1Amending Title 53 (Municipalities Generally) of the Pennsylvania
2Consolidated Statutes, in indebtedness and borrowing, further
3providing for definitions, for classification and authority
4to issue bonds and notes, for cost of project, for exclusion
5of other self-liquidating debt to determine net nonelectoral
6debt or net lease rental debt and for preliminary
7authorizations as to financing; providing for preliminary
8approval by the department of the issuance of debt; further
9providing for submission to department, for manner of sale of
10bonds or notes, for fees for filing, for certificate of
11approval of transcript, for effect of failure of timely
12action by department, for records of department; providing
13for duty of advisors; further providing for treatment of
14costs upon refunding; providing for the offense of knowingly
15participating in an ultra vires act of a local government
16unit and for the offense of knowingly filing materially false
17or misleading certifications or statements with the
18department; and making a related repeal.

19The General Assembly of the Commonwealth of Pennsylvania
20hereby enacts as follows:

21Section 1. The definition of "self-liquidating debt" in
22subsection (b) of section 8002 of Title 53 of the Pennsylvania
23Consolidated Statutes is amended and subsection (c) is amended
24by adding a definition to read:

25§ 8002. Definitions.

26* * *

1(b) Exclusions from debt.--With respect to exclusions from
2any particular category of debt and subject to additional
3definitions contained in subsequent provisions of this subpart
4which are applicable to specific provisions of this subpart, the
5following words and phrases when used in this subpart shall have
6the meanings given to them in this section unless the context
7clearly indicates otherwise:

8"Self-liquidating debt." Debt payable solely from rents,
9rates or other charges to the ultimate users of the project, to
10be financed in whole or in part by that debt, or payable solely
11from special levies or assessments of benefits lawfully
12earmarked exclusively for that purpose. The term also includes
13debt or any portion thereof at the time qualified as self-
14liquidating pursuant to this subpart, whether or not solely
15payable from those sources. The term "ultimate users" includes
16the local government unit itself only where its use of the
17project is incidental to the use of the project by other users.
18A debt for which payments have been made under a guaranty shall 
19not be considered self-liquidating.

20* * *

21(c) Other definitions.--Subject to additional definitions
22contained in subsequent provisions of this subpart which are
23applicable to specific provisions of this subpart, the following
24words and phrases when used in this subpart shall have the
25meanings given to them in this section unless the context
26clearly indicates otherwise:

27* * *

28"Working capital." An amount which constitutes, under
29generally accepted accounting principles, the cost of the day-
30to-day operations of the project as well as a proper allowance

1for contingencies. Reimbursements under a guaranty or amounts to
2address budgetary deficits not related to the project shall not
3constitute reasonable working capital in connection with the
4incurring of debt under this subpart.

5Section 2. Sections 8005(c) and (d), 8007, 8026(a)(5) and
68102 of Title 53 are amended to read:

7§ 8005. Classification and authority to issue bonds and notes.

8* * *

9(c) Authority to issue bonds and notes and lease rental 
10debt.--Notwithstanding any other law to the contrary, every
11local government unit shall have full power and authority to
12issue bonds or notes, and make guaranties, leases, subsidy
13contracts or other agreements evidencing the acquisition of
14capital assets payable out of taxes and other general revenues,
15to provide funds for and towards the cost of or the cost of
16completing any project or combination of projects which the
17local government unit is authorized to own, acquire, subsidize,
18operate or lease or to participate in owning, acquiring,
19subsidizing, operating or leasing with others, to issue tax
20anticipation notes and funding bonds or notes as provided in
21this subpart and to contract for insurance covering the risks of
22nonpayment of principal, interest and premium of bonds, notes,
23tax anticipation notes and guaranties. Notwithstanding the 
24foregoing, a local government unit may only issue a guaranty of 
25municipal authority debt when the debt is incurred in connection 
26with a loan from the Federal Government, the Pennsylvania 
27Infrastructure Investment Authority or any other instrumentality 
28or agency of the Commonwealth for a water or sanitary sewer 
29project.

30(d) Nature of guaranty and prohibition on fees.--The
 

1following shall apply to a guaranty:

2(1) For the purpose of this subpart, unless debt
3evidenced by a guaranty has been approved as electoral debt
4in accordance with Subchapter C (relating to procedure for
5securing approval of electors), the guaranty shall be deemed
6to be nonelectoral debt if the local government unit
7guaranties its own bonds or notes and shall be deemed to be
8lease rental debt if it guaranties the bonds or notes of an
9authority or another local government unit. For the purpose
10of all other statutes, the guaranty shall be deemed to create
11debt or indebtedness of the local government unit making the
12guaranty.

13(2) A local government unit is prohibited from
14collecting a fee to guaranty the debt of an authority or
15another local government unit.

16§ 8007. Cost of project.

17The cost of a project includes the amount of all payments to
18contractors or for the acquisition of a project or for lands,
19easements, rights and other appurtenances deemed necessary for
20the project, fees of architects, engineers, appraisers,
21consultants, financial advisors and attorneys incurred in
22connection with the project financing costs, costs of necessary
23printing and advertising, costs of preliminary feasibility
24studies and tests, cost estimates and interest on money borrowed
25to finance the project, if capitalized, to the date of
26completion of construction and, if deemed necessary, for one
27year thereafter, amounts to be placed in reserve funds, if any,
28a reasonable initial working capital for operating the project
29and a proper allowance for contingencies and any amount which
30constitutes, under generally accepted accounting principles, a

1cost of, and which has been determined by an independent actuary
2or other expert to be required for the purposes of, a reserve or
3a contribution toward a combined reserve, pool or other
4arrangement for losses or liabilities covered by a self-
5insurance arrangement established by one or more local
6government units. Costs incurred before the fiscal year 
7immediately preceding the date the debt is incurred may not be 
8included in the cost of a project. Reimbursements under a 
9guaranty or amounts to address budgetary deficits not related to 
10the project shall not constitute a cost of a project in 
11connection with the incurring of debt under this subpart.

12§ 8026. Exclusion of other self-liquidating debt to determine
13net nonelectoral debt or net lease rental debt.

14(a) Filings with department.--Self-liquidating debt shall
15not be excluded in determining net nonelectoral debt or net
16lease rental debt for the purpose of establishing net debt of
17either category where the debt is evidenced by general
18obligation bonds or notes, by bonds, notes or other obligations
19of an authority or of another local government unit or by a
20guaranty until there has been filed with and approved by the
21department a report to the local government unit from qualified
22registered engineers or architects or other persons qualified by
23experience appropriate to the project, setting forth:

24* * *

25(5) The estimated net revenues of the project for each
26year of the remaining life of the bonds, notes or obligations
27with a justification for any assumed increase in the gross 
28revenues of more than 5% in any one year and a computation
29showing, in reasonable detail, that the net revenues,
30together with other available funds to be received in respect

1of the project, will be sufficient in each year to pay the
2annual debt service, other than capitalized debt service, on
3the bonds, notes or obligations or a specified aggregate
4principal amount thereof.

5* * *

6§ 8102. Preliminary authorizations as to financing.

7The governing body of a local government unit may express its
8intent to evidence debt as electoral debt, nonelectoral debt or
9lease rental debt. [Action] After obtaining approval by the 
10department under section 8102.1 (relating to preliminary 
11approval by the department of the issuance of debt), if 
12applicable, action may be taken either by resolution, which may
13also provide for the submission of proposals to purchase any
14bonds or notes, or by ordinance. But neither bonds or notes nor
15lease, guaranty, subsidy contract or other agreement evidencing
16lease rental debt shall be authorized other than by the
17enactment of any ordinances required by this subchapter or, in
18the case of notes issued under section 8109 (relating to small
19borrowing for capital purposes), other than by adoption of the
20resolution required under section 8109.

21Section 3. Title 53 is amended by adding a section to read:

22§ 8102.1. Preliminary approval by the department of the
23issuance of debt.

24(a) General rule.--Prior to the adoption of an ordinance or
25resolution authorizing the issuance of any general obligation
26bonds or notes or guaranteed revenue bonds or notes constituting
27nonelectoral debt or any agreement evidencing lease rental debt,
28a local government unit shall obtain a preliminary authorization
29to incur debt from the department. Authorization shall be
30obtained by filing a notice with the department in the form of a

1certificate signed by two officers of the local government unit.
2The certificate shall include a basic description of the
3intended financing. The department may prescribe the form of the
4certificate. The local government unit may not take any action
5to incur the debt until it receives a preliminary approval from
6the department. The department may require the local government
7unit to also provide evidence of any of the following:

8(1) Information satisfactory to the department that the
9local government unit has submitted a current audited
10financial statement. If the department determines that the
11most recent audited financial statements of the local
12government unit do not include a current audited financial
13statement, the department may prohibit the local government
14unit from incurring debt until current audited financial
15statements covering the designated fiscal year or years are
16filed with the department.

17(2) As part of the filing made by the local government
18unit with the department under paragraph (1), information
19demonstrating the type and amount of financial security
20proposed to insure the completion of the project.

21(3) Information satisfactory to the department that the
22local government unit is up to date on all of its municipal
23securities disclosures required under 17 CFR § 240.15c2-12
24(relating to municipal securities disclosure). If the
25department is not satisfied that the local government unit is
26in compliance with such disclosure obligations, the
27department may prohibit the local government unit from
28incurring debt until the local government unit provides the
29department with proof of compliance that is satisfactory to
30the department.

1(4) If the local government unit intends for the
2proposed debt to be self-liquidating, information
3satisfactory to the department that the debt will be self-
4liquidating.

5(5) If the local government unit has existing debt which
6was previously approved by the department as subsidized or
7self-liquidating, information satisfactory to the department
8that the debt continues to be treated as subsidized or self-
9liquidating and that no decrease in the amount to be excluded
10is required by any change in circumstances, other than
11resulting from the payments of the debt, or, if there has
12been a change in circumstances, information demonstrating to
13the satisfaction of the department the amount of debt that
14should continue to be treated as subsidized or self-
15liquidating.

16(6) If the local government unit wishes to issue
17refunding debt for a purpose other than as set forth in
18section 8241(b)(1) (relating to power to refund), information
19satisfactory to the department that the refunding is a sound
20financial transaction and is in the best long-term financial
21interest of the local government unit.

22(7) If the local government unit intends that the debt
23to be issued provides that over 10% of the proceeds of the
24debt will be used for working capital, information
25satisfactory to the department that the financing is a sound
26financial transaction and is in the best long-term financial
27interest of the local government unit.

28(b) Additional information.--After receipt by the department
29of a filing by a local government unit under subsection (a), the
30department may request and the local government unit shall

1provide additional information which the department deems
2necessary to avoid an unsound financial transaction or a
3financial transaction which is not in the best long-term
4financial interest of the local government unit.

5(c) Action by department.--If the department, upon review of
6the filing made by the local government unit under subsection
7(a) and any additional information provided under subsection
8(b), if applicable, finds that:

9(1) The requirements are satisfied in connection with
10the proposed debt, the department shall issue a preliminary
11approval of the debt.

12(2) The requirements are not satisfied in connection
13with the proposed debt, the department shall issue a
14preliminary disapproval of the debt and the local government
15may not proceed to incur the debt.

16(d) Timely action required.--The department shall have 60
17days after receipt of the filing required under subsection (a)
18to issue a preliminary approval or disapproval of the debt.

19(e) Incurrence of debt.--Upon issuance of preliminary
20approval of the department, the local government unit shall have
21six months to incur the debt under this subpart. The bonds or
22notes shall be sold, or instruments evidencing lease rental debt
23delivered, not more than one year following the date of the
24preliminary approval.

25(f) Review.--All determinations by the department under this
26section are reviewable as provided under 2 Pa.C.S. Ch. 7
27(relating to judicial review).

28Section 4. Section 8111(a) of Title 53 is amended by adding
29paragraphs to read:

30§ 8111. Submission to department.

1(a) General rule.--Before delivering any bonds or notes
2other than notes representing small borrowings issued under
3section 8109 (relating to small borrowing for capital purposes),
4the local government unit shall apply for and receive or be
5deemed to have received the approval of the department under
6section 8204 (relating to certificate of approval of transcript)
7or 8206 (relating to effect of failure of timely action by
8department). The application, in such form as the department
9prescribes, shall be accompanied by a transcript of the
10proceedings consisting of certified copies of any of the
11following, not previously filed, which are applicable:

12* * *

13(8) Proof of obtainment of the required financial
14security to insure the completion of the project.

15(9) An itemized statement of all disbursements to be
16made from the proceeds of the borrowing. Not more than 2% of
17debt proceeds may be distributed for the cost of issuing the
18debt.

19* * *

20Section 5. Sections 8161(a), 8203, 8204, 8206 and 8207(a)
21and (c) of Title 53 are amended to read:

22§ 8161. Manner of sale of bonds or notes.

23(a) General rule.--Except as otherwise specifically provided
24in this subpart and subject to subsection (b), bonds or notes
25may be sold at public or private sale by negotiation or upon
26invitation and at the price the governing body of the issuing
27local government unit shall determine. Before making any private
28sale by negotiation of bonds or notes[, the governing body shall
29adopt a resolution finding that a private sale by negotiation
30is] of more than $5,000,000 in any fiscal year, the governing
 

1body shall submit to the department satisfactory evidence that 
2exceeding the limit is necessary and in the best financial
3interest of the local government unit. Bonds or notes may be
4conditionally sold before the final details of the series are
5fixed.

6* * *

7§ 8203. Fees for filing.

8Every filing under this subpart with the department shall be
9accompanied by a filing fee [as determined in section 605-A of 
10the act of April 9, 1929 (P.L.177, No.175), known as The 
11Administrative Code of 1929.] of $250. In addition, the filing 
12shall be accompanied by an additional fee of 1/32 mill on each 
13dollar of the aggregate principal amount of the debt relating to 
14the filing. No submission shall constitute a filing until the
15proper fee is paid. All fees received under this section shall
16be [paid by the department into the State Treasury through the
17Department of Revenue.] deposited into the Local Government Unit 
18Debt Act Administrative Account, established as follows:

19(1) There is hereby established a restricted receipt
20account within the General Fund of the State Treasury which
21shall be known as the Local Government Unit Debt Act
22Administrative Account.

23(2) All moneys in the Local Government Unit Debt Act
24Administrative Account shall be held in trust solely for the
25purpose of defraying the costs of the administration of this
26subpart and shall be earmarked for the use of and annually
27appropriated to the department for disbursement solely for
28that purpose. The account shall be subject to audit by the
29Auditor General.

30§ 8204. Certificate of final approval [of transcript].

1The department shall, upon receipt of any bond or note
2transcripts or other filings, carefully examine them to
3determine whether the debt outstanding and to be outstanding is
4within the applicable limitations imposed by this subpart and
5whether the proceedings for incurring the debt, for issuing and
6selling the bonds or notes and for excluding self-liquidating
7and subsidized debt have been taken in conformity with the
8Constitution of Pennsylvania and this subpart. If, upon
9completion of its examination, a transcript or other filing is
10found by the department to be in conformity with the
11Constitution of Pennsylvania and this subpart, the department
12shall certify its approval to the local government unit if
13required under other provisions of this subpart.

14§ 8206. Effect of failure of timely action by department.

15If the local government unit has submitted [a filing] an 
16application for final approval to the department by certified
17mail, return receipt requested, or otherwise has an official
18receipt from the department, and the local government unit has
19not, within [20] 30 days of the date of receipt of the filing by
20the department, received the certificate of final approval or
21disapproval or notification of correctable error, the filing
22shall be deemed to have been approved for all purposes unless
23the local government unit has extended the time within which the
24department may act by written communication to the department or
25by failure to object to a written communication from the
26department requesting the extension. Extensions shall not exceed
27one additional period of [20] 30 days.

28§ 8207. Records of department.

29(a) Retention period.--The department shall keep all
30proceedings and all applications and statements by a local
 

1government unit under sections 8102.1 (relating to preliminary 
2approval by the department of the issuance of debt) and 8111 
3(relating to submission to department) on file for a period of
4not less than [four months after issuance of its certificate of
5approval or disapproval and thereafter as long as any appeal
6respecting the proceedings is pending and not finally
7determined.] five years after the debt issuance has been paid 
8off by the local government unit. The department shall also keep 
9copies of all documents filed with the department relating to a 
10qualified interest rate management agreement for as long as the 
11qualified interest rate management agreement is in effect.

12* * *

13(c) Records open for inspection.--[The records of the
14department shall be public records available for examination by
15any citizen of this Commonwealth or any bondholders or
16noteholders.] All submissions, determinations and records of the 
17department under this subpart, including those related to 
18qualified interest rate management agreements and including 
19correspondence with the interested parties to any debt 
20proceeding, shall be public records available for examination by 
21any citizen of this Commonwealth, any interested parties or any 
22bondholder or noteholder, including holders of tax anticipation 
23notes, of the local government unit.

24Section 6. Title 53 is amended by adding a section to read:

25§ 8212. Duty of advisors.

26In regards to a transaction under this subpart, an attorney
27or financial advisor to a local government unit shall stand in a
28fiduciary relationship to the local government unit and shall
29perform loyally, in good faith and in a manner the attorney or
30financial advisor reasonably believes to be in the best

1interests of the local government unit. The attorney or
2financial advisor shall act with such care, including reasonable
3inquiry, skill and diligence that a person of ordinary prudence
4would use under similar circumstances.

5Section 7. Section 8242(a) of Title 53 is amended to read:

6§ 8242. Treatment of costs upon refunding.

7(a) General rule.--In any refunding, a principal amount of
8refunding bonds or notes or obligations evidencing lease rental
9debt equal to the sum of the following:

10(1) the call premium payable on the bonds, notes or
11obligations being refunded;

12(2) the discount allowed on the sale of the refunding
13bonds, notes or obligations;

14[(2.1) any funds borrowed in order to pay any
15termination payment required to be paid under a qualified
16interest rate management agreement in which the notional
17amount is identified as corresponding to all or any portion
18of the bond or note being refunded;]

19(3) any funds borrowed to pay interest on bonds, notes
20or obligations being refunded; and

21(4) the costs of issue and sale of the refunding bonds,
22notes or obligations;

23may be considered as interest on the refunding bonds, notes or
24obligations and may be separately stated in all reporting of
25debt and in all computation of debt limits and, if so considered
26and reported by the local government unit, shall not be
27considered as electoral, nonelectoral or lease rental debt. In
28subsequent debt statements, any such separately stated principal
29amount of bonds, notes or obligations shall be reported as being
30amortized in the same proportion as the series of which they are

1a part.

2* * *

3Section 8. Title 53 is amended by adding sections to read:

4§ 8272. Knowingly participating in an ultra vires act of a
5local government unit.

6(a) General rule.--Any officer or any member of the
7governing body of any local government unit or any member of a
8law firm or a financial advisor firm who assists or provides
9advice to a local government unit and who knowingly participates
10in an ultra vires act of a local government unit commits a
11misdemeanor of the second degree and shall, upon conviction, be
12sentenced to pay a fine of not more than $5,000 or to
13imprisonment for not more than two years, or both.

14(b) Prohibition.--A law firm or financial advisor firm which
15has had a member convicted under subsection (a) shall be
16prohibited for two years from assisting a local government unit
17with or providing advice to a local government unit for any
18activity under this subpart.

19(c) Definition.--An act is an "ultra vires act" when the
20local government unit is without authority to perform the act or
21when the act is not explicitly prohibited, but is in excess of
22the authority granted to the local government unit.

23§ 8273. Knowingly filing materially false or misleading
24certifications or statements with the department.

25(a) General rule.--Any officer or any member of the
26governing body of any local government unit or any member of a
27law firm or a financial advisor firm who knowingly files a
28materially false or misleading certification or statement with
29the department commits a misdemeanor of the second degree and
30shall, upon conviction, be sentenced to pay a fine of not more

1than $5,000 or to imprisonment for not more than two years, or
2both.

3(b) Aiding or abetting.--Any officer or any member of the
4governing body of any local government unit or any member of a
5law firm or a financial advisor firm who assists or provides
6advice to a local government unit and who aids or abets in the
7commission of the offense under subsection (a) commits a
8misdemeanor of the second degree and shall, upon conviction, be
9sentenced to pay a fine of not more than $5,000 or to
10imprisonment for not more than two years, or both.

11(c) Prohibition.--A law firm or financial advisor firm which
12has been convicted or which has had a member convicted under
13subsection (b) shall be prohibited for two years from assisting
14a local government unit with or providing advice to a local
15government unit for any activity under this subpart.

16Section 9. Repeals are as follows:

17(1) The General Assembly declares that the repeal under
18paragraph (2) is necessary to effectuate the amendment of 53
19Pa.C.S. § 8203.

20(2) Section 605-A of the act of April 9, 1929 (P.L.177,
21No.175), known as The Administrative Code of 1929, is
22repealed.

23(3) All acts and parts of acts are repealed insofar as
24they are inconsistent with the amendment or addition of 53
25Pa.C.S. §§ 8002(b) and (c), 8005(c) and (d), 8007,
268026(a)(5), 8102, 8102.1, 8111(a), 8161(a), 8203, 8204, 8206,
278207(a) and (c), 8212, 8242(a), 8272 and 8273.

28Section 10. This act shall take effect in 60 days.