SENATE AMENDED
PRIOR PRINTER'S NO. 33, 1066, 1178 PRINTER'S NO. 1066
No. 32 Session of 1981
INTRODUCED BY LEVI, FRYER, A. C. FOSTER, JR. AND DeMEDIO,
JANUARY 19, 1981
SENATOR CORMAN, LOCAL GOVERNMENT, IN SENATE, AS AMENDED,
MARCH 24, 1981
AN ACT
1 Amending the act of July 12, 1972 (P.L.781, No.185) entitled, as
2 amended, "An act providing debt limits for local government
3 units, including municipalities and school districts;
4 providing the methods of incurring, evidencing, securing and
5 collecting debt; defining the powers and duties of the
6 Department of Community Affairs and certain other public
7 officers and agencies with respect thereto; exercising the
8 inherent legislative authority of the General Assembly by
9 providing additional over-all limitations on the incurring of
10 lease rental and other obligations for the acquisition of
11 capital assets to be repaid from the general tax revenues of
12 such local government units; imposing penalties for filing
13 false or untrue statements or refusing to give information
14 with respect to proceedings for the incurring of debt; and
15 conferring jurisdiction on the Commonwealth Court with
16 respect to certain proceedings relating to the incurring of
17 debt," making technical and editorial changes.
18 The General Assembly of the Commonwealth of Pennsylvania
19 hereby enacts as follows:
20 Section 1. Clause (1.1) of subsection (c) of section 102,
21 subsections (d) and (e) SUBSECTION (D) of section 202, section <--
22 205, clause (7) of subsection (b) of section 208, subsection (d)
23 of section 303, section 304, clause (1) of section 403,
24 subsection (a) of section 409, subsection (b) of section 410,
1 clause (1) of section 414, the heading of Article V, sections
2 501, 502, 503, 504, 505, 507, 508, 509 and 510, subsections (b)
3 and (c) of section 602, sections 606, 701, 706 and 804,
4 subsection (b) of section 807, subsection (a) of section 809,
5 subsection (a) of section 901, the heading of Article X, <--
6 subsection (c) of section 1006, clause (4) of section 1102,
7 sections 1201 and 1202 SECTION 1201, subsections (b) and (c) of <--
8 section 1203 and sections 1204 and 1301, act of July 12, 1972
9 (P.L.781, No.185), known as the "Local Government Unit Debt
10 Act," reenacted and amended April 28, 1978 (P.L.124, No.52), are
11 amended to read:
12 Section 102. Definitions.--* * *
13 (c) As used in this act unless the context clearly otherwise
14 requires:
15 * * *
16 (1.1) "Authority" means an authority or nonprofit
17 corporation organized under any law of the Commonwealth by or on
18 behalf of the Commonwealth, any local government unit or jointly
19 by any one or more of the foregoing.
20 * * *
21 Section 202. Limitations on the Incurring of Other Debt.--
22 * * *
23 (d) Additional nonelectoral or additional lease rental debt
24 or both in the aggregate amount of one hundred per cent of the
25 borrowing base may be incurred:
26 (i) by a county which has assumed, either before or after
27 the effective date of this act, county-wide responsibility for;
28 or
29 (ii) where the county has not assumed county-wide
30 responsibility, by a local government unit which has, either
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1 before or after the effective date of this act, assumed
2 responsibility for its and its adjacent areas; for hospitals and
3 other public health services, air and water pollution control,
4 flood control, environmental protection, water distribution and
5 supply systems, sewage and refuse collection and disposal
6 systems, education at any level, highways, public transportation
7 or port operations, but such additional debt limit may be so
8 utilized only to provide funds for and towards the cost of
9 capital facilities for any or any combination of the foregoing
10 purposes. Debt, other than electoral debt, at any time incurred
11 for such purposes or any of them, may be assigned by ordinance
12 to this additional debt limit, if the remaining borrowing
13 capacity within the regular limits is insufficient to finance
14 other projects deemed necessary by the governing body of the
15 local government unit.
16 (e) If replacement of assets is required as a result of <--
17 fire, flood, storm, war, riot, civil commotion or other
18 catastrophe, or such replacement or any improvements are
19 required for the prevention of dangers to health or safety, or
20 if funds are required for the payment of tort liability not
21 covered by insurance, or if funds are required to be used for
22 and towards the costs of mandated installations of health,
23 safety, anti-pollution, environmental protection and control
24 facilities or of complying with other mandated Federal or
25 Commonwealth programs, a local government unit not having
26 sufficient remaining borrowing capacity as nonelectoral or lease
27 rental debt or being otherwise prohibited by section 305 from
28 incurring debt for the purpose, upon petition to the court of
29 common pleas alleging the catastrophe, or the danger to health
30 and safety, or the mandated nature of the program and the
19810H0032B1066 - 3 -
1 estimated costs of the proposed facilities, and upon proof
2 thereof to the satisfaction of the court, shall be authorized,
3 notwithstanding section 305 or the insufficiency of nonelectoral
4 or lease rental borrowing capacity, to incur debt, as either
5 lease rental or nonelectoral debt, up to an additional fifty per
6 cent of its borrowing base, if such increase is found by the
7 court to have been made necessary under this subsection by
8 reason of the causes set forth in the petition. The increase
9 together with all outstanding other additional emergency debt
10 which may have been previously authorized under this subsection
11 (excluding any allocated to the additional debt limit under
12 subsection (d) of this section) shall not exceed fifty per cent
13 of the borrowing base. Public notice of the intention to file
14 such a petition and of the purpose for which the additional
15 emergency debt is to be incurred shall be given by advertisement
16 in at least one and not more than two papers of general
17 circulation and in the legal journal not less than five nor more
18 than twenty days before the filing thereof. Such additional
19 emergency debt may be incurred only for the purposes and upon
20 the terms approved by the court. The amount of such debt
21 initially in excess of the regular debt limits shall not
22 thereafter be included in computing net amounts of nonelectoral
23 or lease rental debt.
24 * * * <--
25 Section 205. Procedure for Exclusion of Self-liquidating
26 Debt Evidenced by Revenue Bonds or Notes to Determine Net
27 Nonelectoral Debt.--Self-liquidating debt evidenced by revenue
28 bonds or notes shall not be excluded from nonelectoral debt for
29 the purpose of establishing net nonelectoral debt until there
30 has been filed with the department:
19810H0032B1066 - 4 -
1 (1) A statement by the proper officials of the local
2 government unit certifying the amount of such debt, the project
3 for which it was incurred, and the nature of the revenues from
4 which such debt is to be repaid[;].
5 (2) A certificate from a qualified professional engineer or
6 architect, or other person qualified by experience as may be
7 appropriate to the project estimating the revenues and operating
8 expenses of the project, and showing that the net revenues so
9 estimated will be sufficient to pay the annual debt service as
10 it falls due.
11 (3) An opinion of the bond counsel approving the issue, to
12 the effect that the holders of the bonds or notes have no claim
13 upon the taxing power or tax revenues of the local government
14 unit issuing the bonds or notes, but only claims upon the
15 specific revenues pledged and rights to the enforcement of any
16 covenants as to the levying or collection of rates and charges
17 for the use of the project being financed or any covenants as to
18 the assessment of benefits upon properties serviceable by the
19 project as provided in such covenants with the holders of the
20 revenue bonds.
21 Section 208. Determination of Existing Net Nonelectoral Debt
22 and Net Nonelectoral Plus Net Lease Rental Debt.--* * *
23 (b) Net nonelectoral and net lease rental debt shall then be
24 determined by subtracting separately from gross nonelectoral
25 debt and gross lease rental debt respectively, as may be
26 applicable, and as the local government unit may desire to
27 claim:
28 * * *
29 (7) All other solvent debts due the local government unit
30 directly, the payment of which can be enforced as one of the
19810H0032B1066 - 5 -
1 unit's quick assets, and which have not been committed to any
2 other purpose; and
3 * * *
4 Section 303. Conduct of Election.--* * *
5 (d) The election officers and clerks shall make return on
6 forms provided by the county board of elections of the votes
7 cast on such question to the county board of elections, which
8 shall compute the same and transmit a certified return thereof
9 to the governing body of the local government unit which shall
10 enter the same on its minutes. If such certified return shows
11 that a majority of those voting on such question have voted in
12 favor thereof, irrespective of any other law requiring a greater
13 percentage, the local government unit shall file with the
14 department a certified copy of the [desired] desire resolution,
15 the certified return and proofs of publication of the notice of
16 election, whereupon the amount of such debt so approved shall
17 constitute electoral debt from and after the date of the
18 election, subject to the provisions of section 304.
19 Section 304. Finality of Result of Election.--Any interested
20 party or any taxpayer may contest the validity of any election
21 proceedings under this Article III by filing with the [Court]
22 court a petition in the nature of a bill in equity, specifically
23 alleging the error or errors complained of in the proceedings,
24 and the petitioner shall have the burden of proof. If no such
25 petition has been filed or if a petition shall have been filed
26 and shall have been finally dismissed, the election shall be
27 conclusively deemed to be valid for all purposes. If prior to
28 the timely filing of a petition, further proceedings in
29 connection with the incurring of such debt shall have been filed
30 with the department, then any contest shall proceed by way of an
19810H0032B1066 - 6 -
1 appeal from the action of the department upon such proceedings.
2 The petition or appeal provided by this section shall be such
3 party's, or such taxpayer's, sole and exclusive remedy.
4 Section 403. Contents of Ordinance Authorizing Issuance of
5 Bonds or Notes or Instruments Evidencing Lease Rental Debt;
6 Fixing the Date of Incurring Nonelectoral and Lease Rental Debt;
7 Changes in Purpose of Nonelectoral General Obligation Bonds.--
8 The ordinance or ordinances or, in the case of notes issued
9 under section 409, the resolution, authorizing the issuance of
10 bonds or notes or the execution of a lease, guaranty, subsidy
11 contract or other agreement evidencing lease rental debt by a
12 local government unit shall contain, in substance:
13 (1) In all cases, including lease rental debt:
14 (i) A brief description of the project for which the debt is
15 to be incurred, and, if a capital project, a realistic estimated
16 useful life thereof;
17 (ii) A statement of the aggregate principal amount of bonds
18 or notes proposed to be issued pursuant to the ordinance or, as
19 the case may be, to be secured by the instrument evidencing
20 lease rental debt;
21 (iii) A statement whether the debt is to be incurred as
22 electoral debt, nonelectoral debt or lease rental debt;
23 (iv) An authorization and direction to a specified officer
24 or specified officers and their successors to prepare and
25 certify and[;], except in the case of notes issued under section
26 409, to file the debt statement required by section 410 of this
27 act, to execute and deliver the bonds or notes or the instrument
28 evidencing lease rental debt; and to take other necessary
29 action, and such designation may be changed from time to time
30 thereafter; and
19810H0032B1066 - 7 -
1 (v) An authorization, in the case of nonelectoral or lease
2 rental debt which is subject to exclusion as subsidized debt or
3 self-liquidating debt if such exclusion is presently desired, to
4 the proper officers of the local government unit to prepare and
5 file any statements required by Article II of this act which are
6 necessary to qualify all or any portion of the debt for
7 exclusion from the appropriate debt limit as self-liquidating
8 debt or subsidized debt.
9 * * *
10 Section 409. Small Borrowing for Capital Purposes.--(a) Any
11 local government unit is hereby authorized to incur debt by
12 resolution rather than by ordinance to be evidenced by notes to
13 provide funds for a project as defined in this act without
14 complying with the requirements of Article VIII provided: (i)
15 that the aggregate amount of such debt outstanding at any one
16 time shall not exceed the lesser of $50,000 or thirty percent of
17 the borrowing base; (ii) that the principal of each such debt
18 shall mature not later than five years from the date of
19 issuance; (iii) that the incurrence of such debt shall not cause
20 the debt limits of Article II to be exceeded; and (iv) that the
21 provisions of section 10 of Article IX of the Constitution shall
22 have been observed and provided further that the provisions of
23 section 808 shall apply to notes issued in violation of the
24 foregoing requirements.
25 * * *
26 Section 410. Debt Statement.--* * *
27 (b) Where debt has previously been excluded as self-
28 liquidating or subsidized debt, the debt statement shall be
29 accompanied by a certification that no decrease in the amounts
30 to be excluded is required by any change of circumstances, or if
19810H0032B1066 - 8 -
1 there has been a change, other than decreases resulting from the
2 payments of bonds or notes, so that less debt is to be excluded
3 or if it has become possible to exclude a greater amount of
4 debt, and the local government unit desires to do so, the debt
5 statement shall be accompanied by appropriate certificates
6 supporting the revised amount to be excluded and a revised
7 approval shall be obtained from the department. [and filed in
8 the office for the recording of deeds in the county in which
9 such local government unit is located to effectuate such
10 exclusion.]
11 Section 414. Evidence of Signatures of Holders and of
12 Ownership of Bonds, Notes and Tax Anticipation Notes.--* * *
13 (1) The certificate shall state that the person or persons
14 signing such instrument were known to be such persons by the
15 individual certifying and that such person or persons
16 acknowledged the execution of the instrument as his or their
17 act. The authority of an attorney or agent may be proven by like
18 statement of the principal acknowledged in a like manner, but a
19 certificate as to authority shall not be necessary if an
20 instrument is executed on behalf of a corporate holder of bonds,
21 notes or coupons by a person purporting to be the president or a
22 vice-president of such corporation with the corporate seal
23 affixed and attested by a person purporting to be its secretary
24 or an assistant secretary.
25 The fact and date of the execution by the holder of any
26 bond, note or coupon, or the attorney thereof, of any instrument
27 may be proved by the certificate, which, except as hereinafter
28 provided, need not be acknowledged or verified, of:
29 (i) an officer of any bank or bank and trust company which
30 is in Pennsylvania, or which has a correspondent in Pennsylvania
19810H0032B1066 - 9 -
1 certifying to the authenticity of its certificate;
2 (ii) an authorized signer for any broker or dealer in
3 securities doing business in Pennsylvania, or having a
4 correspondent in Pennsylvania certifying to the authenticity of
5 its certificate;
6 (iii) any notary public or other officer authorized to take
7 acknowledgments of deeds to be recorded in the state in which he
8 purports to act;
9 (iv) any other witness to such execution, whose certificate,
10 however, must be verified before a notary public or other
11 officer authorized to take acknowledgments of deeds in the state
12 in which he purports to act.
13 * * *
14 ARTICLE V
15 Tax and Revenue Anticipation Notes and Funding Debt
16 Section 501. Power to Issue Tax and Revenue Anticipation
17 Notes.--A local government unit shall have power and authority,
18 by resolution of its governing body, to borrow money from time
19 to time in any fiscal year in anticipation of the receipt of
20 current taxes or current revenues, or both, to evidence the
21 obligation by notes, appropriately designated, and to authorize,
22 issue and sell such notes in the manner, and subject to the
23 limitations provided therefor in this article. References in
24 this act to tax anticipation notes include also revenue
25 anticipation notes and tax and revenue anticipation notes.
26 Limitations imposed by this act on the incurring of nonelectoral
27 debt shall not apply to the obligations evidenced by tax
28 anticipation notes. Such power to borrow from time to time shall
29 include but not be limited to, the power to make a single
30 authorization and then issue and sell portions of such amount of
19810H0032B1066 - 10 -
1 authorized notes whenever desired during the fiscal year.
2 Section 502. Limitation on Amount of Tax and Revenue
3 Anticipation Notes.--No local government unit shall authorize or
4 issue tax anticipation notes in any one fiscal year which in the
5 aggregate shall exceed eighty-five per cent of:
6 (1) in the case of notes solely payable from and secured by
7 a pledge of taxes, the amount of such taxes levied for the
8 current fiscal year;
9 (2) in the case of notes solely payable from and secured by
10 a pledge of revenues other than tax revenues, the amount of such
11 revenues pledged; or
12 (3) in the case of notes payable from and secured by a
13 pledge of taxes and other revenues, the sum of such taxes levied
14 and such revenues pledged, which, in all cases, are certified,
15 pursuant to section 506, as remaining to be collected or
16 received in such fiscal year during the period when the notes
17 will be outstanding. The certificate shall be as of a date not
18 more than thirty days prior to, and no later than, the date of
19 the vote on the resolution authorizing the issue and sale of the
20 tax anticipation notes. In computing the aggregate amount of tax
21 anticipation notes outstanding at any given time during the
22 fiscal year for the purpose of the limitation imposed by this
23 section, allowance shall be made for such notes as have already
24 been fully paid and for amounts already paid into appropriate
25 sinking funds, if any.
26 Section 503. Limitation on Stated Maturity Date of Tax and
27 Revenue Anticipation Notes; Time of Payment of Interest.--No tax
28 anticipation notes shall be stated to mature beyond the last day
29 of the fiscal year in which such tax anticipation notes are
30 issued. Interest on tax anticipation notes from the date thereof
19810H0032B1066 - 11 -
1 shall be payable at the maturity of such notes or payable in
2 installments at such earlier dates and at such annual rate or
3 rates as the governing body of the local government unit may
4 determine.
5 Section 504. Other Terms of Tax and Revenue Anticipation
6 Notes.--Tax anticipation notes shall be issued in such
7 denominations, shall be subject to such rights of prior
8 redemption, shall have such privileges of interchange and
9 registration, shall be dated, shall be stated to mature (subject
10 to the provisions of section 503) on such dates and in such
11 amounts, shall be in registered or bearer form with or without
12 coupons, shall be payable in such coin or currency as at the
13 place and at the time of payment shall be legal tender for the
14 payment of public and private debts, and shall be payable at
15 such place or places, one of which shall be within the
16 Commonwealth of Pennsylvania, all as the governing body of the
17 issuing local government unit may determine by resolution.
18 Section 505. Security for Tax and Revenue Anticipation
19 Notes; Sinking Fund.--All tax anticipation notes issued in a
20 single fiscal year, shall be equally and ratably secured by the
21 pledge of, security interest in, and a lien and charge on, the
22 taxes or revenues or both of the local government unit specified
23 in the authorizing resolution to be received during the period
24 when the notes will be outstanding. Such pledge, lien and charge
25 shall be fully perfected as against the local government unit,
26 all creditors thereof, and all third parties in accordance with
27 the terms of such resolution from and after the filing of a
28 financing statement or statements in accordance with the Uniform
29 Commercial Code. For the purpose of such filing the sinking fund
30 depositary, if any, otherwise the fiscal agent or paying agent
19810H0032B1066 - 12 -
1 designated in the notes, may act as the representative of
2 noteholders and, in such capacity, execute and file the
3 financing statement and any continuation or termination
4 statements as secured party. The authorizing resolution may
5 establish one or more sinking funds and provide for periodic or
6 other deposits therein, and may contain such covenants or other
7 provisions as the local government unit shall determine. The
8 amount of any tax anticipation notes issued in compliance with
9 this act shall be general obligations of the local government
10 unit and, if the same shall not be paid within the fiscal year
11 in which such notes were issued, shall be deemed to be
12 nonelectoral debt enforceable in the manner of a general
13 obligation which unless funded pursuant to this article, shall
14 be included in the budget of the local government unit for the
15 ensuing fiscal year and shall be payable from the taxes and
16 revenues of such ensuing year notwithstanding that the amount
17 thereof shall cause the nonelectoral debt of such local
18 government unit to exceed the limitations of Article II.
19 The holder of such tax anticipation notes issued by a first
20 class school district or the sinking fund depositary of the
21 applicable sinking fund, if any, therefor shall have the right
22 to enforce such pledge of, security interest in and lien and
23 charge on, the pledged taxes and revenues of the first class
24 school district against all State and local public officials in
25 possession of any of such taxes and revenues at any time which
26 may be collected directly from such officials upon notice by
27 such holder or depositary for application to the payment thereof
28 as and when due or for deposit in the applicable sinking fund at
29 the times and in the amounts specified in such tax anticipation
30 notes. Any State or local public official in possession of any
19810H0032B1066 - 13 -
1 of such taxes and revenues shall make payment, against receipt
2 therefor, directly to the holder of such tax anticipation notes
3 or to such depositary upon such notice and shall thereby be
4 discharged from any further liability or responsibility for such
5 taxes and revenues. If such payment shall be to a holder of tax
6 anticipation notes, it shall be made against surrender of the
7 notes to the payor for delivery to the first class school
8 district in the case of payment in full, otherwise it shall be
9 made against production of the notes for notation thereon of the
10 amount of the payment. The provisions of this paragraph with
11 respect to the enforceability and collection of taxes and
12 revenues which secure tax anticipation notes of a first class
13 school district shall supersede any contrary or inconsistent
14 statutory provision or rule of law. This paragraph shall be
15 construed and applied to fulfill the legislative purpose of
16 clarifying and facilitating temporary borrowings by a first
17 class school district by assuring to holders of tax anticipation
18 notes the full and immediate benefit of the security therefor
19 without delay, diminishment or interference based on any
20 statute, decision, ordinance or administrative rule or practice.
21 Section 507. Sale of Tax and Revenue Anticipation Notes.--
22 Tax anticipation notes may be sold at public, private, or
23 invited sale as the governing body of the local government unit
24 may determine. Any public sale shall be advertised and conducted
25 in the manner and subject to the conditions provided for a
26 public sale of bonds in Article VII of this act, except as
27 modified by this Article V. The governing body of the local
28 government unit shall award the notes by resolution to specified
29 purchasers at a specified price, not less than the principal
30 amount thereof. At the time of delivery of each issue, series or
19810H0032B1066 - 14 -
1 subseries of tax anticipation notes, authorized officers of the
2 local government unit shall certify to the original purchasers
3 thereof that the amount of all such notes to remain outstanding
4 will not exceed the limitations of section 502 calculated,
5 however, from the date of such certificate to the respective
6 maturity dates of all such notes to remain outstanding. Such
7 certificate need not be filed with the department but a copy
8 thereof shall be retained by the local government unit until all
9 tax anticipation notes issued during the fiscal year shall have
10 been paid in full.
11 Section 508. Condition Precedent to Validity of Tax and
12 Revenue Anticipation Notes.--No tax anticipation note shall be
13 valid or obligatory in the hands of an original purchaser
14 thereof until certified copies of the authorizing and awarding
15 resolution, the certificate as to the taxes and revenues
16 remaining to be collected, and a true copy of the accepted
17 proposal for the purchase of the tax anticipation notes shall
18 have been filed with the department. No approval of the
19 department shall be required.
20 Section 509. Unfunded Debt.--For the purpose of this
21 article, unfunded debt shall mean obligations of the same or [a]
22 one or more prior [year] years incurred for current expenses
23 (including tax anticipation notes), due and owing or judgments
24 against the local government unit entered by a court of
25 competent jurisdiction after adversary proceedings, for the
26 payment of either of which category the taxes and other revenues
27 remaining to be collected in the fiscal year and funds on hand
28 will not be sufficient without a curtailment of municipal
29 services to an extent endangering the health or safety of the
30 public or proper education of school children, and the local
19810H0032B1066 - 15 -
1 government unit either may not legally levy a sufficient tax for
2 the balance of the fiscal year, or a sufficient tax, if legally
3 leviable, would not be in the public interest. Unfunded debt
4 shall not, however, include debt incurred under this act nor
5 obligations in respect of a project or part of a project as
6 defined in section 102(c)(12) or incurred in respect of the cost
7 of a project as defined in section 107.
8 Section 510. Approval by Court.--(a) Whenever the governing
9 body of a local government unit shall be of the opinion that it
10 has outstanding unfunded debt, it may, by petition to the court
11 of common pleas setting forth the facts, request approval for
12 the issuance of bonds or notes to fund the unfunded debt. After
13 hearing, on such notice to the local government unit and its
14 taxpayers as the court may prescribe, the court shall make an
15 order granting authority to fund all or a part of such unfunded
16 debt if the court shall find that such unfunded debt is a lawful
17 obligation of the local government unit, that there has been an
18 unforeseeable decline in revenues, or that taxes levied have not
19 produced the revenues anticipated or that it was not reasonable
20 to foresee such obligation; that paying such debt by curtailing
21 municipal services will be dangerous to the public health,
22 safety or education, and that it is not feasible or not in the
23 public interest to levy additional taxes in the current fiscal
24 year. The funding debt so approved shall be stated to mature in
25 such amounts and over such number of years, not exceeding ten,
26 as the court shall find will accomplish the payment of the debt
27 without endangering the rendering of municipal services or
28 requiring the levying of excessive taxes. If the funding of the
29 unfunded debt has not been approved by a vote of the electors,
30 the order of the court upon cause shown may fix the portion
19810H0032B1066 - 16 -
1 thereof, if any, which shall not be charged against the
2 nonelectoral debt limitations of the local government unit under
3 sections 202 and 505 of this act, during the time such funding
4 debt is outstanding. [The percentages fixed by section 202 of
5 this act shall be deemed increased to the extent required for
6 such funding debt.]
7 (b) The bonds or notes representing funding debt so
8 authorized by the court shall be issued and sold by the
9 governing body as provided by other provisions of this act in
10 respect of general obligation bonds except as such provisions
11 are modified by this section or by orders of the court issued
12 under this section, and the proceedings filed by the local
13 government unit in respect of such funding bonds under section
14 801 shall include certified copies of the petition and of the
15 order of the court.
16 (c) This section shall not be applicable to the funding of
17 obligations in respect of a project or part of a project as
18 defined in section 102(c)(12) or incurred in respect of the cost
19 of a project as defined in section 107.
20 Section 602. Limitations on Stated Maturity Dates.--* * *
21 (b) Bonds or notes may be serial bonds or notes, or term
22 bonds or notes or any combination thereof that may be selected
23 by the governing body of the issuing local government unit. If
24 term bonds or notes are issued, such bonds or notes must be
25 subject to mandatory redemption, and, if serial or installment
26 bonds or notes, the amounts of the stated maturities or
27 installments shall be fixed, (1) so as to amortize the issue on
28 at least an approximately level annual debt service plan during
29 the period specified for the payment of principal in subsection
30 (c) of this section 602; or (2) so that the debt service on
19810H0032B1066 - 17 -
1 outstanding debt of the same classification (and for this
2 purpose lease rental debt shall be considered as the same
3 classification as general obligation debt) will be brought more
4 nearly into an over-all level annual debt service plan.
5 (c) Except as provided by subsection (e), stated
6 installments or maturities of principal of any series of bonds
7 or notes or the mandatory redemption of such principal may not
8 be deferred beyond the later of:
9 (1) two years from date of issue, or
10 (2) one year after estimated completion of construction[:].
11 In the case of revenue or guaranteed revenue bonds this
12 provision will be satisfied by a covenant for the mandatory
13 application to term bonds [or] of such revenues as may remain
14 after payment of interest and operating expenses up to such
15 fixed amount conforming to subsection (b) above as shall be
16 specified in the ordinance pursuant to which the bonds or notes
17 are issued.
18 * * *
19 Section 606. Pledge of Revenues.--The governing body of any
20 local government unit which has determined to issue any revenue
21 bonds or notes, or any guaranteed revenue bonds or notes, may
22 provide, by ordinance, for such pledges of or priorities in such
23 rentals, revenues, receipts, rates and charges to be received
24 from projects of the issuing local government unit as may be
25 desirable. Such pledge or priority shall be perfected as a
26 security interest against all creditors of the local government
27 unit and all third parties, in accordance with the terms of such
28 ordinance, from and after the filing of a financing statement or
29 statements in accordance with the Uniform Commercial Code. For
30 the purpose of such filing the sinking fund depositary may act
19810H0032B1066 - 18 -
1 as representative of the bond or note holders and, in such
2 capacity, execute and file the financing statement and any
3 continuation or termination statements as secured party.
4 Section 701. Manner of Sale of Bonds or Notes.--(a) Except
5 as otherwise specifically provided in this act and subject to
6 the following subsection, bonds or notes may be sold at public
7 sale or private sale by negotiation or upon invitation and at
8 such price all as the governing body of the issuing local
9 government unit shall determine. Before making any private sale
10 by negotiation of bonds or notes, the governing body shall adopt
11 a resolution finding that a private sale by negotiation is in
12 the best financial interest of the local government unit. Bonds
13 or notes may be conditionally sold before the final details of
14 the series are fixed.
15 (b) Bonds or notes, if sold at public sale, shall be sold to
16 the highest responsible bidder or bidders after one public
17 notice by advertisement of either the official notice of sale,
18 or of the availability of the official notice of sale, in at
19 least one and not more than two newspapers of general
20 circulation in the county in which the local government unit is
21 located. The advertisement may also be published in a financial
22 journal circulating among the underwriters of securities.
23 Advertisements shall be published not less than ten nor more
24 than thirty days prior to the date fixed for opening proposals,
25 and need not appear on the same date nor successively in each
26 newspaper or journal.
27 Section 706. Required Bid Security.--[Bid] In the case of
28 public sale, bid security shall be given by each bidder, shall
29 be in cash or by certified or official bank check payable to the
30 local government unit, and shall be not less than two per cent
19810H0032B1066 - 19 -
1 of the principal amount of the bonds or notes to be purchased.
2 The bid security of the unsuccessful bidder or bidders shall be
3 returned to each unsuccessful bidder, without interest in
4 accordance with written instructions of the bidder conforming to
5 the official notice of sale, promptly upon an award of the bonds
6 or notes or upon the rejection of all bids. The bid security of
7 the successful bidder shall be retained by the treasurer of the
8 local government unit and (with or without allowance for
9 interest as the official notice of sale may specify) shall be
10 applied on the purchase price when the bonds or notes are
11 actually delivered and paid for, retained as liquidated damages
12 if the bidder defaults, or returned to the bidder with interest
13 at the judgment rate if, after an acceptance of the proposal,
14 the bonds or notes are not issued for any reason not
15 constituting a default by the bidder. Unless required by the
16 local governing body, no bid security shall be required in the
17 case of tax anticipation notes, bond anticipation notes or notes
18 to be issued under section 409.
19 Section 804. Examination of Bond or Note Transcript and
20 Other Filings by Department; Certificate of Approval.--The
21 department shall, upon receipt of any bond or note transcripts,
22 or other filings, carefully examine the same to determine
23 whether the debt outstanding and to be outstanding is within the
24 applicable limitations imposed by this act, and whether the
25 proceedings for incurring the debt, for issuing and selling the
26 bonds or notes and for excluding self-liquidating and subsidized
27 debt have been taken in conformity with the Constitution and
28 [all then applicable laws] this act. If, upon completion of its
29 examination, a transcript or other filing is found by the
30 department to be in conformity with the Constitution and
19810H0032B1066 - 20 -
1 [existing laws] this act, the department shall certify its
2 approval, if required under other provisions of this act, to the
3 local government unit.
4 Section 807. Records of Department.--* * *
5 (b) The department shall keep a public record, with respect
6 to each local government unit showing:
7 (1) The name of the local government unit;
8 (2) The purpose of each series issued or lease executed;
9 (3) Whether such series represents nonelectoral, lease
10 rental or electoral debt, and the extent to which such debt is
11 subsidized or self-liquidating, and if subsidized or self-
12 liquidating in part the principal amount thereby eliminated from
13 nonelectoral debt;
14 (4) The schedule of stated maturity dates, interest rates
15 and mandatory sinking fund payments for each outstanding issue
16 of bonds or notes or the schedule of lease rentals;
17 (5) The dates and designations of each issue of bonds or
18 notes, lease or other document to be executed with the approval
19 number assigned to each such issue, lease or other document
20 approved;
21 (6) The local government unit's most recently certified
22 borrowing base and regular debt limits computed therefrom;
23 (7) The date and manner of authorization of any use of any
24 additional debt limit.
25 * * *
26 Section 809. Finality of Proceedings; Validity of Bonds,
27 Notes, Tax Anticipation Notes, Leases, Guaranties, Subsidy
28 Contracts or Other Agreements.--(a) Where a certificate of
29 approval has been issued by the department or has been deemed
30 issued under section 806, or, in the case of tax anticipation
19810H0032B1066 - 21 -
1 notes where the filing with the department required by section
2 508 has occurred, and no petition for a declaratory order or
3 complaint has been filed within the applicable time limits
4 specified in section 901, or when after a petition for a
5 declaratory order or complaint has been filed, the proceedings
6 have been approved finally by [the court,] the department, and
7 no appeal to court has been taken, or an appeal to court has
8 been taken, and the proceedings have been approved finally by
9 the court or the appeal has been dismissed, the validity of the
10 proceedings, the right of the local government unit lawfully to
11 issue its bonds or notes or to enter into a lease, guaranty,
12 subsidy contract or other agreement evidencing lease rental debt
13 pursuant to such proceedings, and the validity and due
14 enforceability of the bonds, notes or other instruments in
15 accordance with their terms shall not thereafter be inquired
16 into judicially, in equity, at law, or by civil or criminal
17 proceedings, or otherwise, either directly or collaterally. The
18 effect of the approval by the department, or by the court on
19 appeal, or, in the case of tax anticipation notes, the effect of
20 filing in compliance with section 508, shall be to ratify,
21 validate and confirm such proceedings absolutely, including the
22 lawful nature of the project and, in the case of tax
23 anticipation notes, the accuracy of the estimates contained in
24 the certificate as to taxes and revenues to be collected,
25 notwithstanding any defect or error in such proceedings, except
26 as specifically provided hereinafter in this section, and any
27 debt limit imposed by this act shall be deemed increased to the
28 extent necessary to validate such debt or obligation. Nothing
29 herein contained shall, however, free an initial purchaser of
30 bonds or notes from liability to a local government unit for the
19810H0032B1066 - 22 -
1 payment of the consideration agreed in the contract of sale, or
2 make all such bonds or notes valid and enforceable in the hands
3 of an initial purchaser unless the issuer shall have received a
4 substantial consideration for the series as a whole.
5 * * *
6 Section 901. Petitions for Declaratory Orders and Complaints
7 to the Department; Exclusive Jurisdiction of Department.--(a)
8 Where proceedings for the incurring of debt represented by bonds
9 or notes or by a lease, guaranty, subsidy contract or other
10 agreement evidencing the acquisition of a capital asset, for the
11 issuance of tax anticipation notes, or for the exclusion of debt
12 as self-liquidating or subsidized, have been taken by a local
13 government unit, such local government unit, or any taxpayer of
14 the local government unit, or other interested party may file
15 with the department a petition for a declaratory order asserting
16 the validity or a complaint asserting the invalidity of such
17 proceedings, or any part thereof. Any such complaint asserting
18 the invalidity of such proceedings or part thereof taken under
19 section 409 may be filed at any time not later than one year
20 after final adoption of the resolution authorizing the debt. Any
21 such complaint asserting the invalidity of such proceedings or
22 part thereof excluding debt as self-liquidating under section
23 205 or authorizing tax anticipation notes under Article V may be
24 filed at any time not later than fifteen days after the filing
25 with the department of the documents required by section 205 or
26 of the proceedings pursuant to section 506, as the case may be.
27 Any such complaint asserting the invalidity of any such
28 proceedings or part thereof in cases in which, under this act,
29 the approval or deemed approval of the department is required,
30 may be filed with the department at any time not later than the
19810H0032B1066 - 23 -
1 later of (i) fifteen days after the date of the submission of
2 the proceedings by the local government unit to the department
3 for approval even though such proceeding may be subject to
4 correction as provided in section 805 or otherwise or (ii) five
5 days after the date of the last submission of any such corrected
6 document or certification to the department.
7 If a petition for a declaratory order or complaint shall be
8 filed in respect of proceedings requiring the approval of the
9 department after the submission of the proceedings to the
10 department but prior to approval, disapproval or deemed
11 approval, the department shall not be deemed to have approved
12 the proceedings during the pendency of the matter before the
13 department.
14 * * * <--
15 (B) EXCLUSIVE JURISDICTION IS HEREBY CONFERRED ON THE <--
16 DEPARTMENT TO HEAR AND DETERMINE ALL PROCEDURAL AND SUBSTANTIVE
17 MATTERS ARISING FROM THE PROCEEDINGS OF A LOCAL GOVERNMENT UNIT
18 TAKEN PURSUANT TO THIS ACT, INCLUDING WITHOUT LIMITATION, THE
19 REGULARITY OF THE PROCEEDINGS, THE VALIDITY OF THE BONDS, NOTES,
20 TAX ANTICIPATION NOTES OR OTHER OBLIGATIONS OF THE LOCAL
21 GOVERNMENT UNIT, AND THE LEGALITY OF THE PURPOSE FOR WHICH SUCH
22 OBLIGATIONS ARE TO BE ISSUED. IF A LOCAL GOVERNMENT UNIT SHALL
23 FILE A PETITION FOR A DECLARATORY ORDER WITH THE DEPARTMENT,
24 RELATING TO SUCH PROCEEDINGS, THE DEPARTMENT MAY REQUIRE SUCH
25 SERVICE BY PUBLICATION ON TAXPAYERS AS THE CIRCUMSTANCES
26 WARRANT. IN ALL OTHER RESPECTS THE PROCEEDINGS BEFORE THE
27 DEPARTMENT SHALL BE GOVERNED BY REGULATIONS OF THE DEPARTMENT.
28 THE DEPARTMENT SHALL HAVE THE POWER, AFTER APPROPRIATE
29 PROCEEDINGS IN ACCORDANCE WITH SUCH REGULATIONS, TO APPROVE OR
30 DISAPPROVE THE PROCEEDINGS OF THE LOCAL GOVERNMENT UNIT OR TO
19810H0032B1066 - 24 -
1 DIRECT CORRECTION AS PROVIDED IN SECTION 805. A DETERMINATION BY
2 THE DEPARTMENT UNDER THIS ACT SHALL, EXCEPT AS PROVIDED IN
3 [SECTION 902] THIS SUBSECTION, BE CONCLUSIVE AND BINDING AS TO
4 ALL PROCEDURAL AND SUBSTANTIVE MATTERS WHICH WERE OR COULD HAVE
5 BEEN PRESENTED TO THE DEPARTMENT HEREUNDER. [A DETERMINATION IN
6 FAVOR OF THE LOCAL GOVERNMENT UNIT UNDER THIS SECTION SHALL HAVE
7 THE EFFECT PROVIDED IN SECTION 809.] ALL DETERMINATIONS BY THE
8 DEPARTMENT UNDER THIS ACT ARE REVIEWABLE AS PROVIDED IN 2
9 PA.C.S. CH. 7 (RELATING TO JUDICIAL REVIEW).
10 ARTICLE X
11 Sinking and Assessment Funds[:]; Reserves
12 and Pledged Revenues
13 Section 1006. Inspection of Sinking Funds; Orders to
14 Comply.--* * *
15 (c) In addition to the criminal prosecutions provided for in
16 Article XIII of this act, or in lieu thereof, the department
17 may, in its discretion, apply to the [Court] court for a writ of
18 mandamus to issue to such officer or governing body of the local
19 government unit to compel compliance with such order of the
20 department or such order with such modifications thereof as to
21 the court may seem just and proper.
22 Section 1102. Treatment of Costs Upon a Refunding.--In any
23 refunding, a principal amount of refunding bonds or notes or
24 obligations evidencing lease rental debt equal to the sum of the
25 following:
26 * * *
27 (4) The costs of issue and sale of the refunding bonds,
28 notes or obligations; may be considered as interest on the
29 refunding bonds, notes or obligations, may be separately stated
30 in all reporting of debt, and in all computation of debt limits
19810H0032B1066 - 25 -
1 and if so considered and reported by the local government unit
2 shall not be considered as electoral, nonelectoral or lease
3 rental debt. In subsequent debt statements, any such separately
4 stated principal amount of bonds, notes or obligations shall be
5 reported as being amortized in the same proportion as the series
6 of which they are a part.
7 * * *
8 Section 1201. Failure to Budget Debt Service.--If a local
9 government unit having outstanding any general obligation bonds
10 or notes or guaranteed revenue bonds or notes, lease rental debt
11 or guaranty of authority obligations fails or refuses to make
12 adequate provision in its budget for any fiscal year for the
13 sums payable in respect of such bonds or notes, lease rental or
14 guaranty in such year or shall fail to appropriate or pay the
15 moneys necessary in such year for the payment of the amount of
16 the lease rental or guaranty, [or] as the case may be, of the
17 maturing principal of and the interest on such bonds or notes or
18 any of them, or any tax anticipation notes, or any sinking fund
19 obligation for such bonds or notes or tax anticipation notes, or
20 guaranty or the lease rental payment coming due in the fiscal
21 year of such budget or for which such appropriations or payments
22 should have been made, then at the suit of the holder of any
23 bond, note, or tax anticipation note, or coupon or guaranty, or
24 the holder of any authority obligation secured by a lease
25 evidencing the acquisition of a capital asset or of any taxpayer
26 of the local government unit, the court of common pleas shall,
27 after a hearing held upon such notice to the local government
28 unit as the court may direct, and upon a finding of such failure
29 or neglect, by writ of mandamus, require the treasurer of the
30 local government unit, and it shall be the duty of such
19810H0032B1066 - 26 -
1 treasurer, to pay into the sinking fund for each series of bonds
2 or notes then outstanding, or for each guaranty or lease rental
3 payment, the first tax moneys or other available revenues or
4 moneys thereafter received in such fiscal year by such
5 treasurer, equally and ratably for each series for which
6 provision has not been made in proportion to debt service for
7 such year on each such series then outstanding, or the amounts
8 due upon guaranties or as payments with respect to lease rental
9 debt, as the case may be, (except that any priority on incoming
10 tax moneys accorded to a separate sinking fund for tax
11 anticipation notes under the authority of section 505, shall not
12 be affected by this provision), until the sum on deposit in each
13 sinking fund shall equal the moneys that should have been
14 budgeted or appropriated for each such series.
15 Section 1202. Failure to Pay Principal or Interest.--(a) If <--
16 a local government unit fails or neglects to pay or cause to be
17 paid the interest or principal on any of its general obligation
18 bonds or notes, or tax anticipation notes, as the same becomes
19 due and payable whether at the stated maturity date or upon an
20 unrevoked call for prior redemption, or to perform its payment
21 obligations with respect to any lease rental debt or guaranteed
22 revenue bonds or notes, and such failure shall continue for
23 thirty days, the holder thereof shall, subject to priorities
24 created under sections 505, 1201 and 1203 of this act and to any
25 limitations upon individual rights of action properly provided
26 in the bond ordinance or any indenture, have the right to
27 recover the amount due in an action in the court of common
28 pleas. The judgment recovered shall have an appropriate priority
29 upon the moneys next coming into the treasury of the local
30 government unit and shall be a judgment upon which funding bonds
19810H0032B1066 - 27 -
1 may be issued pursuant to Article V of this act.
2 (b) If a local government unit fails or neglects to pay or
3 cause to be paid the principal of or the interest upon any
4 revenue bond or note as the same shall become due, whether at
5 the stated maturity or upon call for prior redemption, the
6 holder thereof shall, subject to priorities created under
7 sections 505, 1202 and 1203 of this act and to any limitations
8 upon individual rights of action properly provided in the bond
9 ordinance or any indenture, have the right to recover the amount
10 due in an action in the court of common pleas but the judgment
11 shall be limited to payment out of the assessments, revenues,
12 rates, rents, tolls and charges from the project which are
13 pledged for the payment of such bonds or notes.
14 Section 1203. Trustee for Bondholders.--* * *
15 (b) Such trustee may, and upon written request of the
16 holders of twenty-five per cent in principal amount of such
17 bonds or notes then outstanding and upon being furnished with
18 [identity] indemnity satisfactory to it shall, in his or its own
19 name take one or more of the actions set forth below and the
20 taking of such actions shall preclude similar action whether
21 previously or subsequently initiated by individual holders of
22 bonds or notes.
23 (1) By mandamus or other suit, action or proceeding at law
24 or in equity enforce all rights of the holders of the bonds or
25 notes, including in the case of revenue or guaranteed revenue
26 obligations the right to require the local government unit to
27 impose and collect rents, rates, tolls and charges adequate to
28 carry out any agreement or covenant as to, or pledge of such
29 rents, rates, tolls or charges, for the use of the project or
30 projects financed by such bonds or notes, or to require the
19810H0032B1066 - 28 -
1 local government unit to carry out any other agreements with the
2 holders of such bonds or notes;
3 (2) Bring suit on the bonds or notes without the necessity
4 for producing the bonds or notes, and with same effect as a suit
5 by any holder;
6 (3) In the case of revenue or guaranteed revenue bonds or
7 notes to require the local government unit to account as if it
8 were the trustee of an express trust for the holders of such
9 bonds or notes, for any pledged revenues received;
10 (4) In the case of general obligation bonds or notes,
11 petition the court to levy, and the court is hereby empowered to
12 levy, after a hearing upon such notice to the owners of
13 assessable real estate, as the court may prescribe, the amount
14 due before or after the exercise of any right of acceleration on
15 the bonds or notes plus estimated costs of collection as an
16 assessment upon the properties benefited by the improvement
17 pursuant to the front foot rule if the project is an assessable
18 improvement, otherwise upon all taxable real estate and other
19 property subject to ad valorem taxation in the local government
20 unit, in proportion to the value thereof as assessed for tax
21 purposes, and the trustee may collect or cause the local
22 government unit to collect, such assessments as by foreclosure
23 of a mortgage or security interest on the realty or other
24 property if not paid on demand;
25 (5) In the case of guaranteed revenue bonds or notes or a
26 guarantee of authority obligations or unpaid lease rentals under
27 leases evidencing the acquisition of capital assets, to petition
28 the court to levy, and the court is hereby empowered to levy,
29 after hearing upon such notice to the owners of assessable real
30 estate, and other property subject to ad valorem taxation, as
19810H0032B1066 - 29 -
1 the court may prescribe, the amount due on the guaranty or under
2 the lease plus estimated costs of collection as an annual
3 assessment for the current and future years upon all taxable
4 real estate and other properties subject to ad valorem taxation
5 in the local government unit in proportion to the value thereof
6 as assessed for tax purposes, and the trustee may collect or
7 cause the local government unit to collect such assessments as
8 by foreclosure of a mortgage or security interest on the realty
9 or other property if not paid on demand. The levy shall bear
10 interest, until paid, at a rate sufficient to cover accruing
11 interest on the bonds or notes;
12 (6) By suit in equity, enjoin any acts or things which may
13 be unlawful or in violation of the rights of the holders of such
14 bonds, notes, guaranty, or authority obligations under a lease
15 evidencing the acquisition of capital assets;
16 (7) After thirty days prior written notice to the local
17 government unit, and subject to any limitations in the bond
18 ordinance or relevant indenture declare the unpaid principal of
19 all such bonds or notes to be, and it shall thereby become
20 forthwith due and payable with interest at the rates stated in
21 the bonds until final payment, and, if all defaults shall be
22 made good then to annul such declaration and its consequences.
23 Any assessment levied pursuant to clauses (4) and (5) above
24 shall have the same priority and preference as to other liens or
25 mortgages on the real estate or security interests in fixtures
26 thereon or other property, as a lien for unpaid taxes.
27 (c) The court of common pleas in cases of extreme hardship
28 may provide for the payment of sums levied in five or less
29 annual installments with interest at a rate sufficient to cover
30 the interest accruing on the bonds or notes.
19810H0032B1066 - 30 -
1 * * *
2 Section 1204. Receiver for Revenue Projects.--A trustee for
3 the holders of defaulted bonds or notes, whether or not the
4 series of bonds [presented] represented by the trustee has been
5 declared to be and has become forthwith due and payable, shall
6 be entitled as of right to the appointment, by the court of
7 common pleas [of the county in which such local government unit
8 is located, or, if located in two counties, then of either
9 county,] of a receiver of all or any part or parts of a project
10 or the projects, the rents, rates, revenues, tolls and charges
11 of which are pledged for the security of the bonds or notes of
12 such series. Except as otherwise provided in [the] this section,
13 such receiver shall have no power to sell, assign, mortgage, or
14 otherwise dispose of, but may enter and take possession of the
15 project or projects or part or parts thereof, and, subject to
16 the equal or prior rights of the holders of any other series of
17 bonds or notes, shall take possession of all moneys and other
18 property derived from or applicable to the construction,
19 operation, maintenance, repair and reconstruction of such
20 project or projects or parts thereof. The receiver may
21 thereafter proceed with any construction or other work thereon
22 which the local government unit is under obligation to do. The
23 receiver may operate, maintain, repair, and reconstruct such
24 project or projects, or parts thereof and collect and receive
25 all rents, rates, receipts, tolls, other charges and revenues
26 arising therefrom, subject to the equal or prior rights of the
27 holders of any other series of bonds or notes therein. As part
28 of his power to operate and maintain a project, the receiver may
29 sell or otherwise dispose of equipment which is no longer used
30 or usable by the project. The receiver shall perform the public
19810H0032B1066 - 31 -
1 duties and carry out the lawful agreements and obligations of
2 the local government unit with respect to the project or
3 projects or parts thereof, all under the direction of the court
4 but shall not perform any essential governmental functions.
5 Section 1301. False Statement in Documents [Constitute]
6 Constitutes Perjury; Fines and Penalties Therefor.--Whoever
7 wilfully and corruptly makes under oath false oral or written
8 statements or any false statement in any document required to be
9 filed in the department, [in the office of the recorder of
10 deeds] or in the office of the prothonotary of the appropriate
11 county, is guilty of perjury, or false swearing, as the case may
12 be, and whoever wilfully and corruptly procures or suborns any
13 other person to make any such false statement, is guilty of a
14 crime, and on conviction of either offense, shall be sentenced
15 to pay a fine or undergo imprisonment or both within the limits
16 prescribed by Title 18 Pa.C.S. (relating to crimes and
17 offenses).
18 Section 2. This act shall take effect in 60 days.
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