<-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 certain debt;
9further providing for small borrowing for capital purposes,
10for debt statement, for submission to department, for fees
11for filing, for certificate of approval of transcript, for
12effect of failure of timely action by department and for
13records of department; providing for duties of participants
14in Local Government Unit Debt Act transactions; and making a
15related repeal.

<-16Amending Title 53 (Municipalities Generally) of the Pennsylvania
17Consolidated Statutes, in indebtedness and borrowing, further
18providing for definitions, for classification and authority
19to issue bonds and notes, for cost of project and for
20exclusion of other self-liquidating debt to determine net
21nonelectoral debt or net lease rental debt; providing for
22preliminary approval by the department of the issuance of
23certain debt; further providing for small borrowing for
24capital purposes, for debt statement, for submission to
25department, for fees for filing, for certificate of approval
26of transcript, for effect of failure of timely action by
27department and for records of department; providing for
28duties of participants in Local Government Unit Debt Act
29transactions; and making a related repeal.

30The General Assembly of the Commonwealth of Pennsylvania
31hereby enacts as follows:

<-1Section 1. The definition of "self-liquidating debt" in
2subsection (b) of section 8002 of Title 53 of the Pennsylvania
3Consolidated Statutes is amended and subsection (c) is amended
4by adding definitions to read:

5§ 8002. Definitions.

6* * *

7(b) Exclusions from debt.--With respect to exclusions from
8any particular category of debt and subject to additional
9definitions contained in subsequent provisions of this subpart
10which are applicable to specific provisions of this subpart, the
11following words and phrases when used in this subpart shall have
12the meanings given to them in this section unless the context
13clearly indicates otherwise:

14"Self-liquidating debt." Debt payable solely from rents,
15rates or other charges to the ultimate users of the project, to
16be financed in whole or in part by that debt, or payable solely
17from special levies or assessments of benefits lawfully
18earmarked exclusively for that purpose. The term also includes
19debt or any portion thereof at the time qualified as self-
20liquidating pursuant to this subpart, whether or not solely
21payable from those sources. The term "ultimate users" includes
22the local government unit itself only where its use of the
23project is incidental to the use of the project by other users.
24A debt with respect to which debt service payments have been
25made under a guaranty of the debt shall not be considered self-
26liquidating.

27* * *

28(c) Other definitions.--Subject to additional definitions
29contained in subsequent provisions of this subpart which are
30applicable to specific provisions of this subpart, the following

1words and phrases when used in this subpart shall have the
2meanings given to them in this section unless the context
3clearly indicates otherwise:

4* * *

5"Financial advisor." A person who for compensation engages
6in the business of advising others, either directly or in
7writing, as to the value of securities, bonds or notes or as to
8the advisability of investing in, purchasing or selling
9securities, bonds or notes. The term does not include an
10attorney, accountant or engineer whose performance of such
11services is solely incidental to the practice of his profession.

12* * *

13"Working capital." An amount which constitutes, under
14generally accepted accounting principles, the cost of the day-
15to-day operations of the project as well as a proper allowance
16for contingencies. Reimbursements under a guaranty or amounts to
17be used to address budgetary deficits of a local government unit 
18or for other purposes not related to the construction or 
19operation of the project do not constitute reasonable working 
20capital in connection with the incurring of debt under this 
21subpart.

22Section 2. Sections 8005(c) and (d), 8007, 8026(a)(5) and
238102 of Title 53 are amended to read:

24§ 8005. Classification and authority to issue bonds and notes.

25* * *

26(c) Authority to issue bonds and notes and lease rental
27debt.--Notwithstanding any other law to the contrary, every
28local government unit shall have full power and authority to
29issue bonds or notes, and make guaranties, leases, subsidy
30contracts or other agreements evidencing the acquisition of

1capital assets payable out of taxes and other general revenues,
2to provide funds for and towards the cost of or the cost of
3completing any project or combination of projects which the
4local government unit is authorized to own, acquire, subsidize,
5operate or lease or to participate in owning, acquiring,
6subsidizing, operating or leasing with others, to issue tax
7anticipation notes and funding bonds or notes as provided in
8this subpart and to contract for insurance covering the risks of
9nonpayment of principal, interest and premium of bonds, notes,
10tax anticipation notes and guaranties. Notwithstanding the
11foregoing, a local government unit may only issue a guaranty of
12debt of an authority when the debt is incurred for a drinking
13water, storm sewer or sanitary sewer project, the debt is
14incurred in connection with a plan or recovery plan approved
15under the act of July 10, 1987 (P.L.246, No.47), known as the
16Municipalities Financial Recovery Act, or successor legislation,
17or the guaranty is necessary to enable the authority to obtain
18the most competitive interest rate available in the marketplace
19as demonstrated by comparables.

20(d) Nature of guaranty and prohibition on fees.--The
21following shall apply to a guaranty:

22(1) For the purpose of this subpart, unless debt
23evidenced by a guaranty has been approved as electoral debt
24in accordance with Subchapter C (relating to procedure for
25securing approval of electors), the guaranty shall be deemed
26to be nonelectoral debt if the local government unit
27guaranties its own bonds or notes and shall be deemed to be
28lease rental debt if it guaranties the bonds or notes of an
29authority or another local government unit. For the purpose
30of all other statutes, the guaranty shall be deemed to create

1debt or indebtedness of the local government unit making the
2guaranty.

3(2) A local government unit is prohibited from
4collecting a fee to guaranty the debt of an authority or
5another local government unit.

6§ 8007. Cost of project.

7The cost of a project includes the amount of all payments to
8contractors or for the acquisition of a project or for lands,
9easements, rights and other appurtenances deemed necessary for
10the project, fees of architects, engineers, appraisers,
11consultants, financial advisors and attorneys incurred in
12connection with the project financing costs, costs of necessary
13printing and advertising, costs of preliminary feasibility
14studies and tests, cost estimates and interest on money borrowed
15to finance the project, if capitalized, to the date of
16completion of construction and, if deemed necessary, for one
17year thereafter, amounts to be placed in reserve funds, if any,
18a reasonable initial working capital for operating the project
19and a proper allowance for contingencies and any amount which
20constitutes, under generally accepted accounting principles, a
21cost of, and which has been determined by an independent actuary
22or other expert to be required for the purposes of, a reserve or
23a contribution toward a combined reserve, pool or other
24arrangement for losses or liabilities covered by a self-
25insurance arrangement established by one or more local
26government units. Costs paid, from sources other than the debt
27that is to be refunded, more than two years before an issuance
28of new debt to finance the costs may not be included in the
29costs of a project financed by the new debt. Reimbursements
30under a guaranty or amounts to be used by a local government

1unit to address budgetary deficits or other purposes not related
2to the project do not constitute a cost of a project in
3connection with the incurring of debt under this subpart. Costs
4that qualify for funding of unfunded debt under section 8130
5(relating to approval by court to fund unfunded debt) may only
6constitute a cost of a project if the local government unit
7complies with the requirements of section 8130.

8§ 8026. Exclusion of other self-liquidating debt to determine
9net nonelectoral debt or net lease rental debt.

10(a) Filings with department.--Self-liquidating debt shall
11not be excluded in determining net nonelectoral debt or net
12lease rental debt for the purpose of establishing net debt of
13either category where the debt is evidenced by general
14obligation bonds or notes, by bonds, notes or other obligations
15of an authority or of another local government unit or by a
16guaranty until there has been filed with and approved by the
17department a report to the local government unit from qualified
18registered engineers or architects or other persons qualified by
19experience appropriate to the project, setting forth:

20* * *

21(5) The estimated net revenues of the project for each
22year of the remaining life of the bonds, notes or obligations
23with a justification for any assumed increase in the gross
24revenues of more than 5% in any one year and a computation
25showing, in reasonable detail, that the net revenues,
26together with other available funds to be received in respect
27of the project, will be sufficient in each year to pay the
28annual debt service, other than capitalized debt service, on
29the bonds, notes or obligations or a specified aggregate
30principal amount thereof.

1* * *

2§ 8102. Preliminary authorizations as to financing.

3The governing body of a local government unit may express its
4intent to evidence debt as electoral debt, nonelectoral debt or
5lease rental debt. [Action] After obtaining approval by the
6department under section 8102.1 (relating to preliminary
7approval by the department of the issuance of debt), if
8applicable, action may be taken either by resolution, which may
9also provide for the submission of proposals to purchase any
10bonds or notes, or by ordinance. But neither bonds or notes nor
11lease, guaranty, subsidy contract or other agreement evidencing
12lease rental debt shall be authorized other than by the
13enactment of any ordinances required by this subchapter or, in
14the case of notes issued under section 8109 (relating to small
15borrowing for capital purposes), other than by adoption of the
16resolution required under section 8109.

17Section 3. Title 53 is amended by adding a section to read:

18§ 8102.1. Preliminary approval by the department of the
19issuance of certain debt.

20(a) General rule.--Except as provided in section 8109
21(relating to small borrowing for capital purposes), prior to the
22enactment of an ordinance or adoption of a resolution
23authorizing the issuance of any general obligation bonds or
24notes or guaranteed revenue bonds or notes constituting
25nonelectoral debt or any agreement evidencing lease rental debt,
26a local government unit shall obtain a preliminary authorization
27to incur debt from the department. Authorization shall be
28obtained by filing a notice with the department in the form of a
29certificate signed by two officers of the local government unit.
30The certificate shall include a basic description of the

1intended financing. The department may prescribe the form of the
2certificate. The local government unit may not take any action
3to incur the debt until it receives a preliminary approval from
4the department. The department may require the local government
5unit to also provide evidence of any of the following:

6(1) Evidence satisfactory to the department that the
7local government unit is current in the filing of its annual
8financial statements with Commonwealth agencies under
9applicable State law.

10(2) A description of the type and amount of payment or
11performance bond, letter or credit or other financial
12security proposed to insure the completion of the project.

13(3) Information satisfactory to the department that the
14local government unit is up to date on all of its municipal
15securities disclosures required under 17 CFR § 240.15c2-12
16(relating to municipal securities disclosure).

17(4) If the local government unit intends for the 
18proposed debt to be self-liquidating or subsidized, evidence 
19satisfactory to the department that the debt will qualify as 
20self-liquidating or subsidized debt, including filings 
21required under section 8024 (relating to exclusion of 
22subsidized debt from net nonelectoral debt or net lease 
23rental debt), 8025 (relating to exclusion of self-liquidating 
24debt evidenced by revenue bonds or notes to determine net 
25nonelectoral debt) or 8026 (relating to exclusion of other 
26self-liquidating debt to determine net nonelectoral debt or 
27net lease rental debt), as applicable.

28(5) If the local government unit has existing debt which
29was previously approved by the department as subsidized or
30self-liquidating, information satisfactory to the department

1that the debt continues to be treated as subsidized or self-
2liquidating and that no decrease in the amount to be excluded
3is required by any change in circumstances, other than
4resulting from the payments of the debt, or, if there has
5been a change in circumstances, information demonstrating to
6the satisfaction of the department the amount of debt that
7should continue to be treated as subsidized or self-
8liquidating.

9(6) If the local government unit wishes to issue
10refunding debt, schedules demonstrating the estimated net
11debt service impact of the transaction and a certification
12that the local government adopted or approved a plan to
13provide the tax or other revenues necessary to pay the debt
14service on the debt.

15(7) The debt statement required by section 8110
16(relating to debt statement).

17(8) A statement of the intended manner of sale of the
18bonds or notes.

19(9) A project cost statement detailing the intended uses
20of debt proceeds.

21(b) Additional information.--After receipt by the department
22of a filing by a local government unit under subsection (a), the
23department may request and the local government unit shall
24provide additional information which the department deems
25necessary to understand the structure and purpose of the 
26proposed transaction, including:

27(1) justification for costs of issuance exceeding 2% of
28the principal amount of the proposed debt;

29(2) justification for the use of more than 10% of the
30proceeds of the debt for working capital; and

1(3) if bonds or notes are to be sold at private sale by
2negotiation, the basis for the local government unit's
3finding that the bonds or notes are in the best financial
4interests 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 30
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
21one year to incur the debt under this subpart. The bonds or
22notes shall be sold, or instruments evidencing lease rental debt
23delivered, not more than two years 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 3.1. Sections 8109(a)(1) and 8110(b) of Title 53 are
29amended to read:

30§ 8109. Small borrowing for capital purposes.

1(a) General rule.--Any local government unit may incur debt
2by resolution rather than by ordinance to be evidenced by notes
3to provide funds for a project as defined in this subpart
4without complying with the requirements of Subchapter A of
5Chapter 82 (relating to Department of Community and Economic
6Development) if:

7(1) The aggregate amount of the debt outstanding at any
8one time shall not exceed the lesser of [$125,000] $250,000
9or 30% of the nonelectoral debt limit as authorized in
10section 8022(a) (relating to limitations on incurring of
11other debt).

12* * *

13§ 8110. Debt statement.

14* * *

15(b) Previously excluded self-liquidating or subsidized
16debt.--Where debt has previously been excluded as self-
17liquidating or subsidized debt, the debt statement shall be
18accompanied by a certification that either:

19(1) no decrease in the amounts to be excluded is
20required by any change of circumstances other than decreases
21resulting from the payments of bonds or notes; or [,if there
22has been a change, other than decreases resulting from the
23payments of bonds or notes, so that less debt is to be
24excluded. If it has become possible to exclude a greater
25amount of debt and the local government unit desires to do
26so, the debt statement shall be accompanied by appropriate
27certificates supporting the revised amount to be excluded,
28and a revised approval shall be obtained from the
29department.]

30(2) a decrease in the amounts to be excluded is required

1due to a change in circumstances, in which case the change in
2circumstances must be described.

3A debt previously established as self-liquidating for which
4payments are made under a guarantee of the local government unit
5is no longer considered self-liquidating unless and until the
6local government unit files with the department a new report
7satisfying the requirements of section 8025 (relating to
8exclusion of self-liquidating debt evidenced by revenue bonds or
9notes to determine net nonelectoral debt) or 8026 (relating to
10exclusion of other self-liquidating debt to determine net
11nonelectoral debt or net lease rental debt), as the case may be.

12Section 4. Section 8111(a) of Title 53 is amended by adding
13paragraphs to read:

14§ 8111. Submission to department.

15(a) General rule.--Before delivering any bonds or notes
16other than notes representing small borrowings issued under
17section 8109 (relating to small borrowing for capital purposes),
18the local government unit shall apply for and receive or be
19deemed to have received the approval of the department under
20section 8204 (relating to certificate of approval of transcript)
21or 8206 (relating to effect of failure of timely action by
22department). The application, in such form as the department
23prescribes, shall be accompanied by a transcript of the
24proceedings consisting of certified copies of any of the
25following, not previously filed, which are applicable:

26* * *

27(8) Written proof of obtainment of or agreement to
28obtain the required financial security to insure the
29completion of the project.

30(9) An itemized statement of all estimated disbursements

1for costs to be made from the proceeds of the borrowing.

2* * *

3Section 5. Sections 8203, 8204, 8206 and 8207(a) and (c) of
4Title 53 are amended to read:

5§ 8203. Fees for filing.

6Every filing under this subpart with the department shall be
7accompanied by a filing fee [as determined in section 605-A of
8the act of April 9, 1929 (P.L.177, No.175), known as The
9Administrative Code of 1929.] of $250. In addition, the filing
10shall be accompanied by an additional fee of 1/32 mill on each
11dollar of the aggregate principal amount of the debt relating to
12the filing. No submission shall constitute a filing until the
13proper fee is paid. All fees received under this section shall
14be [paid by the department into the State Treasury through the
15Department of Revenue.] deposited into the Local Government Unit
16Debt Act Administrative Account, established as follows:

17(1) There is hereby established a restricted receipt
18account within the General Fund of the State Treasury which
19shall be known as the Local Government Unit Debt Act
20Administrative Account.

21(2) All moneys in the Local Government Unit Debt Act
22Administrative Account shall be held in trust solely for the
23purpose of defraying the costs of the administration of this
24subpart and shall be earmarked for the use of and annually
25appropriated to the department for disbursement solely for
26that purpose. The account shall be subject to audit by the
27Auditor General.

28§ 8204. Certificate of final approval [of transcript].

29The department shall, upon receipt of any bond or note
30transcripts or other filings, carefully examine them to

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

12§ 8206. Effect of failure of timely action by department.

13If the local government unit has submitted [a filing] an
14application for final approval to the department by certified
15mail, return receipt requested, or otherwise has an official
16receipt from the department, and the local government unit has
17not, within [20] 30 days of the date of receipt of the filing by
18the department, received the certificate of final approval or
19disapproval or notification of correctable error, the filing
20shall be deemed to have been approved for all purposes unless
21the local government unit has extended the time within which the
22department may act by written communication to the department or
23by failure to object to a written communication from the
24department requesting the extension. Extensions shall not exceed
25one additional period of [20] 30 days.

26§ 8207. Records of department.

27(a) Retention period.--The department shall keep all
28proceedings including all applications and statements by a local
29government unit under sections 8102.1 (relating to preliminary
30approval by the department of the issuance of debt), 8111

1(relating to submission to department) and 8201 (relating to
2certification to department of bond or note transcript or lease,
3guaranty, subsidy contract or other agreement) on file for a
4period of not less than [four months after issuance of its
5certificate of approval or disapproval and thereafter as long as
6any appeal respecting 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. Chapter 82 of Title 53 is amended by adding a
25subchapter to read:

26SUBCHAPTER G

27MISCELLANEOUS PROVISIONS

28§ 8291. Duties of participants in Local Government Unit Debt
29Act transactions.

30(a) Certification of representation.--With regard to each

1transaction under this subpart, an attorney or financial advisor
2shall advise the local government unit in writing as to the
3party being represented by the attorney or financial advisor,
4the source from which the attorney or financial advisor will
5receive compensation for services related to the transaction and
6whether the compensation is dependent upon the issuance of debt
7by the local government unit.

8(b) Fiduciary duty.--An attorney or financial advisor
9retained by or who purports to advise a local government unit
10with regard to a transaction under this subpart shall stand in a
11fiduciary relationship to the local government unit and shall
12perform loyally, in good faith and in a manner the attorney or
13financial advisor reasonably believes to be in the best
14interests of the local government unit. The attorney or
15financial advisor shall act with such care, including reasonable
16inquiry, skill and diligence that a person of ordinary prudence
17would use under similar circumstances and provide opinion both
18as to positive and negative possible impacts of the transaction.
19An attorney or financial advisor in the course of his
20representation is entitled to rely on reasonable representations
21and certifications made to them by architects, engineers and
22other persons retained by and the officers and employees of the
23local government unit in connection with the transaction.

24(c) Ultra vires acts.--An officer or member of the governing
25body of a local government unit or a financial advisor or
26attorney may not knowingly participate in an ultra vires act.
27For purposes of this subsection, an act is ultra vires when:

28(1) the local government unit is without authority to
29perform the act; or

30(2) the act is not explicitly prohibited but is in

1excess of the authority granted to the local government unit.

2(d) Materially false or misleading certifications.--An
3officer or member of the governing body of a local government
4unit or an attorney or financial advisor may not knowingly file
5a materially false or misleading certification or statement with
6the department under this act.

7(e) Penalties.--

8(1) An officer or member of the governing body of a
9local government unit or an attorney or financial advisor who
10aids or participates in the commission of an act prohibited
11in subsection (c) or (d) commits a misdemeanor of the second
12degree and shall, upon conviction, be sentenced to pay a fine
13of not more than $5,000 or to imprisonment for not more than
14two years, or both.

15(2) Notwithstanding paragraph (1), a local government 
16may seek civil judicial redress for a violation of this 
17section that results in damages to the local government unit 
18not caused by the local government unit or its agents. A 
19local government unit shall prohibit or restrict the future 
20participation in transactions under this subpart of an 
21attorney or financial advisor who violates this section and 
22may also prohibit or restrict participation of a firm that 
23employs the attorney or financial advisor for a period not to 
24exceed two years.

25Section 7. Repeals are as follows:

26(1) The General Assembly declares that the repeal under
27paragraph (2) is necessary to effectuate the amendment of 53
28Pa.C.S. § 8203.

29(2) Section 605-A of the act of April 9, 1929 (P.L.177,
30No.175), known as The Administrative Code of 1929, is

1repealed.

2(3) All acts and parts of acts are repealed insofar as
3they are inconsistent with the amendment or addition of 53
4Pa.C.S. §§ 8002(b) and (c), 8005(c) and (d), 8007,
58026(a)(5), 8102, 8102.1, 8111(a), 8203, 8204, 8206, 8207(a)
6and (c) and 8291.

7Section 8. This act shall take effect in 60 days.

<-8Section 1. The definition of "self-liquidating debt" in
9subsection (b) of section 8002 of Title 53 of the Pennsylvania
10Consolidated Statutes is amended and subsection (c) is amended
11by adding definitions to read:

12§ 8002. Definitions.

13* * *

14(b) Exclusions from debt.--With respect to exclusions from
15any particular category of debt and subject to additional
16definitions contained in subsequent provisions of this subpart
17which are applicable to specific provisions of this subpart, the
18following words and phrases when used in this subpart shall have
19the meanings given to them in this section unless the context
20clearly indicates otherwise:

21"Self-liquidating debt." Debt payable solely from rents,
22rates or other charges to the ultimate users of the project, to
23be financed in whole or in part by that debt, or payable solely
24from special levies or assessments of benefits lawfully
25earmarked exclusively for that purpose. The term also includes
26debt or any portion thereof at the time qualified as self-
27liquidating pursuant to this subpart, whether or not solely
28payable from those sources. The term "ultimate users" includes
29the local government unit itself only where its use of the
30project is incidental to the use of the project by other users.

1A debt with respect to which debt service payments have been 
2made under a guaranty of the debt shall not be considered self-
3liquidating.

4* * *

5(c) Other definitions.--Subject to additional definitions
6contained in subsequent provisions of this subpart which are
7applicable to specific provisions of this subpart, the following
8words and phrases when used in this subpart shall have the
9meanings given to them in this section unless the context
10clearly indicates otherwise:

11* * *

12"Financial advisor." A person who for compensation engages
13in the business of advising a local government unit, either
14directly or in writing, as to the value of securities, bonds or
15notes or as to the advisability of investing in, purchasing or
16selling securities, bonds or notes. The term does not include an
17attorney, accountant or engineer whose performance of such
18services is solely incidental to the practice of his profession.
19The term does not include a lender, underwriter or other entity
20purchasing the bonds or notes of a local government unit.

21* * *

22"Working capital." An amount which constitutes, under
23generally accepted accounting principles, the cost of the day-
24to-day operations of the project as well as a proper allowance
25for contingencies. Reimbursements under a guaranty or amounts to
26be used to address budgetary deficits of a local government unit 
27or for other purposes not related to the construction or 
28operation of the project do not constitute reasonable working 
29capital in connection with the incurring of debt under this 
30subpart.

1Section 2. Sections 8005(c) and (d), 8007 and 8026(a)(5) of
2Title 53 are amended to read:

3§ 8005. Classification and authority to issue bonds and notes.

4* * *

5(c) Authority to issue bonds and notes and lease rental 
6debt.--Notwithstanding any other law to the contrary, every
7local government unit shall have full power and authority to
8issue bonds or notes, and make guaranties, leases, subsidy
9contracts or other agreements evidencing the acquisition of
10capital assets payable out of taxes and other general revenues,
11to provide funds for and towards the cost of or the cost of
12completing any project or combination of projects which the
13local government unit is authorized to own, acquire, subsidize,
14operate or lease or to participate in owning, acquiring,
15subsidizing, operating or leasing with others, to issue tax
16anticipation notes and funding bonds or notes as provided in
17this subpart and to contract for insurance covering the risks of
18nonpayment of principal, interest and premium of bonds, notes,
19tax anticipation notes and guaranties.

20(d) Nature of guaranty procedure for issuance and 
21prohibitions.--The following shall apply to a guaranty:

22(1) For the purpose of this subpart, unless debt
23evidenced by a guaranty has been approved as electoral debt
24in accordance with Subchapter C (relating to procedure for
25securing approval of electors), the guaranty shall be deemed
26to be nonelectoral debt if the local government unit
27guaranties its own bonds or notes and shall be deemed to be
28lease rental debt if it guaranties the bonds or notes of an
29authority or another local government unit. For the purpose
30of all other statutes, the guaranty shall be deemed to create

1debt or indebtedness of the local government unit making the
2guaranty.

3(2) A local government unit may only issue a guaranty of
4debt of another local government unit or an authority after
5the initial local government unit has conducted its own due
6diligence to determine the risks involved in the transaction,
7including the impact of the guaranty on the future financial
8condition of the local government unit, the financial
9condition of the entity seeking the guaranty, the sources and
10reliability of revenue to cover the underlying obligation and
11the likelihood of default of the entity seeking the guaranty.
12A guaranty may only be made by vote of the governing body
13after a public meeting at which the initial local government
14unit demonstrates the foregoing due diligence. A local
15government unit may only issue a guaranty to an authority or
16other local government unit for projects which are expressly
17authorized by statute, including projects under section 5607
18(relating to purposes and powers). Notwithstanding the
19foregoing, a local government unit may not issue a guaranty
20to an authority or other local government unit for sums due
21under a qualified interest rate management agreement, nor may
22guaranties be issued for projects which involve untested
23technology or experimentation.

24(3) A local government unit is prohibited from
25collecting a fee to guaranty the debt of an authority or
26another local government unit.

27§ 8007. Cost of project.

28The cost of a project includes the amount of all payments to
29contractors or for the acquisition of a project or for lands,
30easements, rights and other appurtenances deemed necessary for

1the project, fees of architects, engineers, appraisers,
2consultants, financial advisors and attorneys incurred in
3connection with the project financing costs, costs of necessary
4printing and advertising, costs of preliminary feasibility
5studies and tests, cost estimates and interest on money borrowed
6to finance the project, if capitalized, to the date of
7completion of construction and, if deemed necessary, for one
8year thereafter, amounts to be placed in reserve funds, if any,
9a reasonable initial working capital for operating the project
10and a proper allowance for contingencies and any amount which
11constitutes, under generally accepted accounting principles, a
12cost of, and which has been determined by an independent actuary
13or other expert to be required for the purposes of, a reserve or
14a contribution toward a combined reserve, pool or other
15arrangement for losses or liabilities covered by a self-
16insurance arrangement established by one or more local
17government units. Costs paid, from sources other than the debt 
18that is to be refunded, more than two years before an issuance 
19of new debt to finance the costs may not be included in the 
20costs of a project financed by the new debt. Reimbursements 
21under a guaranty or amounts to be used by a local government 
22unit to address budgetary deficits or other purposes not related 
23to the project do not constitute a cost of a project in 
24connection with the incurring of debt under this subpart. Costs 
25that qualify for funding of unfunded debt under section 8130 
26(relating to approval by court to fund unfunded debt) may only 
27constitute a cost of a project if the local government unit 
28complies with the requirements of section 8130.

29§ 8026. Exclusion of other self-liquidating debt to determine
30net nonelectoral debt or net lease rental debt.

1(a) Filings with department.--Self-liquidating debt shall
2not be excluded in determining net nonelectoral debt or net
3lease rental debt for the purpose of establishing net debt of
4either category where the debt is evidenced by general
5obligation bonds or notes, by bonds, notes or other obligations
6of an authority or of another local government unit or by a
7guaranty until there has been filed with and approved by the
8department a report to the local government unit from qualified
9registered engineers or architects or other persons qualified by
10experience appropriate to the project, setting forth:

11* * *

12(5) The estimated net revenues of the project for each
13year of the remaining life of the bonds, notes or obligations
14with a justification for any assumed increase and a
15computation showing, in reasonable detail, that the net
16revenues, together with other available funds to be received
17in respect of the project, will be sufficient in each year to
18pay the annual debt service, other than capitalized debt
19service, on the bonds, notes or obligations or a specified
20aggregate principal amount thereof.

21* * *

22Section 3. Title 53 is amended by adding a section to read:

23§ 8102.1. Preliminary approval by the department of the
24issuance of certain debt.

25(a) General rule.--Prior to the enactment of an ordinance
26authorizing the sale or issuance of any general obligation bonds
27or notes or guaranteed revenue bonds or notes constituting
28nonelectoral debt or any agreement evidencing lease rental debt,
29a local government unit shall obtain a preliminary authorization
30to incur debt from the department. The following debt

1transactions shall be exempt from the requirement to obtain
2preliminary approval under this section:

3(1) Small borrowing for capital purposes as provided in
4section 8109 (relating to small borrowing for capital
5purposes).

6(2) Transactions under Subchapter C of Chapter 82
7(relating to refunding of debt) which consist exclusively of
8the issuance and sale of obligations, the proceeds of which
9are to be used solely for the payment or redemption of
10outstanding obligations upon or prior to maturity and the
11costs of issuing the obligations. A refunding transaction
12which includes a qualified interest rate management agreement
13shall not be exempt from the requirements of this section.

14(b) Authorization.--Authorization shall be obtained by
15filing a notice with the department in the form of a certificate
16signed by two officers of the local government unit. The
17department shall prescribe the form of the certificate which
18shall include a basic description of the intended financing and,
19as applicable, the following:

20(1) Evidence that the local government unit is current
21in the filing of its annual financial statements with
22Commonwealth agencies under applicable State law.

23(2) A description of the intended type and amount of
24payment or performance bond, letter or credit or other
25financial security proposed to insure the completion of the
26project.

27(3) Information that the local government unit is up to
28date on all of its municipal securities disclosures required
29under 17 CFR § 240.15c2-12 (relating to municipal securities
30disclosure).

1(4) If the local government unit intends for the
2proposed debt to be self-liquidating or subsidized,
3information satisfactory to the department that the debt will
4qualify as self-liquidating or subsidized debt, including
5filings required under section 8024 (relating to exclusion of
6subsidized debt from net nonelectoral debt or net lease
7rental debt), 8025 (relating to exclusion of self-liquidating
8debt evidenced by revenue bonds or notes to determine net
9nonelectoral debt) or 8026 (relating to exclusion of other
10self-liquidating debt to determine net nonelectoral debt or
11net lease rental debt), as applicable.

12(5) If the local government unit has existing debt which
13was previously approved by the department as subsidized or
14self-liquidating, information satisfactory to the department
15that the debt continues to be treated as subsidized or self-
16liquidating and that no decrease in the amount to be excluded
17is required by any change in circumstances, other than
18resulting from the payments of the debt, or, if there has
19been a change in circumstances, information demonstrating to
20the satisfaction of the department the amount of debt that
21should continue to be treated as subsidized or self-
22liquidating.

23(6) Schedules demonstrating the estimated net debt
24service impact of the transaction and a certification that
25the local government adopted or approved a plan to provide
26the tax or other revenues necessary to pay the debt service
27on the debt.

28(7) The debt statement required by section 8110
29(relating to debt statement).

30(8) A statement of the intended manner of sale of the

1bonds or notes.

2(9) A project cost statement detailing the intended uses
3of debt proceeds.

4(c) Additional information.--As part of the department's
5review of a filing by a local government unit under subsection
6(b), the department may request and the local government unit
7shall provide additional information regarding any of the
8following:

9(1) justification for costs of issuance exceeding 2% of
10the principal amount of the proposed debt;

11(2) justification for the use of more than 10% of the
12proceeds of the debt for working capital; and

13(3) if bonds or notes are to be sold at private sale by
14negotiation, the basis for the local government unit's
15finding that the bonds or notes are in the best financial
16interests of the local government unit.

17(d) Action by department.--If the department, upon review of
18the filing made by the local government unit under subsection
19(b) and any additional information provided under subsection
20(c), if applicable, finds that:

21(1) The requirements are satisfied in connection with
22the proposed debt, the department shall issue a preliminary
23approval of the debt.

24(2) The requirements are not satisfied in connection
25with the proposed debt, the department shall issue a
26preliminary disapproval of the debt and the local government
27may not proceed to incur the debt until the requirements are
28satisfied.

29(e) Timely action required.--The department shall have 30
30days after receipt of the filing required under subsection (b)

1to issue a preliminary approval or disapproval of the debt. If
2the local government unit has submitted a certificate for
3preliminary approval to the department by certified mail, return
4receipt requested or otherwise has an official receipt from the
5department and the local government unit has not, within 30 days
6of the date of receipt of the filing by the department, received
7the certificate of preliminary approval, disapproval or
8notification of correctable error, the filing shall be deemed to
9have been preliminarily approved for all purposes unless the
10local government unit has extended the time within which the
11department may act by written communication to the department or
12by failure to object to a written communication from the
13department requesting the extension. No extension shall exceed
1415 days.

15(f) Incurrence of debt.--Upon issuance of preliminary
16approval of the department, the local government unit shall have
17one year to incur the debt under this subpart. The bonds or
18notes shall be sold, or instruments evidencing lease rental debt
19delivered, not more than two years following the date of the
20preliminary approval.

21(g) Review.--All determinations by the department under this
22section are reviewable as provided under 2 Pa.C.S. Ch. 7
23(relating to judicial review).

24Section 4. Sections 8109(a)(1) and 8110(b) of Title 53 are
25amended to read:

26§ 8109. Small borrowing for capital purposes.

27(a) General rule.--Any local government unit may incur debt
28by resolution rather than by ordinance to be evidenced by notes
29to provide funds for a project as defined in this subpart
30without complying with the requirements of Subchapter A of

1Chapter 82 (relating to Department of Community and Economic
2Development) if:

3(1) The aggregate amount of the debt outstanding at any
4one time shall not exceed the lesser of [$125,000] $250,000
5or 30% of the nonelectoral debt limit as authorized in
6section 8022(a) (relating to limitations on incurring of
7other debt).

8* * *

9§ 8110. Debt statement.

10* * *

11(b) Previously excluded self-liquidating or subsidized 
12debt.--Where debt has previously been excluded as self-
13liquidating or subsidized debt, the debt statement shall be 
14accompanied by a certification that indicates one of the 
15following:

16(1) no decrease in the amounts to be excluded is 
17required by any change of circumstances [or ,if there has 
18been a change, other than decreases resulting from the 
19payments of bonds or notes, so that less debt is to be 
20excluded. If it has become possible to exclude a greater 
21amount of debt and the local government unit desires to do 
22so, the debt statement shall be accompanied by appropriate 
23certificates supporting the revised amount to be excluded, 
24and a revised approval shall be obtained from the 
25department.];

26(2) a decrease in the amounts to be excluded is required
27due to a change in circumstances, in which case:

28(i) The change in circumstance must be described. If
29it has become possible to exclude a greater amount of
30debt and the local government unit wants to do so, the

1debt statement shall be accompanied by appropriate
2certifications supporting the revised amount to be
3excluded and a revised approval shall be obtained from
4the department.

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

17Section 5. Section 8111(a) of Title 53 is amended by adding
18paragraphs to read:

19§ 8111. Submission to department.

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

1* * *

2(8) A written statement with regard to the manner of
3compliance or intended compliance with the requirements of
4the act of December 20, 1967 (P.L.869, No.385), known as the
5Public Works Contractors' Bond Law of 1967.

6(9) An itemized statement of all estimated disbursements
7for costs to be made from the proceeds of the borrowing.

8* * *

9Section 6. Sections 8203, 8204, 8206 and 8207(a) and (c) of
10Title 53 are amended to read:

11§ 8203. Fees for filing.

12Every filing under this subpart with the department shall be
13accompanied by a filing fee [as determined in section 605-A of 
14the act of April 9, 1929 (P.L.177, No.175), known as The 
15Administrative Code of 1929.] of $250. In addition, the filing 
16shall be accompanied by an additional fee of 1/32 mill on each 
17dollar of the aggregate principal amount of the debt relating to 
18the filing. No submission shall constitute a filing until the
19proper fee is paid. All fees received under this section shall
20be [paid by the department into the State Treasury through the
21Department of Revenue.] deposited into the Local Government Unit 
22Debt Act Administrative Account, established as follows:

23(1) There is hereby established a restricted receipt
24account within the General Fund of the State Treasury which
25shall be known as the Local Government Unit Debt Act
26Administrative Account.

27(2) All moneys in the Local Government Unit Debt Act
28Administrative Account shall be held in trust solely for the
29purpose of defraying the costs of the administration of this
30subpart and shall be earmarked for the use of and annually

1appropriated to the department for disbursement solely for
2that purpose. The account shall be subject to audit by the
3Auditor General.

4(3) The fee shall be waived for borrowings in connection
5with a plan or recovery plan under the act of July 10, 1987
6(P.L.246, No.47), known as the Municipalities Financial
7Recovery Act.

8(4) Fees paid in connection with a filing under section
98102.1 (relating to preliminary approval by the department on
10the issuance of certain debt) shall constitute payment of
11fees due under section 8204 (relating to certificate of
12fiscal approval).

13§ 8204. Certificate of final approval [of transcript].

14The department shall, upon receipt of a submission under 
15section 8111 (relating to submission to department) containing 
16an application for final approval and any bond or note
17transcripts or other filings, carefully examine them to
18determine whether the debt outstanding and to be outstanding is
19within the applicable limitations imposed by this subpart and
20whether the proceedings for incurring the debt, for issuing and
21selling the bonds or notes and for excluding self-liquidating
22and subsidized debt have been taken in conformity with the
23Constitution of Pennsylvania and this subpart. If, upon
24completion of its examination, a transcript or other filing is
25found by the department to be in conformity with the
26Constitution of Pennsylvania and this subpart, the department
27shall certify its approval to the local government unit if
28required under other provisions of this subpart. If the debt 
29requires preliminary approval under section 8102.1 (relating to 
30preliminary approval by the department of the issuance of
 

1certain debt), the certificates and filings related to 
2preliminary approval shall be part of the transcript and a 
3requirement for final approval under this section. If the debt 
4has received preliminary approval under section 8102.1, the 
5department shall provide for a procedure to expedite the 
6processing of final approval.

7§ 8206. Effect of failure of timely action by department.

8If the local government unit has submitted [a filing] an 
9application for final approval to the department by certified
10mail, return receipt requested, or otherwise has an official
11receipt from the department, and the local government unit has
12not, within 20 days of the date of receipt of the filing by the
13department, received the certificate of final approval or
14disapproval or notification of correctable error, the filing
15shall be deemed to have been approved for all purposes unless
16the local government unit has extended the time within which the
17department may act by written communication to the department or
18by failure to object to a written communication from the
19department requesting the extension. Extensions shall not exceed
20one additional period of 20 days.

21§ 8207. Records of department.

22(a) Retention period.--The department shall keep all
23proceedings including all applications and statements by a local 
24government unit under sections 8102.1 (relating to preliminary 
25approval by the department of the issuance of certain debt), 
268111 (relating to submission to department) and 8201 (relating 
27to certification to department of bond or note transcript or 
28lease, guaranty, subsidy contract or other agreement) on file
29for a period of not less than [four months after issuance of its
30certificate of approval or disapproval and thereafter as long as

1any appeal respecting the proceedings is pending and not finally
2determined.] five years after the debt issuance has been paid 
3off by the local government unit. The department shall also keep 
4copies of all documents filed with the department relating to a 
5qualified interest rate management agreement for as long as the 
6qualified interest rate management agreement is in effect.

7* * *

8(c) Records open for inspection.--[The records of the
9department shall be public records available for examination by
10any citizen of this Commonwealth or any bondholders or
11noteholders.] All submissions, determinations and records of the 
12department under this subpart, including those related to 
13qualified interest rate management agreements and including 
14correspondence with the interested parties to any debt 
15proceeding, shall be public records available for examination by 
16any citizen of this Commonwealth, any interested parties or any 
17bondholder or noteholder, including holders of tax anticipation 
18notes, of the local government unit.

19Section 7. Chapter 82 of Title 53 is amended by adding a
20subchapter to read:

21SUBCHAPTER G

22MISCELLANEOUS PROVISIONS

23Sec.

248291. Duties of participants in Local Government Unit Debt Act
25transactions.

26§ 8291. Duties of participants in Local Government Unit Debt
27Act transactions.

28(a) Declaration of representation.--With regard to each
29transaction under this subchapter, each attorney or financial
30advisor involved in the transaction shall provide a written

1declaration to the local government unit as to which party is
2being represented by the attorney or financial advisor, the
3source from which the attorney or financial advisor will receive
4compensation for services related to the transaction and whether
5the compensation is dependent upon the issuance of debt by the
6local government unit. A full time employee of the local
7government unit shall not be required to file a declaration
8under this subsection.

9(b) Fiduciary duty.--An attorney or financial advisor
10retained by or who in subsection (a) purports to represent a
11local government unit with regard to a transaction under this
12subpart shall stand in a fiduciary relationship to the local
13government unit and shall perform loyally, in good faith and in
14a manner the attorney or financial advisor reasonably believes
15to be in the best interests of the local government unit. The
16attorney or financial advisor shall act with such care,
17including reasonable inquiry, skill and diligence that a person
18of ordinary prudence would use under similar circumstances and
19provide opinion both as to positive and negative possible
20impacts of the transaction. An attorney or financial advisor in
21the course of the representation is entitled to rely on
22reasonable representations and certifications made to the
23attorney or financial advisor by architects, engineers and other
24persons retained by and the officers and employees of the local
25government unit in connection with the transaction. For
26attorneys licensed to practice law in this Commonwealth, this
27duty shall be interpreted to be consistent with Supreme Court
28rule of professional conduct pertaining to attorney fiduciary
29relationships. For financial advisors retained by a local
30government unit, this duty shall be in addition to any fiduciary

1duty which may be imposed by Federal law.

2(c) Ultra vires acts.--An officer or member of the governing
3body of a local government unit or a financial advisor or
4attorney may not knowingly participate in an ultra vires act.
5For purposes of this subsection, an act is ultra vires when:

6(1) the local government unit is without authority to
7perform the act; or

8(2) the act is in excess of the authority granted to the
9local government unit.

10(d) Materially false or misleading certifications.--An
11officer or member of the governing body of a local government
12unit or an attorney or financial advisor may not knowingly file
13a materially false or misleading certification or statement with
14the department under this act.

15(e) Penalties.--

16(1) An officer or member of the governing body of a
17local government unit or an attorney or financial advisor who
18aids or participates in the commission of an act prohibited
19in subsection (c) or (d) commits a misdemeanor of the second
20degree and shall, upon conviction, be sentenced to pay a fine
21of not more than $5,000 or to imprisonment for not more than
22two years, or both.

23(2) Notwithstanding paragraph (1), a local government 
24may seek civil judicial redress for a violation of this 
25section that results in damages to the local government unit 
26not caused by the local government unit or its agents. A 
27local government unit shall prohibit or restrict the future 
28participation in transactions under this subpart of an 
29individual attorney or financial advisor who violates this 
30section and may also prohibit or restrict participation of a
 

1firm that employs the attorney or financial advisor for a 
2period not to exceed two years.

3Section 8. Repeals are as follows:

4(1) The General Assembly declares that the repeal under
5paragraph (2) is necessary to effectuate the amendment of 53
6Pa.C.S. § 8203.

7(2) Section 605-A of the act of April 9, 1929 (P.L.177,
8No.175), known as The Administrative Code of 1929, is
9repealed.

10(3) All acts and parts of acts are repealed insofar as
11they are inconsistent with the amendment or addition of 53
12Pa.C.S. §§ 8002(b) and (c), 8005(c) and (d), 8007,
138026(a)(5), 8102.1, 8111(a), 8203, 8204, 8206, 8207(a) and
14(c) and 8291.

15Section 9. This act shall take effect in 60 days.