PRIOR PRINTER'S NO. 141 PRINTER'S NO. 895
No. 136 Session of 1987
INTRODUCED BY RHOADES, SINGEL, CORMAN, WENGER AND STOUT,
JANUARY 15, 1987
SENATOR PECORA, LOCAL GOVERNMENT, AS AMENDED, APRIL 29, 1987
AN ACT
1 Empowering the Department of Community Affairs to declare
2 certain municipalities as financially distressed; providing
3 for the restructuring of debt of financially distressed
4 municipalities; limiting the ability of financially
5 distressed municipalities to obtain government funding;
6 authorizing municipalities to participate in Federal debt
7 readjustment ADJUSTMENT actions and bankruptcy actions under <--
8 certain circumstances; and providing for consolidation or
9 merger of contiguous municipalities to relieve financial
10 distress.
11 TABLE OF CONTENTS
12 Chapter 1. General Provisions
13 Subchapter A. Preliminary Provisions
14 Section 101. Short title.
15 Section 102. Purpose and legislative intent.
16 Section 103. Definitions.
17 Subchapter B. Administrative Provisions
18 Section 121. Powers and duties of department.
19 Section 122. Duties of Commonwealth agencies.
20 Section 123. Powers and duties of municipalities.
21 Subchapter C. Judicial Provisions
1 Section 141. Jurisdiction of court of common pleas.
2 Chapter 2. Municipal Financial Distress
3 Subchapter A. Determination of Municipal Financial Distress
4 Section 201. Criteria.
5 Section 202. Standing to petition for a determination.
6 Section 203. Procedure for determination.
7 Section 204. Commonwealth funds.
8 Subchapter B. Coordinator
9 Section 221. Appointment DESIGNATION. <--
10 Section 222. Access to information.
11 Section 223. Public and private meetings.
12 Section 224. Coordinator barred from elective office.
13 Subchapter C. Coordinator's Plan
14 Section 241. Contents.
15 Section 242. Publication.
16 Section 243. Review of plan.
17 Section 244. Revision.
18 Section 245. Adoption by municipality.
19 Section 246. Preparation and action on alternate plan.
20 Section 247. Plan implementation.
21 SECTION 248. FAILURE TO ADOPT OR IMPLEMENT PLAN. <--
22 Section 248 249. Plan amendments. <--
23 Section 249 250. Debt provisions. <--
24 Section 250 251. Commonwealth agency payments or assistance. <--
25 Section 251 252. Plan not affected by certain collective <--
26 bargaining agreements or settlements.
27 Section 252 253. Termination of status. <--
28 Subchapter D. Application of Federal Law
29 Section 261. Filing municipal debt adjustment under Federal
30 law.
19870S0136B0895 - 2 -
1 Section 262. Significance and duty on filing Federal action.
2 Section 263. Application of this act during Federal action.
3 Section 264. Suspension of Commonwealth funding.
4 Chapter 3. Consolidation or Merger of Economically Nonviable
5 Municipalities
6 Subchapter A. General Provisions
7 Section 301. Determination.
8 Section 302. Procedure for consolidation or merger.
9 Section 303. Joint agreement of governing bodies.
10 Section 304. Initiative of electors.
11 Section 305. Conduct of referenda.
12 Section 306. Consolidation or merger agreement.
13 Section 307. Effectuation of consolidation or merger.
14 Section 308. Collective bargaining agreements; furlough of
15 employees; disputes.
16 Section 309. Procedures.
17 Subchapter B. Economic Assistance
18 Section 321. Eligibility.
19 Section 322. Priority.
20 Chapter 4. Technical Provisions
21 Section 401. Repeal.
22 SECTION 402. EXPIRATION. <--
23 Section 402 403. Effective date. <--
24 The General Assembly of the Commonwealth of Pennsylvania
25 hereby enacts as follows:
26 CHAPTER 1
27 GENERAL PROVISIONS
28 SUBCHAPTER A
29 PRELIMINARY PROVISIONS
30 Section 101. Short title.
19870S0136B0895 - 3 -
1 This act shall be known and may be cited as the Financially
2 Distressed Municipalities Act.
3 Section 102. Purpose and legislative intent.
4 (a) Policy.--It is hereby declared to be a public policy of
5 the Commonwealth to foster fiscal integrity of municipalities so
6 that they provide for the health, safety and welfare of their
7 citizens; pay due principal and interest on their debt
8 obligations when due; meet financial obligations to their
9 employees, vendors and suppliers; and provide for proper
10 financial accounting procedures, budgeting and taxing practices.
11 The failure of a municipality to do so is hereby determined to
12 affect adversely the health, safety and welfare not only of the
13 citizens of the municipality but also of other citizens in this
14 Commonwealth.
15 (b) Legislative intent.--
16 (1) It is the intent of the General Assembly to:
17 (i) Enact procedures and provide powers and
18 guidelines to ensure fiscal integrity of municipalities
19 while leaving principal responsibility for conducting the
20 governmental affairs of a municipality, including
21 choosing the priorities for and manner of expenditures
22 based on available revenues, to the charge of its elected
23 officials, consistent with the public policy set forth in
24 this section.
25 (ii) Enact procedures for the adjustment of
26 municipal debt by negotiated agreement with creditors.
27 (2) The General Assembly further recognizes that
28 changing and deteriorating economic conditions, developing
29 technologies and attendant unemployment erode local tax bases
30 and threaten essential municipal services. Under such
19870S0136B0895 - 4 -
1 circumstances, the General Assembly believes that such
2 distressed governmental units may no longer be viable and
3 that the citizens of those communities should be granted the
4 opportunity to voluntarily consolidate or merge their
5 municipalities with other municipalities in an effort to
6 allow municipal boundaries to reflect the geographic and
7 economic realities of a distressed area, to merge a common
8 community of interest, to take advantage of economies of
9 scale in providing services, and to create an expanded
10 revenue base to provide necessary public services to the
11 citizens of financially distressed municipalities.
12 Section 103. Definitions.
13 The following words and phrases when used in this act shall
14 have the meanings given to them in this section unless the
15 context clearly indicates otherwise:
16 "BASIS OF ACCOUNTING." REVENUES AND EXPENDITURES MAY BE <--
17 RECOGNIZED ON THE CASH, MODIFIED ACCRUAL OR FULL ACCRUAL BASIS
18 OF ACCOUNTING, PROVIDED THAT BASIS IS APPLIED CONSISTENTLY
19 THROUGHOUT THE FISCAL PERIODS REPORTED FOR EVALUATION PURPOSES.
20 "Chief executive officer." Mayor in a mayor-council form of
21 government or manager in a council-manager form of government of
22 a city operating under an optional form of government pursuant
23 to the act of July 15, 1957 (P.L.901, No.399), known as the
24 Optional Third Class City Charter Law; a mayor of a city of the
25 first class; or an individual serving in such capacity as
26 designated by a home rule charter or optional plan pursuant to
27 the act of April 13, 1972 (P.L.184, No.62), known as the Home
28 Rule Charter and Optional Plans Law.
29 "Claim." Right to payment, whether or not the right is
30 reduced to judgment, liquidated, unliquidated, fixed,
19870S0136B0895 - 5 -
1 contingent, matured, unmatured, disputed, undisputed, legal,
2 equitable, secured or unsecured; or right to an equitable remedy
3 for breach of performance if the breach gives rise to a right to
4 payment, whether or not the right to an equitable remedy is
5 reduced to judgment, fixed, contingent, matured, unmatured,
6 disputed, undisputed, secured or unsecured.
7 "Commonwealth agency." The Governor and the departments,
8 boards, commissions, authorities and other officers and agencies
9 of this Commonwealth, whether or not subject to the policy
10 supervision and control of the Governor.
11 "Consolidated or merged municipality." A municipal entity
12 resulting from successful consolidation or merger proceedings
13 under Subchapter A of Chapter 3.
14 "Consolidation or merger." The combination of two or more
15 municipalities into one municipality.
16 "Contiguous territory." A territory of which a portion abuts
17 the boundary of another municipality, including territory
18 separated from the exact boundary of another municipality by a
19 street, road, railroad or highway, or by a river or other
20 natural or artificial stream of water.
21 "Creditor." An individual, partnership, corporation,
22 association, estate, trust, governmental unit or the governing
23 board of a pension fund of a municipality that has a claim
24 against a municipality.
25 "DEFICIT." THE EXCESS OF EXPENDITURES OVER REVENUES, STATED <--
26 AS A PERCENTAGE OF REVENUE, DURING AN ACCOUNTING PERIOD. THIS
27 CALCULATION SHALL INCLUDE ALL GOVERNMENTAL FUND TYPES AND ALL
28 PROPRIETARY FUND TYPES, BUT SHALL EXCLUDE ALL FIDUCIARY FUND
29 TYPES OF THE MUNICIPALITY.
30 "Department." The Department of Community Affairs of this
19870S0136B0895 - 6 -
1 Commonwealth.
2 "Election officials." The county boards of election, except
3 in a city of the first class where "election officials" means
4 the city board of elections.
5 "Expenditures." When accounts are kept on an accrual basis <--
6 or the modified accrual basis, this term designates the cost of
7 goods delivered or services rendered, whether paid or unpaid,
8 including expenses, provision for debt retirement not reported
9 as a liability of the fund from which retired, and capital
10 outlays, which are presumed to benefit a given fiscal year of a
11 municipality. When accounts are kept on a cash basis, the term
12 designates actual cash disbursements for these purposes.
13 "EXPENDITURES." REDUCTIONS IN FUND EQUITY, INCLUDING CURRENT <--
14 OPERATING EXPENSES THAT REQUIRE THE USE OF FUND EQUITY, DEBT
15 SERVICE AND CAPITAL OUTLAYS. THE TERM SHALL NOT INCLUDE
16 INTERFUND TRANSFERS.
17 "FUND EQUITY." EXCESS OF ASSETS OF A FUND OVER ITS
18 LIABILITIES.
19 "Governing body." The council in cities, boroughs and
20 incorporated towns; the board of commissioners in counties; the
21 board of commissioners in townships of the first class; the
22 board of supervisors in townships of the second class, or the
23 legislative policy-making body in home rule municipalities.
24 "Initiative." The filing with applicable election officials
25 of a petition containing a proposal for a referendum to be
26 placed on the ballot of the next election. The petition shall
27 be:
28 (1) Filed at least 90 days before the NOT LATER THAN THE <--
29 13TH TUESDAY PRIOR TO THE NEXT election in which it will
30 appear on the ballot.
19870S0136B0895 - 7 -
1 (2) Signed by voters comprising 5% of the persons voting
2 for the office of Governor in the last gubernatorial general
3 election in the municipality where the proposal will appear
4 on the ballot.
5 (3) Placed on the ballot by election officials in a
6 manner fairly representing the content of the petition for
7 decision by referendum at said election.
8 (4) Submitted not more than once in five years.
9 "Matured claim." A claim that has been reduced to judgment
10 or liquidated in amount by agreement for a period of 90 days
11 prior to the filing of a petition to commence fiscal distress
12 proceedings under this act.
13 "Municipal record." A financial record and document of a
14 municipality or of an authority incorporated by a municipality,
15 excluding confidential information relating to personnel matters
16 and matters relating to the initiation and conduct of
17 investigations of violations of law.
18 "Municipality." Every county, city, borough, incorporated
19 town, township and home rule municipality.
20 "Referendum." Placement of a question inserted on the
21 ballot, by initiative or otherwise, by a majority vote of the
22 electors voting thereon.
23 "Revenues." Moneys received by the municipality in a fiscal <--
24 year from whatever source except:
25 (1) Subsidies or reimbursement from the Federal
26 Government or from the Commonwealth measured by the cost of,
27 or given or paid on account of, a particular project financed
28 by debt.
29 (2) Project revenues, rates, receipts, user charges,
30 special assessments and special levies which are or will be
19870S0136B0895 - 8 -
1 pledged or budgeted for specific self-liquidating debt or for
2 payments under leases, guarantees, subsidy contracts or other
3 forms of agreement which could constitute lease rental debt
4 if the payments are payable solely from such sources; if a
5 portion of the payments are returned to or retained by the
6 municipality, that portion shall not be excluded.
7 (3) Interest on moneys in sinking funds, reserves and
8 other funds, which interest is pledged or budgeted for the
9 payment or security of outstanding debt and interest on bond
10 or note proceeds, if similarly pledged.
11 (4) Grants and gifts in aid of or measured by the
12 construction or acquisition of specified projects.
13 (5) Proceeds from the disposition of capital assets.
14 (6) Other nonrecurring items, including bond or note
15 proceeds not considered income under generally accepted
16 municipal accounting principles.
17 "REVENUES." ADDITIONS TO FUND EQUITY OTHER THAN FROM <--
18 INTERFUND TRANSFERS, PROCEEDS OF DEBT AND PROCEEDS OF
19 DISPOSITION OF GENERAL FIXED ASSETS.
20 "Secretary." The Secretary of Community Affairs of the
21 Commonwealth.
22 SUBCHAPTER B
23 ADMINISTRATIVE PROVISIONS
24 Section 121. Powers and duties of department.
25 (a) Compile financial data.--
26 (1) A power and duty of the department shall be to
27 maintain accurate and current information and data on the
28 fiscal status of municipalities to determine if criteria set
29 forth in section 201 exist and, if so, whether the existence
30 of those factors validly indicates fiscal distress.
19870S0136B0895 - 9 -
1 (2) In compiling the information and data, the
2 department shall mail, before January 1 of each year, a
3 Survey of Financial Condition form to each municipality
4 applicable to the municipality's prior fiscal year.
5 (i) The survey shall seek information necessary to
6 determine the fiscal status of a municipality, shall be
7 concise to facilitate prompt response and shall contain
8 an attestation clause to be signed by the municipality's <--
9 chief executive officer. PRESIDING OFFICER OF THE <--
10 MUNICIPALITY'S GOVERNING BODY.
11 (ii) The survey shall be a supplement to and shall
12 be included with the annual audit reports submitted to
13 the department in accordance with law.
14 (iii) The survey shall include information based on
15 the criteria specified in section 201.
16 (IV) THE SURVEY SHALL INCLUDE INFORMATION RELATING <--
17 TO THE BASIS OF ACCOUNTING UTILIZED BY MUNICIPALITIES.
18 (b) Assess data.--A power and duty of the department shall
19 be to apply the criteria of section 201 to data and information
20 on the fiscal status of municipalities to assess the validity
21 and applicability of an indication of municipal financial
22 distress. In determining ASSESSING validity and applicability, <--
23 the department shall undertake a review process including, but
24 not limited to, consultation, correspondence and visits with a
25 municipality which appears to be financially distressed, <--
26 NOTWITHSTANDING THE PROVISIONS OF SECTION 2501-C(E) AND (F) OF
27 THE ACT OF APRIL 9, 1929 (P.L.177, NO.175), KNOWN AS THE
28 ADMINISTRATIVE CODE OF 1929, WHICH LIMITS DEPARTMENT
29 INTERVENTION TO INCIDENCES WHEN SUCH IS REQUESTED BY THE
30 MUNICIPALITY. If the department determines ASSESSES that a <--
19870S0136B0895 - 10 -
1 municipality is not financially distressed but needs assistance <--
2 to correct minor fiscal problems, the department shall offer
3 appropriate recommendations. If the municipality adopts those
4 recommendations, the department need take no further action.
5 (c) Make determination of fiscal distress.--A power and duty <--
6 of the department shall be to make determinations of fiscal
7 distress based upon its review and analysis of various data and
8 information available to it pursuant to this act and their
9 interrelationship with the fiscal distress criteria set forth in
10 section 201 when the department determines a municipality is in
11 a state of distress pursuant to section 203(f).
12 (d) (C) Notify agencies of determination.--Upon the making <--
13 of a determination BY THE SECRETARY that a municipality is <--
14 distressed PURSUANT TO SECTION 203(F), the department shall <--
15 immediately notify the heads of all Commonwealth agencies of the
16 determination.
17 (e) (D) Act as repository ANALYZER of municipal reports.--A <--
18 power and duty of the department shall be to act as the
19 Commonwealth repository and analyzer for all RELEVANT reports, <--
20 data and information required by law to be filed by
21 municipalities with any Commonwealth agency when such reports,
22 data and information directly relate to the financial conditions
23 of municipalities. The department shall, in consultation with
24 every Commonwealth agency, determine which reports, data and
25 information relate to the fiscal condition of municipalities.
26 UPON AN INDICATION OF DISTRESS IN A MUNICIPALITY THROUGH <--
27 INFORMATION AVAILABLE TO THE DEPARTMENT, THE DEPARTMENT SHALL
28 REQUEST DATA, REPORTS AND INFORMATION FROM ALL COMMONWEALTH
29 AGENCIES TO ASSIST THE DEPARTMENT TO SUBSTANTIATE A POSSIBLE
30 DISTRESS STATUS OF A MUNICIPALITY.
19870S0136B0895 - 11 -
1 (f) (E) Furnish program data to municipality.--Upon receipt <--
2 of information forwarded to the department by each Commonwealth
3 agency pursuant to section 122(a), the department shall furnish
4 this information to the distressed municipality coordinator for
5 possible inclusion of such information into the plan developed
6 by the coordinator in accordance with Subchapter C of Chapter 2.
7 (g) (F) Develop early warning system.--In conjunction with <--
8 evaluating ASSESSING a municipality's current fiscal stability <--
9 under subsections (a), (b) and (c) AND (B) and section 201, the <--
10 department shall develop an early warning system utilizing
11 necessary fiscal and socioeconomic variables to identify
12 municipal financial emergencies before they reach crisis
13 proportions AND TO NOTIFY AN AFFECTED MUNICIPALITY <--
14 APPROPRIATELY. The department shall be responsible for testing
15 the validity and reliability of these variables and shall
16 continuously monitor them to assure their effectiveness. In
17 developing an early warning system, the department may employ or
18 contract with municipal fiscal consultants as deemed necessary
19 to execute the provisions of this subsection. NOTICE SHALL BE <--
20 PUBLISHED IN THE PENNSYLVANIA BULLETIN THAT THE EARLY WARNING
21 SYSTEM HAS BEEN DEVELOPED AND THE SYSTEM MAY NOT BECOME
22 OPERATIONAL UNTIL THE PUBLICATION OF THE NOTICE.
23 (h) (G) Promulgate rules and regulations.--The department <--
24 shall promulgate rules and regulations necessary to implement
25 the provisions of this act.
26 Section 122. Duties of Commonwealth agencies.
27 (a) Review programs.--After the department SECRETARY makes a <--
28 determination that a municipality is distressed and THE <--
29 DEPARTMENT notifies Commonwealth agencies of its THE SECRETARY'S <--
30 determination, pursuant to section 121(d) 121(C), each agency <--
19870S0136B0895 - 12 -
1 shall review all matters and programs pending, underway or about
2 to be commenced or possible programs concerning the distressed
3 municipality. An action which is within the authority and budget
4 of a Commonwealth agency and which, in the judgment of the head
5 of the agency, will help to improve the distressed
6 municipality's financial situation shall be reported to the
7 department.
8 (b) Transfer documented information.--Each UPON REQUEST OF <--
9 THE DEPARTMENT, EACH Commonwealth agency shall forward to the
10 department all documented reports, data and other information
11 referred to in section 121(e) 121(D) within 30 days of receipt. <--
12 Section 123. Powers and duties of municipalities.
13 (a) File completed survey.--On or before March 30 15 of each <--
14 year, every municipality shall return to the department a
15 completed Survey of Financial Conditions referred to in section
16 121(a). No municipality shall receive its alloted payments
17 pursuant to the act of June 1, 1956 (1955 P.L.1944, No.655),
18 referred to as the Liquid Fuels Tax Municipal Allocation Law,
19 unless it complies with the provisions of this section,
20 notwithstanding a provision of law to the contrary, and the
21 Department of Transportation may not disburse funds to a
22 municipality pursuant to the Liquid Fuels Tax Municipal
23 Allocation Law until notified by the department that the
24 municipality has complied with the provisions of this section.
25 (b) Right to petition court for tax increase.--After a
26 municipality has adopted a plan under Subchapter C of Chapter 2,
27 it may petition the court of common pleas of the county in which
28 the municipality is located to increase its rates of taxation
29 for earned income, real property, or both, beyond maximum rates
30 provided by law. If a tax increase above existing limits is
19870S0136B0895 - 13 -
1 granted by the court, the additional amount of taxes shall not <--
2 be subject to sharing with a school district. COURTS, THE <--
3 INCREASE SHALL BE EFFECTIVE FOR A PERIOD OF ONE YEAR FROM THE
4 DATE A FINAL PLAN IS ADOPTED BY THE GOVERNING BODY PURSUANT TO
5 SECTION 245. SUBSEQUENT INCREASES IN RATES OF TAXATION MAY BE
6 GRANTED BY THE COURT UPON ANNUAL PETITION OF THE MUNICIPALITY.
7 THE ADDITIONAL AMOUNT OF TAXES RESULTING FROM THE PETITION SHALL
8 NOT BE SUBJECT TO SHARING WITH A SCHOOL DISTRICT.
9 SUBCHAPTER C
10 JUDICIAL PROVISIONS
11 Section 141. Jurisdiction of court of common pleas.
12 The court of common pleas of each county shall have
13 jurisdiction to hear a petition filed by a municipality which
14 has adopted a final plan pursuant to Subchapter C of Chapter 2
15 to increase rates of taxation for earned income, real property,
16 or both, beyond maximum rates provided by law. The court may not <--
17 extend ANNUALLY the increased taxing powers of the municipality <--
18 beyond the date for final consummation UNTIL THE TERMINATION <--
19 DATE of a THE plan adopted by the municipality pursuant to <--
20 Chapter 2.
21 CHAPTER 2
22 MUNICIPAL FINANCIAL DISTRESS
23 SUBCHAPTER A
24 DETERMINATION OF MUNICIPAL FINANCIAL DISTRESS
25 Section 201. Criteria.
26 The evaluation of a municipality's financial stability by the
27 department under section 121 shall include each of the following
28 criteria. If at least one criterion is present and the
29 department finds ASSESSES pursuant to section 121(b) that it is <--
30 a valid indication of municipal financial distress, then the
19870S0136B0895 - 14 -
1 department shall exercise its powers and duties pursuant to
2 section 121.
3 (1) The municipality has maintained a deficit over a
4 three-year period, with a deficit of 1% or more in each of
5 the previous fiscal years.
6 (2) The municipality's expenditures have exceeded
7 revenues for a period of three years or more.
8 (3) The municipality has defaulted in payment of
9 principal or interest on any of its bonds or notes or in
10 payment of rentals due any authority.
11 (4) The municipality has missed a payroll for 30 days.
12 (5) The municipality has failed to make required
13 payments to judgment creditors for 30 days beyond the date of
14 the recording of the judgment.
15 (6) The municipality, for a period of at least 30 days
16 beyond the due date, has failed to forward taxes withheld on
17 the income of employees or has failed to transfer employer or
18 employee contributions for Social Security.
19 (7) The municipality has accumulated and has operated
20 for each of two successive years a deficit equal to 5% or
21 more of its revenues.
22 (8) The municipality has failed to make the budgeted
23 payment of its minimum municipal obligation as required by
24 section 302 of the act of December 18, 1984 (P.L.1005,
25 No.205), known as the Municipal Pension Plan Funding Standard
26 and Recovery Act, with respect to a pension fund during the
27 fiscal year for which the payment was budgeted and has failed
28 to take action within that time period to make required
29 payments.
30 (9) A municipality has sought to negotiate resolution or
19870S0136B0895 - 15 -
1 adjustment of a claim in excess of 30% against a fund or
2 budget and has failed to reach an agreement with creditors.
3 (10) A municipality has filed a municipal debt
4 readjustment plan pursuant to Chapter 9 of the Bankruptcy
5 Code (11 U.S.C. § 901 et seq).
6 (11) THE MUNICIPALITY HAS EXPERIENCED A DECREASE IN A <--
7 QUANTIFIED LEVEL OF MUNICIPAL SERVICE FROM THE PRECEDING
8 FISCAL YEAR WHICH HAS RESULTED FROM THE MUNICIPALITY REACHING
9 ITS LEGAL LIMIT IN LEVYING REAL ESTATE TAXES FOR GENERAL
10 PURPOSES. FOR DETERMINING LEVELS OF MUNICIPAL SERVICE FOR THE
11 YEAR 1987, THE DEPARTMENT SHALL UTILIZE ANNUAL STATISTICAL
12 DATA SINCE THE YEAR 1982 TO DETERMINE A PATTERN OF DECREASE
13 IN DELIVERY OF MUNICIPAL SERVICES SINCE 1982.
14 Section 202. Standing to petition for a determination.
15 The following have standing to seek a determination of
16 municipal financial distress from the department SECRETARY: <--
17 (1) The department itself, if, subsequent to its review
18 and analysis under sections 121 and 201, it concludes that a
19 municipality is substantially in a condition of financial
20 distress.
21 (2) The governing body of the municipality upon passing
22 a resolution by a majority vote of the governing body after a
23 special public meeting duly advertised as provided by law.
24 (3) A creditor with a matured claim to whom the
25 municipality owes $10,000 or more, if the creditor agrees in
26 writing to suspend pending actions and to forbear from
27 bringing an alternate or additional legal action against the
28 municipality to collect the debt or part of it for a period
29 of nine months or until the municipality adopts a plan under
30 this act, whichever occurs first. The filing of a Federal
19870S0136B0895 - 16 -
1 debt adjustment action by a municipality pursuant to
2 Subchapter D of Chapter 2 during the nine-month period
3 cancels the forbearance obligation.
4 (4) Ten percent of the number of electors of the
5 municipality that voted at the last municipal election, by
6 petition to the department alleging the municipality is
7 fiscally distressed.
8 (5) Trustee of a municipal pension fund; an actuary for
9 a pension fund; or 10% or more of the beneficiaries of a
10 pension fund upon petition to the department, provided that a
11 municipality has not timely deposited its minimum obligation
12 payment as required by section 302 of the act of December 18,
13 1984 (P.L.1005, No.205), known as the Municipal Pension Plan
14 Funding Standard and Recovery Act.
15 (6) Ten percent of the employees of the municipality who
16 have not been paid for over 30 days from the time of a missed
17 payroll, upon signing collectively the petition to the
18 department.
19 (7) Trustees or paying agents of a municipal bond
20 indenture.
21 (8) The elected auditors, appointed independent auditors
22 or elected controllers of a municipality if they have reason
23 to believe a municipality is in a state of financial distress
24 pursuant to section 201.
25 Section 203. Procedure for determination.
26 (a) Petition.--A party with standing to petition under
27 section 202 may petition the secretary seeking a determination
28 that the municipality involved is a financially distressed
29 municipality. The petition shall:
30 (1) Allege the petitioner has standing to bring a
19870S0136B0895 - 17 -
1 determination of the distress.
2 (2) State why the petitioner believes the municipality
3 is distressed under section 201.
4 (3) Include a listing of judgments recorded against the
5 municipality.
6 (4) Include any other material allegation justifying the
7 relief afforded by this act.
8 (5) IF THE PETITIONER IS A MUNICIPALITY, THE PETITION <--
9 MAY STATE WHY THE PETITIONER BELIEVES MANIFESTATION OF
10 SECTION 201 CRITERIA IS IMMINENT AND INEVITABLE. THIS
11 STATEMENT MAY BE IN LIEU OF THE STATEMENT REQUIRED UNDER
12 PARAGRAPH (2).
13 (b) Hearing.--Within ten days of receiving a petition, the
14 secretary shall set a time and place for a public hearing which
15 shall be scheduled to be held on a date at least two weeks but
16 not more than 30 days later within the county of the subject
17 municipality.
18 (c) Investigation.--After receiving the petition but before
19 the public hearing, the secretary may make an investigation into
20 the financial affairs of the municipality. The results of the
21 investigation of OR any study previously conducted by the <--
22 department under section 121 shall be placed in the record of
23 the public hearing.
24 (d) Notice.--The secretary shall publish notice of the
25 hearing in accordance with the act of July 3, 1986 (P.L.388,
26 No.84), known as the Sunshine Act, at least once in a newspaper
27 with general circulation in the subject municipality and shall
28 give written notice by certified mail, with return receipt
29 requested, upon the municipal clerk or municipal secretary, the
30 mayor, the municipal solicitor, each member of the governing
19870S0136B0895 - 18 -
1 body of the municipality and the petitioner.
2 (e) Hearing officer.--The secretary or an official of the
3 department designated by the secretary shall conduct the public
4 hearing to hear testimony of the petitioners and other
5 interested persons.
6 (f) Determination.--Within 30 days after the hearing, the
7 secretary shall issue an administrative determination of whether
8 the municipality is financially distressed and reasons for the
9 determination.
10 (G) APPEAL.--A DETERMINATION BY THE SECRETARY UNDER THIS ACT <--
11 IS APPEALABLE PURSUANT TO TITLE 2 OF THE PENNSYLVANIA
12 CONSOLIDATED STATUTES (RELATING TO ADMINISTRATIVE LAW AND
13 PROCEDURE).
14 Section 204. Commonwealth funds.
15 No municipality shall be deemed to be distressed by reason of
16 circumstances arising as a result of the failure of the
17 Commonwealth to make any payment of money, including any Federal
18 money which passes through the Commonwealth, due the
19 municipality at the time such payment is due.
20 SUBCHAPTER B
21 COORDINATOR
22 Section 221. Appointment DESIGNATION. <--
23 (a) Duties APPOINTMENT.--No later than 30 days following a <--
24 determination of municipal financial distress under section 203,
25 the secretary shall appoint a coordinator who shall prepare a
26 plan addressing the municipality's financial problems.
27 (b) Qualifications.--The coordinator may be an employee of
28 the department, furnished with additional staff or consultant
29 assistance, if needed, or may be a consultant or consulting
30 firm. No elected or appointed OFFICIAL OR employee of the <--
19870S0136B0895 - 19 -
1 municipality shall be eligible for serving as coordinator. The
2 coordinator shall be experienced in municipal administration and
3 finance.
4 (c) Compensation.--The department shall be responsible for
5 compensating the coordinator appointed by the secretary for
6 reasonable salary and expenses. Notwithstanding any law to the
7 contrary, the appointment of a plan coordinator shall not be
8 subject to contractual competitive bidding procedures.
9 Section 222. Access to information.
10 The coordinator shall have full access to all municipal
11 records. If the coordinator believes that an official or
12 employee of the municipality is not answering questions
13 accurately or completely or is not furnishing information
14 requested, the coordinator may notify the official or employee,
15 in writing, to furnish answers to questions or to furnish
16 documents or records, or both. If the official or employee
17 refuses, the coordinator may seek a subpoena in the court of
18 common pleas to compel testimony and furnish records and
19 documents. An action is mandamus shall lie to enforce the
20 provisions of this section.
21 Section 223. Public and private meetings.
22 (a) Public meetings authorized.--The coordinator may hold
23 public meetings as defined in the act of July 3, 1986 (P.L.388,
24 No.84), known as the Sunshine Act, in connection with plan
25 preparation.
26 (b) Private meetings authorized.--Private NOTWITHSTANDING <--
27 THE PROVISIONS OF THE SUNSHINE ACT, PRIVATE negotiation sessions
28 may be conducted by the coordinator between the municipality and
29 the individual creditors in an effort to obtain the consent of
30 each creditor to the proposed adjustment and handling of
19870S0136B0895 - 20 -
1 specific claims against the municipality.
2 Section 224. Coordinator barred from elective office.
3 The coordinator may not run for an elected office of the
4 municipality or its coterminous political subdivisions within
5 two years after the final adoption of a plan pursuant to this
6 act.
7 SUBCHAPTER C
8 COORDINATOR'S PLAN
9 Section 241. Contents.
10 A plan formulated by the appointed coordinator shall be
11 consistent with applicable law and shall include any of the
12 following factors which are relevant to alleviating the
13 financially distressed status of the municipality:
14 (1) Projections of revenues and expenditures for the
15 current year and the next two years, both assuming the
16 continuation of present operations and as impacted by the
17 measures in the plan.
18 (2) Recommendations which will:
19 (i) Satisfy judgments, past due accounts payable,
20 and past due and payable payroll and fringe benefits.
21 (ii) Eliminate deficits and deficit funds.
22 (iii) Restore to special fund accounts money from
23 those accounts that was used for purposes other than
24 those specifically authorized.
25 (iv) Balance the budget, avoid future deficits in
26 funds and maintain current payments of payroll, fringe
27 benefits and accounts through possible revenue
28 enhancement recommendations, including tax or fee
29 changes.
30 (v) Avoid a fiscal emergency condition in the
19870S0136B0895 - 21 -
1 future.
2 (vi) Enhance the ability of the municipality to
3 negotiate new general obligation bonds, lease rental
4 debt, funded debt and tax and revenue anticipation
5 borrowing.
6 (vii) Consider changes in accounting and automation
7 procedures for the financial benefit of the municipality.
8 (viii) Propose a reduction of debt due on specific
9 claims by an amortized or lump sum payment considered to
10 be the most reasonable disposition of each claim possible
11 for the municipality considering the totality of
12 circumstances.
13 (3) Possible changes in collective bargaining agreements
14 and permanent and temporary staffing level changes or changes
15 in organization.
16 (4) Recommended changes in municipal ordinances or
17 rules.
18 (5) Recommendations for special audits or further
19 studies.
20 (6) An analysis of whether conditions set forth in
21 section 261 exist, whether specific exclusive Federal
22 remedies could help relieve the municipality's financial
23 distress and whether filing a Federal debt adjustment action
24 under Subchapter D is deemed to be appropriate.
25 (7) An analysis of whether the economic conditions of
26 the municipality are so severe that it is reasonable to
27 conclude that the municipality is no longer viable and should
28 consolidate or merge with an adjacent municipality or
29 municipalities pursuant to Chapter 3.
30 Section 242. Publication.
19870S0136B0895 - 22 -
1 (a) Filing.--Within 90 days of being named, the coordinator
2 shall formulate a plan for relieving the municipality's
3 financial distress and shall deliver true and correct copies of
4 it to:
5 (1) The municipal clerk or municipal secretary, who
6 shall immediately place the copy on file for public
7 inspection in the municipal office.
8 (2) The secretary.
9 (3) Each member of the municipal governing body.
10 (4) The mayor.
11 (5) The chief financial officer of the municipality.
12 (6) The solicitor of the municipal governing body.
13 (7) All parties who have petitioned the secretary under
14 section 203.
15 (b) Date of filing.--For purposes of this section, the date
16 of filing the plan shall be the date on which the municipal
17 clerk or municipal secretary places a true and correct copy of
18 the plan on file for public inspection in the municipal office.
19 (c) Notices of plan.--
20 (1) On the date of filing, notice that a plan has been
21 filed and is open for public inspection in the municipal
22 office shall be published by the coordinator in the county
23 legal reporter and in one or more newspapers with general
24 circulation serving the area in which the municipality is
25 located. The cost for publishing the notice shall be borne by
26 the department. The notice shall set forth the following
27 information:
28 (i) That a plan regarding the coordination and
29 relief of the municipality's financial distress was filed
30 pursuant to this act.
19870S0136B0895 - 23 -
1 (ii) The date and place of filing.
2 (iii) That the public has 15 days from the date of
3 filing in which to file written comments on the plan.
4 (iv) The name and address of the coordinator to whom
5 written comments should be sent.
6 (v) Summary of the plan.
7 (2) Notice of a coordinator's public meeting on the plan
8 shall be published by the coordinator in the county legal
9 reporter and in one or more newspaper with general
10 circulation serving the area in which the municipality is
11 located. The department shall bear the cost for publishing
12 the notice. The notice shall contain the following
13 information:
14 (i) That the purpose of the coordinator's public
15 meeting is to receive public comments on the plan.
16 (ii) The date and place of the meeting.
17 (3) The coordinator may combine the publication of the
18 notice that a plan has been filed with the publication of the
19 notice of the public meeting.
20 (d) Comment period.--Written comments on the plan may be
21 filed with the coordinator. Written comments shall be made no
22 later than 15 days after the date of filing. Written comments
23 judged by the coordinator to have value to the plan may be used
24 to develop a revised plan.
25 (e) Coordinator's public meeting.--A meeting conducted by
26 the coordinator in the municipality shall be set for a date not
27 later than 20 days after the date of filing the plan. The
28 coordinator shall request in writing that the chief executive
29 officer, each member of the municipal governing body and the
30 chief financial officer of the municipality to be present at the
19870S0136B0895 - 24 -
1 coordinator's meeting. Comments on the plan shall be received by
2 the coordinator at that time.
3 Section 243. Review of plan.
4 (a) General rule.--The coordinator, in his discretion, shall
5 consider comments made on the plan. Creditors who do not consent
6 to the handling of their claim by the plan, shall notify the
7 coordinator of their rejection of the plan not later than ten
8 days before the public meeting scheduled by the governing body
9 under section 245.
10 (b) Rejected claims.--If a creditor has rejected the plan,
11 the coordinator shall make a written report to the governing
12 body stating whether the timing and amount of payment or
13 proposed resolution of the claim is the best disposition the
14 municipality can make.
15 (c) Additional negotiations authorized.--Additional
16 negotiations between the municipality and creditors rejecting
17 the plan shall be encouraged and presided over by the
18 coordinator.
19 (d) Governing body proposals.--The governing body of the
20 municipality may propose to the coordinator resolutions of
21 claims which have been the reason for rejection of the proposed
22 plan, and the coordinator may revise the plan accordingly.
23 (e) Revision on own initiative.--Nothing in this section
24 shall preclude the coordinator from revising a plan of his own
25 initiative.
26 Section 244. Revision.
27 Neither the secretary nor the chief executive officer or the
28 governing body, as appropriate, may revise the coordinator's
29 plan. However, the coordinator shall consult with the secretary
30 and either the chief executive officer or the governing body
19870S0136B0895 - 25 -
1 throughout the revision of the plan and shall give consideration
2 to comments they may propose.
3 Section 245. Adoption by municipality.
4 Not later than 15 days following the coordinator's public
5 meeting, the municipal governing body shall either enact an
6 ordinance approving the implementation of the plan, including
7 enactment of necessary related ordinances and revisions to
8 ordinances, or shall reject the plan and proceed under section
9 246. If the ordinance takes effect in a municipality operating
10 under an optional plan form of government or a home rule
11 charter, the chief executive officer may issue an order
12 directing the implementation of the plan no later than seven
13 days from the enactment of the ordinance by the governing body.
14 Section 246. Preparation and action on alternate plan.
15 (a) Chief executive officer's plan.--If the governing body
16 of a municipality that operates under an optional plan form of
17 government or a home rule charter enacts an ordinance directing
18 implementation of the coordinator's plan and the chief executive
19 officer refuses or fails to issue an order as provided in
20 section 245, or if the governing body refuses to enact an
21 ordinance approving the coordinator's plan, then the chief
22 executive officer, within 14 days of the action or refusal to
23 act on the ordinance by the governing body, shall develop a
24 plan, including a signed order implementing it, which shall be
25 the subject of a public meeting no later than ten days following
26 its completion.
27 (1) The chief executive officer may conduct private
28 sessions before the public meeting with individual creditors
29 in an effort to obtain the consent of each creditor to
30 proposed adjustment and handling of specific claims against
19870S0136B0895 - 26 -
1 the municipality. An agreement reached as a result of these
2 private sessions shall become a matter of record and part of
3 the proceedings of the public meeting conducted pursuant to
4 this subsection.
5 (2) The chief executive officer shall be responsible for
6 placing notice that a public meeting will be held on his
7 plan. Notice shall be published in the same manner as
8 provided in section 242(c). The coordinator shall attend the
9 public meeting and furnish written and oral comments on the
10 chief executive officer's plan.
11 (b) Governing body's plan.--In the case of a municipality
12 operating under a form of government other than an optional plan
13 form of government or a home rule charter, if the governing body
14 by majority vote refuses to enact an ordinance approving and
15 implementing the coordinator's plan as provided in section 245,
16 then within 14 days of its refusal the governing body shall
17 develop a plan which shall be the subject of a public meeting
18 held not later than ten days following plan completion.
19 (1) The governing body may conduct private sessions
20 before the public meeting with individual creditors in an
21 effort to obtain consent of each creditor to proposed
22 adjustment and handling of specific claims against the
23 municipality. An agreement reached as a result of these
24 private sessions shall become a matter of record and part of
25 the proceedings of the public meeting conducted pursuant to
26 this subsection.
27 (2) The governing body shall be responsible for placing
28 notice that a public meeting will be held on its plan. Notice
29 shall be published in the same manner as provided in section
30 242(c). The coordinator shall attend the public meeting and
19870S0136B0895 - 27 -
1 furnish written and oral comments on the governing body's
2 plan.
3 (c) Approval or rejection of plan.--Following the public
4 meeting on the chief executive officer's plan or the governing
5 body's plan, the governing body may enact an ordinance,
6 including necessary related implementing ordinances or revisions
7 to ordinances, approving the plan.
8 (d) Failure to adopt or implement plan.--If no plan is <--
9 adopted pursuant to this chapter, then sections 250 and 264
10 shall apply.
11 (D) REVIEW BY SECRETARY.-- <--
12 (1) IF AN ORDINANCE IS ENACTED APPROVING A PLAN UNDER
13 THIS SECTION, IT SHALL BE FORWARDED TO THE SECRETARY FOR
14 DETERMINATION THAT THE PLAN, WHEN IMPLEMENTED, WILL OVERCOME
15 THE MUNICIPALITY'S FINANCIAL DISTRESS.
16 (2) IF THE SECRETARY IS OF THE OPINION THAT THE PLAN,
17 WHEN IMPLEMENTED, WILL OVERCOME THE MUNICIPALITY'S FINANCIAL
18 DISTRESS, THE SECRETARY SHALL SO INFORM THE MUNICIPALITY.
19 (3) IF THE SECRETARY IS OF THE OPINION THAT THE PLAN,
20 WHEN IMPLEMENTED, WILL NOT OVERCOME THE MUNICIPALITY'S
21 FINANCIAL PROBLEMS, THE SECRETARY SHALL INFORM THE
22 MUNICIPALITY OF THE FOLLOWING:
23 (I) THE SECRETARY'S DETERMINATION.
24 (II) THE REASONS FOR THE DETERMINATION.
25 (III) THE APPLICABILITY OF SECTIONS 251 AND 264 TO
26 THE MUNICIPALITY.
27 Section 247. Plan implementation.
28 (a) Coordinator's plan.--If the coordinator's plan is
29 adopted by the municipal governing body, the coordinator shall
30 be charged with implementing his plan and shall:
19870S0136B0895 - 28 -
1 (1) Give written notice of plan adoption to creditors,
2 collective bargaining units and other parties who will be
3 directly affected by plan implementation. In the notice he
4 shall outline the provisions of the plan and specify how that
5 person's claim or interest will be treated.
6 (2) Initiate plan implementation and continue its
7 implementation for at least four months.
8 (3) Oversee completion of the plan either by directly
9 controlling the implementation process or by turning the
10 implementation process over to a person designated by the
11 governing body or by the chief executive officer, as the case
12 may be. The person designated shall supply the coordinator
13 with monthly reports.
14 (4) Terminate the plan upon its completion.
15 (5) Suggest amendments to the plan which may be
16 necessary to implement or complete the plan.
17 (b) Chief executive officer's plan.--If the plan adopted is
18 the plan proposed by the chief executive officer in an optional
19 plan form of government or home rule charter, the chief
20 executive officer shall have the duties of the coordinator set
21 forth in subsection (a).
22 (c) Municipal governing body's plan.--If the plan adopted is
23 the plan proposed by the municipal governing body, a person
24 designated by the governing body shall have the duties of the
25 coordinator set forth in subsection (a).
26 SECTION 248. FAILURE TO ADOPT OR IMPLEMENT PLAN. <--
27 IF NO PLAN IS ADOPTED OR IMPLEMENTED PURSUANT TO THIS
28 CHAPTER, THEN SECTIONS 251 AND 264 SHALL APPLY.
29 Section 248 249. Plan amendments. <--
30 An amendment to an adopted plan may be initiated by the
19870S0136B0895 - 29 -
1 coordinator, the chief executive officer, or the governing body
2 of a municipality, as the case may be. The adoption of an
3 amendment shall be by ordinance.
4 Section 249 250. Debt provisions. <--
5 Adoption of a plan by ordinance is a condition precedent for
6 the approval of long-term debt or funding debt under the act of
7 July 12, 1972 (P.L.781, No.185), known as the Local Government
8 Unit Debt Act. A debt financing provision of the plan may be
9 waived by agreement of the lender and the municipality; but any
10 such waiving must be expressly set forth in the indenture or
11 contract securing the debt.
12 Section 250 251. Commonwealth agency payments or assistance. <--
13 (a) Withholding of certain Commonwealth funds.--Upon
14 certification by the secretary that a financially distressed
15 municipality has failed to ADOPT A PLAN OR implement an adopted <--
16 plan as proposed under this act OR HAS ADOPTED A PLAN WHICH IS <--
17 INADEQUATE TO ADDRESS THE MUNICIPALITY'S FINANCIAL DISTRESS, the
18 municipality shall not receive a grant, loan, entitlement or
19 payment from the Commonwealth or any of its agencies. Moneys
20 withheld shall be held in escrow by the Commonwealth until the
21 secretary has rescinded the certification.
22 (b) Exceptions to the withholding of Commonwealth funds.--
23 Notwithstanding the provisions of subsection (a), the following
24 funds shall not be withheld from a municipality.
25 (1) Capital projects under contract in progress.
26 (2) Moneys received by a municipality from an agency of
27 the Commonwealth or the Federal Government subsequent to the
28 declaration of a disaster resulting from a catastrophe.
29 (3) Pension fund disbursements made pursuant to State
30 law.
19870S0136B0895 - 30 -
1 Section 251 252. Plan not affected by certain collective <--
2 bargaining agreements or settlements.
3 A collective bargaining agreement or arbitration settlement
4 executed after the adoption of a plan shall not in any manner
5 violate, expand or diminish its provisions.
6 Section 252 253. Termination of status. <--
7 (a) Determination by secretary.--Following a duly advertised
8 public hearing with notices given as provided in section 203,
9 the secretary may issue a determination that the conditions
10 which led to the earlier determination of municipal financial
11 distress municipality are no longer applicable. The
12 determination shall rescind the status of municipal financial
13 distress and shall include a statement of facts as part of the
14 final order.
15 (b) Determination upon petition by a municipality.--A
16 financially distressed municipality may petition the secretary
17 to make a determination that the conditions which led to the
18 earlier determination of municipal financial distress are no
19 longer present. Upon receiving the petition, the secretary may
20 issue a determination to rescind following a duly advertised
21 public hearing with notices given as provided in section 203.
22 SUBCHAPTER D
23 APPLICATION OF FEDERAL LAW
24 Section 261. Filing municipal debt adjustment under Federal
25 law.
26 (a) Authorization.--In the event one of the following
27 conditions is present, a municipality is hereby authorized to
28 file a municipal debt adjustment action pursuant to the
29 Bankruptcy Code (11 U.S.C. § 101 et seq.):
30 (1) After recommendation by the plan coordinator
19870S0136B0895 - 31 -
1 pursuant to section 241(6).
2 (2) Imminent jeopardy of an action by a creditor,
3 claimant or supplier of goods or services which is likely to
4 substantially interrupt or restrict the continued ability of
5 the municipality to provide health or safety services to its
6 citizens.
7 (3) One or more creditors of the municipality have
8 rejected the proposed or adopted plan, and efforts to
9 negotiate resolution of their claims have been unsuccessful
10 for a ten-day period.
11 (4) A condition substantially affecting the
12 municipality's financial distress is potentially solvable
13 only by utilizing a remedy exclusively available to the
14 municipality through the Federal Municipal Debt Readjustment
15 Act (48 Stat. 798).
16 (5) A majority of the current or immediately preceding
17 governing body of a municipality determined to be financially
18 distressed has failed to adopt a plan or to carry out the
19 recommendations of the coordinator pursuant to this act.
20 (b) Majority vote.--This authority may be exercised only
21 upon the vote by a majority of the municipality's governing
22 body.
23 Section 262. Significance and duty on filing Federal action.
24 (a) Status.--A municipality which files a municipal debt
25 adjustment action under Federal law shall be deemed to be a
26 financially distressed municipality under this act.
27 (b) Notice.--The municipality shall immediately notify the
28 secretary and the plan coordinator, if one has been assigned, of
29 the Federal filing.
30 (c) Appointment of coordinator.--Upon receipt of notice of
19870S0136B0895 - 32 -
1 filing of the Federal action by a municipality, the secretary
2 shall appoint a plan coordinator under section 221, if none had
3 yet been appointed. The coordinator shall formulate a plan
4 approvable by the Federal court.
5 Section 263. Application of this act during Federal action.
6 (a) Existing plan.--After filing a Federal municipal debt
7 adjustment action, if there is a plan in process under the terms
8 of this act, the municipality shall utilize the plan and the
9 expertise of the plan coordinator, among others available to it,
10 to work out a revised plan to be proposed through the Federal
11 action, adapting it to incorporate Federal remedies which are
12 appropriate in the circumstances.
13 (b) Necessary plan development.--A municipality which files
14 a municipal debt adjustment action under Federal law, whether or
15 not a proceeding under this act had been commenced as of the
16 date of such filing, shall utilize the procedures set up by this
17 act concurrently with the processing of the Federal action, so
18 as to efficiently expedite the formulation of a plan, its timely
19 confirmation by the Federal court having jurisdiction of the
20 Federal action and its adoption by ordinance.
21 (c) Plan implementation.--After adoption of a plan by the
22 municipality as an ordinance and confirmation of the plan by the
23 Federal court, implementation of the plan shall be coordinated
24 through this act and in accordance with requirements set by the
25 Federal court.
26 Section 264. Suspension of Commonwealth funding.
27 (a) General rule.--A municipality which remains classified
28 as financially distressed by the department and has failed to
29 adopt or implement a plan within a period set by the Federal
30 court, or has failed or refused to follow a recommendation by a
19870S0136B0895 - 33 -
1 coordinator, shall be notified in writing by the coordinator
2 that he is requesting the secretary to issue a suspension of
3 Commonwealth funding to the municipality for its failure to take
4 the steps enumerated in the notice.
5 (b) Certification.--Ten days after receipt by the secretary <--
6 of the request, if the municipality has not
7 (B) MUNICIPALITY'S RESPONSE.--THE MUNICIPALITY SHALL HAVE <--
8 TEN DAYS FROM THE DATE OF THE COORDINATOR'S NOTICE IN WHICH TO
9 SHOW CAUSE TO THE SECRETARY AND THE COORDINATOR WHY COMMONWEALTH
10 FUNDING TO THE MUNICIPALITY SHOULD NOT BE SUSPENDED.
11 (C) CERTIFICATION.--IF THE MUNICIPALITY HAS NOT ADEQUATELY
12 shown cause to the secretary and coordinator why such action
13 should not be taken, the secretary, WITHIN 20 DAYS OF THE <--
14 COORDINATOR'S REQUEST, shall certify to the municipality in
15 writing that each grant, loan, entitlement or payment by the
16 Commonwealth or any of its agencies shall be suspended pending
17 adoption of a plan calculated to fully resolve the
18 municipality's financial distress. Suspended funds shall be held
19 in escrow by the Commonwealth until the secretary has rescinded
20 the certification.
21 (c) (D) Exception.--Notwithstanding the provisions of <--
22 subsection (b) (C), the following funds shall not be withheld <--
23 from a municipality:
24 (1) Capital projects under contract in progress.
25 (2) Moneys received by a municipality from an agency of
26 the Commonwealth or the Federal Government subsequent to the
27 declaration of a disaster resulting from a catastrophe.
28 (3) Pension fund disbursements made pursuant to State
29 law.
30 CHAPTER 3
19870S0136B0895 - 34 -
1 CONSOLIDATION OR MERGER OF ECONOMICALLY NONVIABLE
2 MUNICIPALITIES
3 SUBCHAPTER A
4 GENERAL PROVISIONS
5 Section 301. Determination.
6 If a municipality has been determined to be financially
7 distressed pursuant to this act and the coordinator has further
8 determined under section 241 that consolidation or merger of the
9 municipality with an adjacent municipality or municipalities is
10 in the public interest, then the municipality may utilize the
11 provisions of this chapter.
12 Section 302. Procedure for consolidation or merger.
13 Two or more municipalities may be consolidated or merged into
14 a single municipality, whether within the same or different
15 counties, if each of the municipalities is contiguous to at
16 least one of the other consolidating or merging municipalities,
17 and if together such municipalities would form a consolidated or
18 merged municipality. Consolidation or merger may be commenced by
19 one of the following:
20 (1) Joint agreement of the governing bodies of the
21 municipalities proposed for consolidation or merger approved
22 by ordinance.
23 (2) Initiative of electors.
24 Section 303. Joint agreement of governing bodies.
25 (a) General rule.--The governing body of each municipality
26 to be consolidated or merged shall enter into a joint agreement
27 under the official seal of each municipality to consolidate or
28 merge into one municipality.
29 (b) Elements.--The joint agreement shall set forth:
30 (1) The name of each municipality that is a party to the
19870S0136B0895 - 35 -
1 agreement.
2 (2) The name and the territorial boundaries of the
3 consolidated or merged municipality.
4 (3) The type and class of the consolidated or merged
5 municipality.
6 (4) Whether the consolidated or merged municipality
7 shall be governed solely by the code and other general laws
8 applicable to the kind and class of the consolidated or
9 merged municipality or whether it shall be governed by a home
10 rule charter or an optional plan of government previously
11 adopted by one of the consolidating or merging
12 municipalities.
13 (5) The number of wards, if any, into which the
14 consolidated or merged municipality will be divided for the
15 purpose of electing all or some members of its governing
16 body.
17 (6) Terms for:
18 (i) The disposition of existing assets of each
19 municipality.
20 (ii) The liquidation of existing indebtedness of
21 each municipality.
22 (iii) The assumption, assignment or disposition of
23 existing liabilities of each municipality, either
24 jointly, separately or in certain defined proportions, by
25 separate rates of taxation within each of the constituent
26 municipalities until consolidation or merger becomes
27 effective pursuant to section 307.
28 (iv) The implementation of a legally consistent
29 uniform tax system throughout the consolidated or merged
30 municipality which provides the revenue necessary to fund
19870S0136B0895 - 36 -
1 required municipal services.
2 (7) The governmental organization of the consolidated or
3 merged municipality insofar as it concerns elected officers.
4 (8) A transitional plan and schedule applicable to
5 elected officers. The transitional plan shall provide for the
6 abolition of the elected offices of each component
7 municipality and the termination of the terms of office of
8 the elected officials of each municipality and for the
9 election of the first officers of the consolidated or merged
10 municipality so that election and tenure shall conform to
11 those in other municipalities of the same kind and class in
12 the Commonwealth with properly staggered terms where required
13 or desired.
14 (9) The common administration and enforcement of
15 ordinances enforced uniformly within the consolidated or
16 merged municipality.
17 Section 304. Initiative of electors.
18 (a) General rule.--In order for consolidation or merger
19 proceedings to be initiated by petition of electors, petitions
20 containing signatures of at least 5% of the electors voting for
21 the Office of Governor in the last gubernatorial general
22 election in each municipality proposed to be consolidated or
23 merged shall be filed with the county board of elections of the
24 county in which the municipality, or the greater portion of its
25 territory, is located.
26 (b) Notice to governing bodies affected.--When election
27 officials find that a petition is in proper order, they shall
28 send copies of the initiative petition without the signatures
29 thereon to the governing bodies of each of the municipalities
30 affected by the proposed consolidation or merger.
19870S0136B0895 - 37 -
1 (c) Contents.--A petition shall set forth:
2 (1) The name of the municipality from which the signers
3 of the petition were obtained.
4 (2) The names of the municipalities proposed to be
5 consolidated or merged.
6 (3) The name of the consolidated or merged municipality.
7 (4) The type and class of the consolidated or merged
8 municipality.
9 (5) Whether the consolidated or merged municipality
10 shall be governed solely by the code and other general laws
11 applicable to the kind and class of the consolidated or
12 merged municipality, or whether it shall be governed by a
13 home rule charter or an optional plan of government
14 previously adopted by one of the consolidating or merging
15 municipalities.
16 (6) The number of wards, if any, into which the
17 consolidated or merged municipality will be divided for the
18 purpose of electing all or some members of its governing
19 body.
20 (d) Time limitations.--Once the circulation of a petition <--
21 has begun, the petition shall be submitted to the county board
22 of elections within 21 days. Failure to do so within that
23 prescribed time limit will invalidate the petition.
24 (D) FILING OF PETITION.--THE CONSOLIDATION OR MERGER <--
25 PETITION SHALL BE FILED WITH THE ELECTION OFFICIALS NOT LATER
26 THAN THE 13TH TUESDAY PRIOR TO THE NEXT PRIMARY, MUNICIPAL OR
27 GENERAL ELECTION. THE PETITION AND PROCEEDINGS THEREIN SHALL BE
28 IN THE MANNER AND SUBJECT TO THE PROVISIONS OF THE ELECTION LAWS
29 WHICH RELATE TO THE SIGNING, FILING AND ADJUDICATION OF
30 NOMINATION PETITIONS INSOFAR AS SUCH PROVISIONS ARE APPLICABLE,
19870S0136B0895 - 38 -
1 EXCEPT THAT NO REFERENDUM PETITION SHALL BE SIGNED OR CIRCULATED
2 PRIOR TO THE 20TH TUESDAY BEFORE THE ELECTION, NOR LATER THAN
3 THE 13TH TUESDAY BEFORE THE ELECTION.
4 Section 305. Conduct of referenda.
5 (a) Duty to place on ballot.--Following initiation of
6 proceedings for consolidation or merger by the procedures set
7 forth either in section 303 or 304, the question of
8 consolidation or merger shall be placed before the electors of
9 each of the municipalities proposed to be consolidated or
10 merged. A referendum shall be held at the first primary,
11 municipal or general election after either:
12 (1) the date of the general agreement entered into under
13 the provisions of section 303; or
14 (2) the date of filing of the petition filed under the
15 provisions of section 304.
16 (b) Approval.--Consolidation or merger shall not be
17 effective unless the referendum question is approved by a
18 majority of the electors voting in each of the municipalities in
19 which the referendum is held. If in any one of the
20 municipalities in which the referendum is held a majority in
21 favor of consolidation or merger does not result, the referendum
22 shall fail and consolidation or merger shall not take place. The
23 question described in the consolidation or merger proposal shall
24 not be voted on again for a period of five years.
25 Section 306. Consolidation or merger agreement.
26 (a) Form.--Upon favorable action by the electorate on
27 consolidation or merger, in cases where consolidation or merger
28 was initiated otherwise than by joint agreement of municipal
29 governing bodies under section 303, the governing bodies of the
30 municipalities to be consolidated or merged shall meet within 60
19870S0136B0895 - 39 -
1 days after the certification of the favorable vote and shall
2 make a consolidation or merger agreement, as follows:
3 (1) If the governing body, or part of the governing
4 body, of the consolidated or merged municipality is to be
5 elected on a ward basis, the agreement shall set forth the
6 ward boundaries and the ward designation, by number, and the
7 number of members of the municipal governing body to be
8 elected from each ward.
9 (2) The agreement shall set forth terms for:
10 (i) The disposition of the existing assets of each
11 municipality.
12 (ii) The liquidation of the existing indebtedness of
13 each municipality.
14 (iii) The assumption, assignment, and disposition of
15 the existing liabilities of each municipality, either
16 jointly, separately or in certain defined proportions, by
17 separate rates of taxation within each of the constituent
18 municipalities until consolidation or merger becomes
19 effective pursuant to section 307.
20 (3) The agreement shall set forth the governmental
21 organization of the consolidated or merged municipality,
22 insofar as it concerns elected officers, and shall contain a
23 transitional plan and schedule applicable to elected
24 officers. The agreement shall provide for the abolition of
25 elected offices and for the termination of the terms of
26 office of elected officers of each municipality being merged
27 or consolidated, and the election of the first officers of
28 the consolidated or merged municipality so that election and
29 tenure shall conform to those in other municipalities of the
30 same kind and class in the Commonwealth, with properly
19870S0136B0895 - 40 -
1 staggered terms, where required or desired.
2 (4) The agreement shall provide for common
3 administration and enforcement of ordinances to be enforced
4 uniformly within the consolidated or merged municipality.
5 (5) The agreement shall also provide, consistent with
6 exiting law, for the implementation of an uniform tax system
7 throughout the consolidated or merged municipality which
8 shall provide the revenue necessary to fund required
9 municipal services.
10 (b) Filing.--A copy of the consolidation or merger agreement
11 shall be filed with the Department of Community Affairs, the
12 Department of Transportation, the Governor's Office of Policy
13 Development or its successor, the Department of Education, State
14 Tax Equalization Board, the Legislative Reapportionment
15 Commission and the court of common pleas and the board of county
16 commissioners of the county or counties in which municipalities
17 affected are located.
18 Section 307. Effectuation of consolidation or merger.
19 Municipalities consolidated or merged shall continue to be
20 governed as before consolidation or merger until the first
21 Monday of January following the municipal election next
22 succeeding the election at which consolidation or merger
23 referenda were held. At that municipal election, the necessary
24 officers of the consolidated or merged municipality shall be
25 elected in accordance with the terms of the general law
26 affecting municipalities of the kind or class of the
27 consolidated or merged municipality, or, in case of a
28 consolidated or merged municipality operating under a home rule
29 charter or optional plan of government, in accordance with the
30 charter or optional plan or with general law affecting home rule
19870S0136B0895 - 41 -
1 or optional plan municipalities, as applicable. The officers
2 elected at that municipal election shall be elected for terms of
3 office under the plan and schedule set forth in the
4 consolidation or merger agreement authorized by section 303 or
5 306, as the case may be. They shall take office as officers of
6 the consolidated or merged municipality on the first Monday of
7 January following the municipal election at which they were
8 elected, and thereupon, the consolidated or merged municipality
9 shall begin to function and the former municipalities
10 consolidated or merged into it shall be abolished.
11 Section 308. Collective bargaining agreements; furlough of
12 employees; disputes.
13 (a) Collective bargaining contracts, agreements or
14 arbitration awards.--A collective bargaining agreement or
15 contract in existence in a municipality or an arbitration award
16 in effect in a municipality prior to a consolidation or merger
17 shall remain effective after consolidation or merger until the
18 contract, agreements, or awards expire. After the expiration of
19 the contracts, agreements or awards, a subsequent collective
20 bargaining agreement, contract or award shall not impair the
21 implementation of a plan adopted pursuant to this act.
22 (b) Reduction in existing work force.--Subsequent to
23 consolidation or merger, the consolidated or merged municipality
24 may, in accordance with existing contracts or arbitration award
25 provisions and consistent with applicable laws, reduce the
26 number of uniformed and nonuniformed employees to avoid
27 overstaffing and duplication of positions in the consolidated or
28 merged municipality. If a consolidated or merged municipality
29 determines in its discretion that it is necessary to increase
30 the number of uniformed or nonuniformed employees, employees of
19870S0136B0895 - 42 -
1 the constituent municipalities shall be reinstated in the order
2 of their seniority if they had been previously furloughed.
3 (c) Disputes.--The Pennsylvania Labor Relations Board shall
4 have jurisdiction to determine labor disputes or controversies,
5 except those arising out of interpretation or construction of a
6 collective bargaining agreement containing provision for binding
7 arbitration, between the consolidated or merged municipality and
8 its employees.
9 (d) Effect on existing law.--Nothing in this section shall
10 prohibit a consolidated or merged municipality from exercising
11 its powers and responsibilities pursuant to provisions of law
12 related to collective bargaining, including, but not limited to,
13 the act of June 24, 1968 (P.L.237, No.111), referred to as the
14 Policemen and Firemen Collective Bargaining Act, and the act of
15 July 23, 1970 (P.L.563, No.195), known as the Public Employe
16 Relations Act.
17 Section 309. Procedures.
18 (a) Ordinance book.--After consolidation or merger becomes
19 effective, a new ordinance book shall be used by the
20 municipality and the first document to be recorded in it shall
21 be the consolidation or merger agreement.
22 (b) Ordinance codification.--No later than two years after
23 consolidation or merger goes into effect, codification of all
24 the ordinances of the municipality shall be completed. This
25 shall include tabulation or indexing of those ordinances of the
26 component municipalities that are of permanent effect in the
27 consolidated or merged municipality.
28 (c) Vesting of rights, privileges, property and
29 obligations.--All rights, privileges and franchises of each
30 component municipality and all property belonging to each
19870S0136B0895 - 43 -
1 component municipality shall be vested in the consolidated or
2 merged municipality. The title to real estate vested in any of
3 those municipalities shall not revert or be in any way impaired
4 by reason of the consolidation or merger. All liens and rights
5 of creditors shall be preserved. Agreements and contracts shall
6 remain in force. Debts, liabilities and duties of each of the
7 municipalities shall be attached to the consolidated or merged
8 municipality and may be enforced against it.
9 SUBCHAPTER B
10 ECONOMIC ASSISTANCE
11 Section 321. Eligibility.
12 In the event a municipality has been determined to be
13 distressed pursuant to section 203(f) and has subsequently
14 consolidated or merged under provisions of this chapter, the
15 consolidated or merged municipality shall be eligible for
16 economic and community development assistance as provided in
17 section 322.
18 Section 322. Priority.
19 Notwithstanding law to the contrary, if the electors of two
20 or more municipalities at least one of which has been determined
21 to be distressed pursuant to section 203(f), have voted to
22 approve the consolidation or merger of those municipalities, the
23 consolidated or merged municipality shall receive priority in
24 all economic and community development programs funded by the
25 Commonwealth. The secretary, upon notification of consolidation
26 or merger of such municipalities shall notify Commonwealth
27 agencies that the consolidated or merged municipality shall
28 receive priority in funding as provided in this subchapter.
29 CHAPTER 4
30 TECHNICAL PROVISIONS
19870S0136B0895 - 44 -
1 Section 401. Repeal REPEALS. <--
2 SECTION 2501-C(E) AND (F) OF THE ACT OF APRIL 9, 1929 <--
3 (P.L.177, NO.175), KNOWN AS THE ADMINISTRATIVE CODE OF 1929, ARE
4 REPEALED INSOFAR AS THEY ARE INCONSISTENT WITH THIS ACT.
5 The act of June 11, 1935 (P.L.323, No.146), entitled "An act
6 designating the Department of Internal Affairs as the agency of
7 the Commonwealth to approve or disapprove petitions to courts,
8 and plans for the readjustment of debts of political
9 subdivisions, under the act of Congress relating to the
10 bankruptcy of political subdivisions; and defining the powers
11 and duties of said department in relation thereto," is repealed
12 insofar as it related to a municipality as defined in section
13 103 of this act.
14 SECTION 402. EXPIRATION. <--
15 SECTION 203(A)(5) SHALL EXPIRE UPON PUBLICATION IN THE
16 PENNSYLVANIA BULLETIN OF THE NOTICE REQUIRED UNDER SECTION
17 121(G).
18 Section 402 403. Effective date. <--
19 This act shall take effect in 60 days.
L19L53RDG/19870S0136B0895 - 45 -