent

authorized under Chapter 7.

Section 610.  Applicability.

(a)  Statement.--

(1)  This chapter shall apply only to distressed cities.

(2)  Except as set forth in subsection (b), nothing in

this chapter is intended to limit or otherwise abrogate the

applicability of any other part of this act.

(b)  Conflict.--If there is a conflict between a provision of

this chapter and any other provision of this act, the provision

of this chapter shall prevail.

CHAPTER 7

RECEIVERSHIP IN CITIES OF THE THIRD CLASS

Section 701.  Definitions.

The following words and phrases when used in this chapter

shall have the meanings given to them in this section unless the

context clearly indicates otherwise:

"Authority."  A municipal authority, parking authority or any

other authority or corporate entity that is directly or

indirectly controlled by a distressed city or to which a

distressed city has power of appointment.

"City."  A city of the third class.

"Debt obligations."  Any obligation to pay money, including

amounts owed for payments relating to lease rental debt, debt

service, bonds, notes, guarantees for bonds or notes, trust

indentures or other agreements.

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

financially distressed under section 203(f).

"Fiscal emergency."  A determination made by the Governor

under section 602(b).

"Insolvent."  Unable to meet all financial obligations as

they become due, including payment of debt obligations.

"Vital and necessary services."  Basic and fundamental

municipal services, including any of the following:

(1)  Police and fire services.

(2)  Ambulance and rescue services.

(3)  Water supply and distribution.

(4)  Wastewater services.

(5)  Refuse collection and disposal.

(6)  Snow removal.

(7)  Fulfillment of financial obligations necessary for

the continued provision of one or more basic and fundamental

municipal services, including payroll and pension

obligations, lease rental debt and all other debt

obligations.

Section 702.  Receivership.

(a)  Receiver.--Following the issuance of a declaration of

fiscal emergency under section 602(b), the Governor may direct

the secretary to file a petition in Commonwealth Court to

appoint the individual named in the petition as a receiver for

the distressed city. The court shall have no authority to

appoint anyone other than the individual named in the petition

as the receiver.

(b)  Service and notice.--

(1)  The secretary shall serve the petition upon:

(i)  the governing body of the distressed city;

(ii)  the chief executive officer of the distressed

city; and

(iii)  the governing body of each authority.

(2)  The secretary must publish notice of the filing of

the petition once in a newspaper of general circulation.

(c)  Hearing.--Within 15 days of the failure of the

distressed city to adopt a valid ordinance under section 607,

the Commonwealth Court shall conduct a hearing on the petition.

(d)  Determination.--No later than 60 days following the

filing of a petition under this section, the court shall issue

an order under subsection (e) if it finds by a preponderance of

the evidence that all of the following apply:

(1)  Thirty days have passed since the declaration of a

fiscal emergency.

(2)  There has been a failure by:

(i)  the governing body of the distressed city to

adopt a consent agreement acceptable to the secretary

under section 607;

(ii)  the governing body of the distressed city to

fully implement a consent agreement acceptable to the

secretary under section 607; or

(iii)  an elected or appointed official of the

distressed city or authority to strictly comply with an

order issued by the Governor under section 604.

(3)  A fiscal emergency under section 602(a) continues to

exist.

(e)  Order.--An order issued under subsection (e) shall:

(1)  set forth the findings under subsection (d);

(2)  grant the petition and declares the distressed city

to be in receivership;

(3)  appoint the individual named in the petition to be

the receiver for a period not to exceed two years, subject to

extension under section 710(b);

(4)  direct the receiver to develop a recovery plan under

section 703 and submit it to the court, the governing body of

the distressed city and the secretary; and

(5)  require and empower the receiver to implement the

emergency action plan developed by the secretary under

section 602 until a recovery plan developed by the receiver

is approved by the court under section 703.

Section 703.  Recovery plan.

(a)  Issuance.--Within 30 days of the appointment of the

receiver, the recovery plan required under section 702(e)(4)

shall be furnished to Commonwealth Court, the secretary and the

governing body and chief executive officer of the distressed

city.

(b)  Contents.--The receiver shall consider the plan prepared

by the coordinator under section 241 and any other existing

alternate plans in the development of the recovery plan. The

following shall apply:

(1)  The recovery plan shall provide for all of the

following:

(i)  Continued provision of vital and necessary

services.

(ii)  Payment of the financial obligations of the

distressed city and authorities. This subparagraph

includes debt obligations, municipal securities, lease

rental obligations, uncontested legal obligations and

consensual modifications of existing obligations.

(iii)  Timely deposit of required payments to the

pension fund in which the distressed city and each

authority participates.

(2)  The recovery plan may inlcude:

(i)  the sale, lease, conveyance, assignment or other

use or disposition of the assets of the distressed city

or authority;

(ii)  the approval, modification, rejection,

renegotiation or termination of contracts or agreements

of the distressed city or authorities;

(iii)  the execution of new contracts or agreements;

and

(iv)  other information the receiver deems

appropriate.

(c)  Restrictions.—-The recovery plan may not do any of the

following:

(1)  Unilaterally levy taxes.

(2)  Unilaterally abrogate, alter or otherwise interfere

with a lien, charge, covenant or relative priority that is:

(i)  held by a holder of a debt obligation of a

distressed city; and

(ii)  granted by the contract, law, rule or

regulation governing the debt obligation.

(3)  Unilaterally impair or modify existing bonds, notes

or municipal securities.

(4)  Authorize the use of the proceeds of the sale,

lease, conveyance, assignment or other use or disposition of

the assets of the distressed city or authority in a manner

contrary to section 707.

(d)  Confirmation.--Commonwealth Court shall conduct a

hearing on the recovery plan within 30 days of the receipt of

the plan from the receiver. The court shall confirm the plan

within 60 days of the receipt of the plan unless it finds clear

and convincing evidence that the plan is arbitrary, capricious

or wholly inadequate to alleviate the fiscal emergency in the

distressed city.

(e)  Modification of plan.--The receiver shall notify the

Commonwealth Court of any modification to the plan. The court

may conduct a hearing on the modification within 30 days of its

receipt. The court shall confirm the modification within 60 days

of receipt of the modification unless it finds clear and

convincing evidence that the recovery plan as modified is

arbitrary, capricious or wholly inadequate to alleviate the

fiscal emergency in the distressed city.

Section 704.  Confirmation.

(a)  Effect of confirmation.--The confirmation of the

recovery plan and any modification to the receiver's plan under

section 703 shall have the effect of:

(1)  imposing on the elected and appointed officials of

the distressed city or an authority a mandatory duty to

undertake the acts set forth in the recovery plan;

(2)  suspending the authority of the elected and

appointed officials of the distressed city or an authority to

exercise power on behalf of the distressed city or authority

pursuant to law, charter, ordinance, rule or regulation to

the extent that the power would interfere with the powers

granted to the receiver or the goals of the recovery plan;

and

(3)  superseding the emergency action plan developed by

the secretary under section 602.

(b)  Form of government.--Confirmation of the recovery plan

and any modification to the plan under section 703 shall not be

construed to:

(1)  change the form of government of the distressed city

or an authority; or

(2)  except as set forth in subsection (a), affect powers

and duties of elected and appointed officials of the

distressed city or an authority.

(c)  Collective bargaining.--A collective bargaining

agreement or arbitration settlement executed after confirmation

of a recovery plan is void to the extent that it violates,

expands or diminishes the provisions of the recovery plan.

Section 705.  Receiver.

(a)  Appointment.--The court shall appoint the receiver as

provided under section 702.

(b)  Qualifications.--The receiver shall have the following

qualifications:

(1)  Have a minimum of five years' experience and

demonstrable expertise in business, financial or local or

state budgetary matters.

(2)  Be a resident of this Commonwealth for at least one

year prior to the appointment.

(c)  Vacancy.--A vacancy in the office of the receiver shall

be filled in the same manner as the original appointment.

(d)  Revocation.--Upon application by the secretary, the

appointment of the receiver shall be revoked and the receiver

shall be replaced by the individual named in the application.

The court shall have no authority to appoint anyone other than

the individual named in the application as the receiver.

(e)  Compensation and expenses.--The receiver's compensation

and reimbursement for actual and necessary expenses shall be

paid by the Commonwealth. Compensation shall be established by

the secretary.

(f)  Prohibitions.--The receiver shall not:

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

appointed public official within this Commonwealth or as a

political party officer during the term of the receivership.

(2)  Seek election as a public official or political

party officer for one year after the person's service as

receiver has ended.

(3)  Engage in any conduct prohibited by the act of July

19, 1957 (P.L.1017, No.451), known as the State Adverse

Interest Act, or 65 Pa.C.S. Ch. 11 (relating to ethics

standards and financial disclosure).

(g)  Liability.--The receiver shall not be liable personally

for any obligations of the distressed city. It is declared to be

the intent of the General Assembly that the receiver 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).

Section 706.  Powers, duties and prohibited actions.

(a)  Powers and duties.--Notwithstanding any other provision

of law, the receiver shall have the following powers and duties:

(1)  To require the distressed city to take actions

necessary to implement the recovery plan under section 703.

(2)  To modify the recovery plan as necessary to achieve

financial stability of the distressed city in accordance with

section 703.