PRIOR PRINTER'S NOS. 1372, 1407, 1435

PRINTER'S NO.  1447

  

THE GENERAL ASSEMBLY OF PENNSYLVANIA

  

SENATE BILL

 

No.

1151

Session of

2011

  

  

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

  

  

AS AMENDED ON THIRD CONSIDERATION, JUNE 27, 2011   

  

  

  

AN ACT

  

1

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

2

act empowering the Department of Community Affairs to declare

3

certain municipalities as financially distressed; providing

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for the restructuring of debt of financially distressed

5

municipalities; limiting the ability of financially

6

distressed municipalities to obtain government funding;

7

authorizing municipalities to participate in Federal debt

8

adjustment actions and bankruptcy actions under certain

9

circumstances; and providing for consolidation or merger of

10

contiguous municipalities to relieve financial distress,"

11

further providing for purpose and legislative intent and for

12

Commonwealth agency payments or assistance; providing for 

13

review of coordinator, for the establishment of a management

14

board for distressed third class cities and for powers of

15

management boards; prohibiting distressed third class cities

16

from filing Federal bankruptcy petitions; and making

17

editorial changes.

18

The General Assembly of the Commonwealth of Pennsylvania

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hereby enacts as follows:

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

21

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

22

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

23

paragraph to read:

24

Section 102.  Purpose and legislative intent.

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* * *

 


1

(b)  Legislative intent.--

2

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

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(i)  Enact procedures and provide powers and

4

guidelines to ensure fiscal integrity of municipalities

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while leaving principal responsibility for conducting the

6

governmental affairs of a municipality, including

7

choosing the priorities for and manner of expenditures

8

based on available revenues, to the charge of its elected

9

officials, consistent with the public policy set forth in

10

this section.

11

(ii)  Enact procedures for the adjustment of

12

municipal debt by negotiated agreement with creditors.

13

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

14

sovereign and plenary police power in emergency fiscal

15

conditions to protect the health, safety and welfare of a

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municipality's citizens when local officials are

17

unwilling or unable to accept a solvency plan developed

18

for the benefit of the community.

19

* * *

20

(3)  The General Assembly recognizes that the financial

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conditions of certain distressed municipalities are so severe

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and the policies of those municipalities so ineffective that

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the nonviability of those municipalities threatens the fiscal

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condition and credit stability of other communities. In such

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cases, additional methods of protecting citizens must be

26

implemented, including:

27

(i)  Instituting more direct Commonwealth oversight

28

pursuant to the Commonwealth's power to provide for local

29

government under Article IX of the Constitution of

30

Pennsylvania and through the creation of public

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1

authorities as instrumentalities of the Commonwealth.

2

(ii)  Judicial intervention when necessary to ensure

3

the compliance of the distressed municipality with the

4

provisions of this act.

5

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

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section is amended by adding a subsection to read:

7

Section 251.  Commonwealth agency payments or assistance.

8

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

9

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

10

[secretary] department that a financially distressed

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municipality has failed to adopt a plan or implement an adopted

12

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

13

inadequate to address the municipality's financial distress, the

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municipality shall not receive a grant, loan, entitlement or

15

payment from the Commonwealth or any of its agencies. Moneys

16

withheld shall be held in escrow by the Commonwealth until the

17

[secretary] department has rescinded the certification.

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

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the failure of a distressed city or a management board

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

21

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

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accordance with section 605.

23

* * *

24

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

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Section 254.  Review and investigation of coordinators.

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

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of all coordinators appointed or serving during 2010. The review

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

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Within 30 days of the completed review, the department shall

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determine if the coordinator has failed to develop an adequate

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1

plan or to implement the plan in an appropriate or adequate

2

manner. If the coordinator has failed to develop or implement

3

the plan in an appropriate or adequate manner, the department

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shall remove the coordinator and appoint a new coordinator.

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

6

review of all coordinators appointed for service or serving

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during 2011 and each year thereafter. The review under this

8

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

9

completed review, the department shall determine if the

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coordinator has failed to develop an adequate plan or to

11

implement the plan in an appropriate manner. If the coordinator

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

13

in an appropriate manner, the department shall remove the

14

coordinator and appoint a new coordinator.

15

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

16

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

17

complaint as to the failure of the coordinator to develop an

18

adequate plan or to implement the plan in an appropriate or

19

adequate manner. The complaint must be brought by:

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

21

governing body of the municipality; or

22

(2)  a petition signed by 30 residents of the

23

municipality.

24

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

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CHAPTER 6

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CITIES OF THE THIRD CLASS

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Section 601.  Definitions.

28

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

29

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

30

definitions).

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1

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

<--

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

3

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

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

5

45,000.

6

"Controlled authority."  A municipal authority, parking

7

authority or other authority or corporate entity which is

8

directly or indirectly controlled by a distressed city or to

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which a distressed city has powers of appointment.

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

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

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

13

any controlled authority which is directly or indirectly

14

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

15

indirect power of appointment or has pledged or designated the

16

city's revenues or the city's credit.

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

18

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

19

"Management board."  The city management board.

20

Section 602.  Applicability.

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A distressed city shall be subject to the provisions of this

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

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

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this chapter shall prevail.

25

Section 603.  Management board.

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

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if the secretary determines that a distressed city has either

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failed to adopt or has not implemented the coordinator's plan in

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accordance with sections 245 and 247(a). A distressed city shall

30

be deemed to have failed to adopt the coordinator's plan if it

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1

takes any action to approve an alternative plan under section

2

246.

3

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

4

subsection (a) shall be comprised of the following:

5

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

6

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

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is being appointed.

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(2)  One member appointed by the board of commissioners

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

10

time of appointment and shall maintain county residence while

11

a member of the board.

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

13

of interest prohibited.--

14

(1)  Members of the management board shall not:

15

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

16

appointed public official within this Commonwealth or as

17

a political party officer while in the service of the

18

management board.

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(ii)  Seek election as public officials or political

20

party officers for one year after their service with the

21

management board.

22

(2)  The following apply:

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(i)  No member of the management board may:

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

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an interest in any contract or agreement with the

26

distressed city. The prohibition under this clause

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shall extend to a member's immediate family or a

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business with which he or a member of his immediate

29

family is associated.

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(B)  Use his office or any confidential

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information received through his office for the

2

private pecuniary benefit of himself, a member of his

3

immediate family or a business with which he or a

4

member of his immediate family is associated.

5

(ii)  Any member who willfully violates this

6

paragraph shall forfeit his office and shall be subject

7

to any other criminal and civil sanctions as may be

8

imposed by law. Any contract or agreement knowingly made

9

in contravention of this paragraph shall be void.

10

(c)  Experience and residence.--

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(1)  All members and their designees shall have

12

experience in finance or management.

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(2)  All members and their designees shall be residents

14

of this Commonwealth.

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

16

a determination by the secretary under subsection (a). Members

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

18

years. Members appointed by the Governor shall have a term

19

coterminous with the appointing authority. A member appointed by

20

the county commissioners shall have a term coterminous with the

21

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

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appointing authority who originally appointed the management

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board member whose seat has become vacant shall appoint a

24

successor member within 30 days of the vacancy. A member

25

appointed to fill a vacancy occurring prior to the expiration of

26

a term shall serve the unexpired term.

27

(e)  Organization.--

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

29

the initial organizational meeting of the management board

30

within five days of the appointment of the members of the

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1

management board. The initial organizational meeting shall be

2

held within 15 days of the appointment under subsection (d).

3

(2)  Members shall elect other officers as they deem

4

necessary.

5

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

6

the management board shall meet as frequently as it deems

7

appropriate but at least once during each quarter of the fiscal

8

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

9

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

10

two members of the management board. A majority of the

11

management board shall constitute a quorum. All actions of the

12

management board shall be taken by a majority of the management

13

board. The following statutes shall apply to the management

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board:

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

16

(relating to ethics standards and financial disclosure).

17

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

18

as the State Adverse Interest Act.

19

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

20

the Right-to-Know Law.

21

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

22

remuneration but shall be entitled to reimbursement for all

23

reasonable and necessary expenses.

24

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

25

and other support to the management board. The management board

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may contract for or receive the loan of services of other

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individuals employed by other government agencies.

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

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under this chapter shall constitute a public authority and

30

instrumentality of the Commonwealth, exercising the powers of

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the Commonwealth. The exercise of the powers of the management

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board shall be deemed to be an essential government function.

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

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shall not be liable personally for any obligations of the

5

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

6

Assembly that the management board and its members shall enjoy

7

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

8

(relating to sovereign immunity reaffirmed; specific waiver) and

9

shall remain immune from suit except as provided by and subject

10

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

11

general provisions) and B (relating to actions against

12

Commonwealth parties).

13

(k)  Term of existence.--

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

15

of at least seven years. The management board shall be

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renewed for seven-year terms by the department unless:

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

18

year period and the city's revenues have exceeded

19

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

20

(ii)  the department determines that the city has

21

implemented the coordinator's plan.

22

(2)  Upon termination of the management board, records

23

and documents of the board shall be transferred to the

24

director of finance of the city. Within 60 days of

25

termination, the management board shall submit a final report

26

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

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

28

the House of Representatives.

29

Section 604.  Powers and duties.

30

Notwithstanding any other provision of law, the management

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1

board shall have the following powers and duties:

2

(1)  To require the distressed city to implement the

3

coordinator's plan.

4

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

5

coordinator's plan as necessary to achieve financial

6

stability of the distressed city.

7

(3)  To require the distressed city to negotiate

8

intergovernmental cooperation agreements between the

9

distressed city and other political subdivisions in order to

10

eliminate and avoid deficits, maintain sound budgetary

11

practices and avoid interruption of municipal services.

12

(4)  To make annual reports for submission to the

13

department within 120 days after the close of the distressed

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city's fiscal year.

15

(5)  To require the distressed city to cause the sale,

16

lease or other disposition of the distressed city's assets

17

under section 605.

18

(6)  To approve or disapprove the execution of contracts

19

and agreements by the distressed city in accordance with

<--

20

section 606(a)(2).

21

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

22

action to implement the coordinator's plan.

23

Section 605.  Sale of assets.

24

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

25

authority to determine that it is in the best financial

26

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

27

assets determined by the management board to be nonessential and

28

owned by the distressed city.

29

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

30

shall:

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1

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

2

disposition and direct the appropriate officials of the

3

distressed city to take all action necessary or appropriate

4

for the consummation of the sale, lease or other disposition

5

of assets.

6

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

7

otherwise dispose of assets in conformity with all applicable

8

competitive bidding requirements.

9

(3)  Direct the distressed city to undertake a

10

competitive bidding process, determine the winning bidder and

11

enter into an agreement of sale, lease or other disposition

12

with the winning bidder.

13

(4)  Direct the distressed city to take all action

14

necessary to complete the sale, lease or disposition of the

15

assets.

16

(5)  Direct the distressed city to take all action

17

necessary to complete any pending agreement for the sale,

18

lease or disposition of the assets, subject to approval by

19

the management board.

20

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

21

disposition of assets of a distressed city shall be applied to

22

the payment of any unpaid debt obligations owed by the

23

distressed city, as determined by the management board. Any

24

proceeds remaining after the payment of these obligations shall

25

be applied at the discretion of the management board to

26

restructure or to provide escrow for the payment of the

27

distressed city's future debt obligations.

28

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

29

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

30

plan as directed by the management board, the management board

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1

may take any action necessary to implement the coordinator's

2

plan. The management board may issue written directives to the

3

officials of the distressed city requiring them to perform any

4

act deemed necessary by the management board to properly manage

5

the distressed city's financial affairs and to implement the

6

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

7

mandamus in the court of common pleas where the distressed city

8

is situated to compel compliance with its directives. The court

9

shall grant the petition for mandamus if the court finds that

10

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

11

directives of the management board.

12

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

13

controlled authority is not taking the action necessary to sell,

14

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

15

board members of the controlled authority and appoint new board 

16

members of the controlled authority.

17

Section 606.  Limitation on bankruptcy.

18

Notwithstanding any other provision of law, including section

19

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

20

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

21

or any other Federal bankruptcy law, and no government agency

22

may authorize the distressed city to become a debtor under 11

23

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

24

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

25

act are renumbered to read:

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CHAPTER [6] 20

27

TECHNICAL PROVISIONS

28

Section [601] 2001.  Repeals.

29

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

30

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

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1

repealed insofar as they are inconsistent with this act.

2

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

3

designating the Department of Internal Affairs as the agency of

4

the Commonwealth to approve or disapprove petitions to courts,

5

and plans for the readjustment of debts of political

6

subdivisions, under the act of Congress relating to the

7

bankruptcy of political subdivisions; and defining the powers

8

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

9

insofar as it relates to a municipality as defined in section

10

103 of this act.

11

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

12

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

13

Section [602] 2002.  Expiration.

14

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

15

Pennsylvania Bulletin of the notice required under section

16

121(f).

17

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

18

Section [603] 2003.  Effective date.

19

This act shall take effect in 60 days.

20

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

21

provision of this act or its application to any person or

22

circumstance is held invalid, the invalidity shall not affect

23

other provisions or applications of this act which can be given

24

effect without the invalid provision or application.

25

Section 7.  This act shall take effect immediately.

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