HOUSE AMENDED
PRIOR PRINTER'S NOS. 141, 895, 944, PRINTER'S NO. 2480
1228
No. 136 Session of 1987
INTRODUCED BY RHOADES, SINGEL, CORMAN, WENGER AND STOUT,
JANUARY 15, 1987
AS RE-REPORTED FROM COMMITTEE ON APPROPRIATIONS, HOUSE OF
REPRESENTATIVES, AS AMENDED, NOVEMBER 14, 1988
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 adjustment actions and bankruptcy actions under certain
8 circumstances; and providing for consolidation or merger of
9 contiguous municipalities to relieve financial distress.
10 TABLE OF CONTENTS
11 Chapter 1. General Provisions
12 Subchapter A. Preliminary Provisions
13 Section 101. Short title.
14 Section 102. Purpose and legislative intent.
15 Section 103. Definitions.
16 Subchapter B. Administrative Provisions
17 Section 121. Powers and duties of department.
18 Section 122. Duties of Commonwealth agencies.
19 Section 123. Powers and duties of municipalities.
1 Subchapter C. Judicial Provisions
2 Section 141. Jurisdiction of court of common pleas.
3 Chapter 2. Municipal Financial Distress
4 Subchapter A. Determination of Municipal Financial Distress
5 Section 201. Criteria.
6 Section 202. Standing to petition for a determination.
7 Section 203. Procedure for determination.
8 Section 204. Commonwealth funds.
9 Subchapter B. Coordinator
10 Section 221. Designation.
11 Section 222. Access to information.
12 Section 223. Public and private meetings.
13 Section 224. Coordinator barred from elective office.
14 Subchapter C. Coordinator's Plan
15 Section 241. Contents.
16 Section 242. Publication.
17 Section 243. Review of plan.
18 Section 244. Revision.
19 Section 245. Adoption by municipality.
20 Section 246. Preparation and action on alternate plan.
21 Section 247. Plan implementation.
22 Section 248. Failure to adopt or implement plan.
23 Section 249. Plan amendments.
24 Section 250. Debt provisions.
25 Section 251. Commonwealth agency payments or assistance.
26 Section 252. Plan not affected by certain collective
27 bargaining agreements or settlements.
28 Section 253. Termination of status.
29 Subchapter D. Application of Federal Law
30 Section 261. Filing municipal debt adjustment under Federal
19870S0136B2480 - 2 -
1 law.
2 Section 262. Significance and duty on filing Federal action.
3 Section 263. Application of this act during Federal action.
4 Section 264. Suspension of Commonwealth funding.
5 Chapter 3. Emergency Financial Aid for Distressed
6 Municipalities
7 Section 301. Program.
8 Section 302. Grant and loan procedure.
9 Section 303. Limitations.
10 Section 304. Expiration.
11 Chapter 4. Consolidation or Merger of Economically Nonviable
12 Municipalities
13 Subchapter A. General Provisions
14 Section 401. Determination.
15 Section 402. Procedure for consolidation or merger.
16 Section 403. Joint agreement of governing bodies.
17 Section 404. Initiative of electors.
18 Section 405. Conduct of referenda.
19 Section 406. Consolidation or merger agreement.
20 Section 407. Effectuation of consolidation or merger.
21 Section 408. Collective bargaining agreements; furlough of
22 employees; disputes.
23 Section 409. Procedures.
24 Subchapter B. Economic Assistance
25 Section 421. Eligibility.
26 Section 422. Priority.
27 Section 423. Listing of eligible municipalities.
28 Chapter 5. Funding
29 Section 501. Appropriation.
30 Chapter 6. Technical Provisions
19870S0136B2480 - 3 -
1 Section 601. Repeals.
2 Section 602. Expiration.
3 Section 603. Effective date.
4 AMENDING THE ACT OF JULY 10, 1987 (P.L.246, NO.47), ENTITLED "AN <--
5 ACT EMPOWERING THE DEPARTMENT OF COMMUNITY AFFAIRS TO DECLARE
6 CERTAIN MUNICIPALITIES AS FINANCIALLY DISTRESSED; PROVIDING
7 FOR THE RESTRUCTURING OF DEBT OF FINANCIALLY DISTRESSED
8 MUNICIPALITIES; LIMITING THE ABILITY OF FINANCIALLY
9 DISTRESSED MUNICIPALITIES TO OBTAIN GOVERNMENT FUNDING;
10 AUTHORIZING MUNICIPALITIES TO PARTICIPATE IN FEDERAL DEBT
11 ADJUSTMENT ACTIONS AND BANKRUPTCY ACTIONS UNDER CERTAIN
12 CIRCUMSTANCES; AND PROVIDING FOR CONSOLIDATION OR MERGER OF
13 CONTIGUOUS MUNICIPALITIES TO RELIEVE FINANCIAL DISTRESS,"
14 PROVIDING FOR THE ESTABLISHMENT OF A REVOLVING FUND; FURTHER
15 PROVIDING FOR CRITERIA TO DECLARE A MUNICIPALITY DISTRESSED
16 AND FOR THE PUBLICATION OF CERTAIN NOTICES; ESTABLISHING A
17 REVOLVING LOAN FUND; PROVIDING FOR REVISION AND ADOPTION OF
18 PLANS BY MUNICIPALITIES; FURTHER PROVIDING FOR EXPIRATION OF
19 THE ACT; AND MAKING A REPEAL.
20 The General Assembly of the Commonwealth of Pennsylvania
21 hereby enacts as follows:
22 CHAPTER 1 <--
23 GENERAL PROVISIONS
24 SUBCHAPTER A
25 PRELIMINARY PROVISIONS
26 Section 101. Short title.
27 This act shall be known and may be cited as the Financially
28 Distressed Municipalities Act.
29 Section 102. Purpose and legislative intent.
30 (a) Policy.--It is hereby declared to be a public policy of
19870S0136B2480 - 4 -
1 the Commonwealth to foster fiscal integrity of municipalities so
2 that they provide for the health, safety and welfare of their
3 citizens; pay due principal and interest on their debt
4 obligations when due; meet financial obligations to their
5 employees, vendors and suppliers; and provide for proper
6 financial accounting procedures, budgeting and taxing practices.
7 The failure of a municipality to do so is hereby determined to
8 affect adversely the health, safety and welfare not only of the
9 citizens of the municipality but also of other citizens in this
10 Commonwealth.
11 (b) Legislative intent.--
12 (1) It is the intent of the General Assembly to:
13 (i) Enact procedures and provide powers and
14 guidelines to ensure fiscal integrity of municipalities
15 while leaving principal responsibility for conducting the
16 governmental affairs of a municipality, including
17 choosing the priorities for and manner of expenditures
18 based on available revenues, to the charge of its elected
19 officials, consistent with the public policy set forth in
20 this section.
21 (ii) Enact procedures for the adjustment of
22 municipal debt by negotiated agreement with creditors.
23 (2) The General Assembly further recognizes that
24 changing and deteriorating economic conditions, developing
25 technologies and attendant unemployment erode local tax bases
26 and threaten essential municipal services. Under such
27 circumstances, the General Assembly believes that such
28 distressed governmental units may no longer be viable and
29 that the citizens of those communities should be granted the
30 opportunity to voluntarily consolidate or merge their
19870S0136B2480 - 5 -
1 municipalities with other municipalities in an effort to
2 allow municipal boundaries to reflect the geographic and
3 economic realities of a distressed area, to merge a common
4 community of interest, to take advantage of economies of
5 scale in providing services, and to create an expanded
6 revenue base to provide necessary public services to the
7 citizens of financially distressed municipalities.
8 Section 103. Definitions.
9 The following words and phrases when used in this act shall
10 have the meanings given to them in this section unless the
11 context clearly indicates otherwise:
12 "Basis of accounting." Revenues and expenditures may be
13 recognized on the cash, modified accrual or full accrual basis
14 of accounting, provided that basis is applied consistently
15 throughout the fiscal periods reported for evaluation purposes.
16 "Chief executive officer." Mayor in a mayor-council form of
17 government or manager in a council-manager form of government of
18 a city operating under an optional form of government pursuant
19 to the act of July 15, 1957 (P.L.901, No.399), known as the
20 Optional Third Class City Charter Law; a mayor of a city of the
21 first class; or an individual serving in such capacity as
22 designated by a home rule charter or optional plan pursuant to
23 the act of April 13, 1972 (P.L.184, No.62), known as the Home
24 Rule Charter and Optional Plans Law.
25 "Claim." Right to payment, whether or not the right is
26 reduced to judgment, liquidated, unliquidated, fixed,
27 contingent, matured, unmatured, disputed, undisputed, legal,
28 equitable, secured or unsecured; or right to an equitable remedy
29 for breach of performance if the breach gives rise to a right to
30 payment, whether or not the right to an equitable remedy is
19870S0136B2480 - 6 -
1 reduced to judgment, fixed, contingent, matured, unmatured,
2 disputed, undisputed, secured or unsecured.
3 "Commonwealth agency." The Governor and the departments,
4 boards, commissions, authorities and other officers and agencies
5 of this Commonwealth, whether or not subject to the policy
6 supervision and control of the Governor.
7 "Consolidated or merged municipality." A municipal entity
8 resulting from successful consolidation or merger proceedings
9 under Subchapter A of Chapter 4.
10 "Consolidation or merger." The combination of two or more
11 municipalities into one municipality.
12 "Contiguous territory." A territory of which a portion abuts
13 the boundary of another municipality, including territory
14 separated from the exact boundary of another municipality by a
15 street, road, railroad or highway, or by a river or other
16 natural or artificial stream of water.
17 "Creditor." An individual, partnership, corporation,
18 association, estate, trust, governmental unit or the governing
19 board of a pension fund of a municipality that has a claim
20 against a municipality.
21 "Deficit." The excess of expenditures over revenues, stated
22 as a percentage of revenue, during an accounting period. This
23 calculation shall include all governmental fund types and all
24 proprietary fund types, but shall exclude all fiduciary fund
25 types of the municipality.
26 "Department." The Department of Community Affairs of this
27 Commonwealth.
28 "Election officials." The county boards of election, except
29 in a city of the first class where "election officials" means
30 the city board of elections.
19870S0136B2480 - 7 -
1 "Expenditures." Reductions in fund equity, including current
2 operating expenses that require the use of fund equity, debt
3 service and capital outlays. The term shall not include
4 interfund transfers.
5 "Fund equity." Excess of assets of a fund over its
6 liabilities.
7 "Governing body." The council in cities, boroughs and
8 incorporated towns; the board of commissioners in counties; the
9 board of commissioners in townships of the first class; the
10 board of supervisors in townships of the second class, or the
11 legislative policy-making body in home rule municipalities.
12 "Initiative." The filing with applicable election officials
13 of a petition containing a proposal for a referendum to be
14 placed on the ballot of the next election. The petition shall
15 be:
16 (1) Filed not later than the 13th Tuesday prior to the
17 next election in which it will appear on the ballot.
18 (2) Signed by voters comprising 5% of the persons voting
19 for the office of Governor in the last gubernatorial general
20 election in the municipality where the proposal will appear
21 on the ballot.
22 (3) Placed on the ballot by election officials in a
23 manner fairly representing the content of the petition for
24 decision by referendum at said election.
25 (4) Submitted not more than once in five years.
26 "Matured claim." A claim that has been reduced to judgment
27 or liquidated in amount by agreement for a period of 90 days
28 prior to the filing of a petition to commence fiscal distress
29 proceedings under this act.
30 "Municipal record." A financial record and document of a
19870S0136B2480 - 8 -
1 municipality or of an authority incorporated by a municipality,
2 excluding confidential information relating to personnel matters
3 and matters relating to the initiation and conduct of
4 investigations of violations of law.
5 "Municipality." Every county, city, borough, incorporated
6 town, township and home rule municipality.
7 "Referendum." Placement of a question inserted on the
8 ballot, by initiative or otherwise, by a majority vote of the
9 electors voting thereon.
10 "Revenues." Additions to fund equity other than from
11 interfund transfers, proceeds of debt and proceeds of
12 disposition of general fixed assets.
13 "Secretary." The Secretary of Community Affairs of the
14 Commonwealth.
15 SUBCHAPTER B
16 ADMINISTRATIVE PROVISIONS
17 Section 121. Powers and duties of department.
18 (a) Compile financial data.--
19 (1) A power and duty of the department shall be to
20 maintain accurate and current information and data on the
21 fiscal status of municipalities to determine if criteria set
22 forth in section 201 exist and, if so, whether the existence
23 of those factors validly indicates fiscal distress.
24 (2) In compiling the information and data, the
25 department shall mail, before January 1 of each year, a
26 Survey of Financial Condition form to each municipality
27 applicable to the municipality's prior fiscal year.
28 (i) The survey shall seek information necessary to
29 determine the fiscal status of a municipality, shall be
30 concise to facilitate prompt response and shall contain
19870S0136B2480 - 9 -
1 an attestation clause to be signed by the presiding
2 officer of the municipality's governing body.
3 (ii) The survey shall be a supplement to and shall
4 be included with the annual audit reports submitted to
5 the department in accordance with law.
6 (iii) The survey shall include information based on
7 the criteria specified in section 201.
8 (iv) The survey shall include information relating
9 to the basis of accounting utilized by municipalities.
10 (b) Assess data.--A power and duty of the department shall
11 be to apply the criteria of section 201 to data and information
12 on the fiscal status of municipalities to assess the validity
13 and applicability of an indication of municipal financial
14 distress. In assessing validity and applicability, the
15 department shall undertake a review process including, but not
16 limited to, consultation, correspondence and visits with a
17 municipality which appears to be financially distressed,
18 notwithstanding the provisions of section 2501-C(e) and (f) of
19 the act of April 9, 1929 (P.L.177, No.175), known as The
20 Administrative Code of 1929, which limits department
21 intervention to incidences when such is requested by the
22 municipality. If the department assesses that a municipality
23 needs assistance to correct minor fiscal problems, the
24 department shall offer appropriate recommendations. If the
25 municipality adopts those recommendations, the department need
26 take no further action.
27 (c) Notify agencies of determination.--Upon the making of a
28 determination by the secretary that a municipality is distressed
29 pursuant to section 203(f), the department shall immediately
30 notify the heads of all Commonwealth agencies of the
19870S0136B2480 - 10 -
1 determination.
2 (d) Act as analyzer of municipal reports.--A power and duty
3 of the department shall be to act as the Commonwealth analyzer
4 for relevant reports, data and information required by law to be
5 filed by municipalities with any Commonwealth agency when such
6 reports, data and information directly relate to the financial
7 conditions of municipalities. The department shall, in
8 consultation with every Commonwealth agency, determine which
9 reports, data and information relate to the fiscal condition of
10 municipalities. Upon an indication of distress in a municipality
11 through information available to the department, the department
12 shall request data, reports and information from all
13 Commonwealth agencies to assist the department to substantiate a
14 possible distress status of a municipality.
15 (e) Furnish program data to municipality.--Upon receipt of
16 information forwarded to the department by each Commonwealth
17 agency pursuant to section 122(a), the department shall furnish
18 this information to the distressed municipality coordinator for
19 possible inclusion of such information into the plan developed
20 by the coordinator in accordance with Subchapter C of Chapter 2.
21 (f) Develop early warning system.--In conjunction with
22 assessing a municipality's current fiscal stability under
23 subsections (a) and (b) and section 201, the department shall
24 develop an early warning system utilizing necessary fiscal and
25 socioeconomic variables to identify municipal financial
26 emergencies before they reach crisis proportions and to notify
27 an affected municipality appropriately. The department shall be
28 responsible for testing the validity and reliability of these
29 variables and shall continuously monitor them to assure their
30 effectiveness. In developing an early warning system, the
19870S0136B2480 - 11 -
1 department may employ or contract with municipal fiscal
2 consultants as deemed necessary to execute the provisions of
3 this subsection. Notice shall be published in the Pennsylvania
4 Bulletin that the early warning system has been developed and
5 the system may not become operational until the publication of
6 the notice.
7 (g) Distribute grants and loans.--The department shall
8 distribute grants and loans to financially distressed
9 municipalities in accordance with Chapter 3.
10 (h) Promulgate rules and regulations.--The department shall
11 promulgate rules and regulations necessary to implement the
12 provisions of this act.
13 Section 122. Duties of Commonwealth agencies.
14 (a) Review programs.--After the secretary makes a
15 determination that a municipality is distressed and the
16 department notifies Commonwealth agencies of the secretary's
17 determination pursuant to section 121(c), each agency shall
18 review all matters and programs pending, underway or about to be
19 commenced or possible programs concerning the distressed
20 municipality. An action which is within the authority and budget
21 of a Commonwealth agency and which, in the judgment of the head
22 of the agency, will help to improve the distressed
23 municipality's financial situation shall be reported to the
24 department.
25 (b) Transfer documented information.--Upon request of the
26 department, each Commonwealth agency shall forward to the
27 department all documented reports, data and other information
28 referred to in section 121(d) within 30 days of receipt.
29 Section 123. Powers and duties of municipalities.
30 (a) File completed survey.--On or before March 15 of each
19870S0136B2480 - 12 -
1 year, every municipality shall return to the department a
2 completed Survey of Financial Conditions referred to in section
3 121(a). No municipality shall receive its alloted payments
4 pursuant to the act of June 1, 1956 (1955 P.L.1944, No.655),
5 referred to as the Liquid Fuels Tax Municipal Allocation Law,
6 unless it complies with the provisions of this section,
7 notwithstanding a provision of law to the contrary, and the
8 Department of Transportation may not disburse funds to a
9 municipality pursuant to the Liquid Fuels Tax Municipal
10 Allocation Law until notified by the department that the
11 municipality has complied with the provisions of this section.
12 (b) File applications for grants and loans.--A financially
13 distressed municipality may apply to the secretary for emergency
14 financial aid in the form of a grant or loan pursuant to Chapter
15 3.
16 (c) Right to petition court for tax increase.--After a
17 municipality has adopted a plan under Subchapter C of Chapter 2,
18 it may petition the court of common pleas of the county in which
19 the municipality is located to increase its rates of taxation
20 for earned income, real property, or both, beyond maximum rates
21 provided by law. If a tax increase above existing limits is
22 granted by the courts, the increase shall be effective for a
23 period of one year from the date a final plan is adopted by the
24 governing body pursuant to section 245. Subsequent increases in
25 rates of taxation may be granted by the court upon annual
26 petition of the municipality. The additional amount of taxes
27 resulting from the petition shall not be subject to sharing with
28 a school district.
29 SUBCHAPTER C
30 JUDICIAL PROVISIONS
19870S0136B2480 - 13 -
1 Section 141. Jurisdiction of court of common pleas.
2 The court of common pleas of each county shall have
3 jurisdiction to hear a petition filed by a municipality which
4 has adopted a final plan pursuant to Subchapter C of Chapter 2
5 to increase rates of taxation for earned income, real property,
6 or both, beyond maximum rates provided by law. The court may
7 extend annually the increased taxing powers of the municipality
8 until the termination date of the plan adopted by the
9 municipality pursuant to Chapter 2.
10 CHAPTER 2
11 MUNICIPAL FINANCIAL DISTRESS
12 SUBCHAPTER A
13 DETERMINATION OF MUNICIPAL FINANCIAL DISTRESS
14 Section 201. Criteria.
15 The evaluation of a municipality's financial stability by the
16 department under section 121 shall include each of the following
17 criteria. If at least one criterion is present and the
18 department assesses pursuant to section 121(b) that it is a
19 valid indication of municipal financial distress, then the
20 department shall exercise its powers and duties pursuant to
21 section 121.
22 (1) The municipality has maintained a deficit over a
23 three-year period, with a deficit of 1% or more in each of
24 the previous fiscal years.
25 (2) The municipality's expenditures have exceeded
26 revenues for a period of three years or more.
27 (3) The municipality has defaulted in payment of
28 principal or interest on any of its bonds or notes or in
29 payment of rentals due any authority.
30 (4) The municipality has missed a payroll for 30 days.
19870S0136B2480 - 14 -
1 (5) The municipality has failed to make required
2 payments to judgment creditors for 30 days beyond the date of
3 the recording of the judgment.
4 (6) The municipality, for a period of at least 30 days
5 beyond the due date, has failed to forward taxes withheld on
6 the income of employees or has failed to transfer employer or
7 employee contributions for Social Security.
8 (7) The municipality has accumulated and has operated
9 for each of two successive years a deficit equal to 5% or
10 more of its revenues.
11 (8) The municipality has failed to make the budgeted
12 payment of its minimum municipal obligation as required by
13 section 302 of the act of December 18, 1984 (P.L.1005,
14 No.205), known as the Municipal Pension Plan Funding Standard
15 and Recovery Act, with respect to a pension fund during the
16 fiscal year for which the payment was budgeted and has failed
17 to take action within that time period to make required
18 payments.
19 (9) A municipality has sought to negotiate resolution or
20 adjustment of a claim in excess of 30% against a fund or
21 budget and has failed to reach an agreement with creditors.
22 (10) A municipality has filed a municipal debt
23 readjustment plan pursuant to Chapter 9 of the Bankruptcy
24 Code (11 U.S.C. § 901 et seq.).
25 (11) The municipality has experienced a decrease in a
26 quantified level of municipal service from the preceding
27 fiscal year which has resulted from the municipality reaching
28 its legal limit in levying real estate taxes for general
29 purposes. For determining levels of municipal service for the
30 year 1987, the department shall utilize annual statistical
19870S0136B2480 - 15 -
1 data since the year 1982 to determine a pattern of decrease
2 in delivery of municipal services since 1982.
3 Section 202. Standing to petition for a determination.
4 The following have standing to seek a determination of
5 municipal financial distress from the secretary:
6 (1) The department itself, if, subsequent to its review
7 and analysis under sections 121 and 201, it concludes that a
8 municipality is substantially in a condition of financial
9 distress.
10 (2) The governing body of the municipality upon passing
11 a resolution by a majority vote of the governing body after a
12 special public meeting duly advertised as provided by law.
13 (3) A creditor with a matured claim to whom the
14 municipality owes $10,000 or more, if the creditor agrees in
15 writing to suspend pending actions and to forbear from
16 bringing an alternate or additional legal action against the
17 municipality to collect the debt or part of it for a period
18 of nine months or until the municipality adopts a plan under
19 this act, whichever occurs first. The filing of a Federal
20 debt adjustment action by a municipality pursuant to
21 Subchapter D of Chapter 2 during the nine-month period
22 cancels the forbearance obligation.
23 (4) Ten percent of the number of electors of the
24 municipality that voted at the last municipal election, by
25 petition to the department alleging the municipality is
26 fiscally distressed.
27 (5) Trustee of a municipal pension fund; an actuary for
28 a pension fund; or 10% or more of the beneficiaries of a
29 pension fund upon petition to the department, provided that a
30 municipality has not timely deposited its minimum obligation
19870S0136B2480 - 16 -
1 payment as required by section 302 of the act of December 18,
2 1984 (P.L.1005, No.205), known as the Municipal Pension Plan
3 Funding Standard and Recovery Act.
4 (6) Ten percent of the employees of the municipality who
5 have not been paid for over 30 days from the time of a missed
6 payroll, upon signing collectively the petition to the
7 department.
8 (7) Trustees or paying agents of a municipal bond
9 indenture.
10 (8) The elected auditors, appointed independent auditors
11 or elected controllers of a municipality if they have reason
12 to believe a municipality is in a state of financial distress
13 pursuant to section 201.
14 Section 203. Procedure for determination.
15 (a) Petition.--A party with standing to petition under
16 section 202 may petition the secretary seeking a determination
17 that the municipality involved is a financially distressed
18 municipality. The petition shall:
19 (1) Allege the petitioner has standing to bring a
20 determination of the distress.
21 (2) State why the petitioner believes the municipality
22 is distressed under section 201.
23 (3) Include a listing of judgments recorded against the
24 municipality.
25 (4) Include any other material allegation justifying the
26 relief afforded by this act.
27 (5) If the petitioner is a municipality, the petition
28 may state why the petitioner believes manifestation of
29 section 201 criteria is imminent and inevitable. This
30 statement may be in lieu of the statement required under
19870S0136B2480 - 17 -
1 paragraph (2).
2 (b) Hearing.--Within ten days of receiving a petition, the
3 secretary shall set a time and place for a public hearing which
4 shall be scheduled to be held on a date at least two weeks but
5 not more than 30 days later within the county of the subject
6 municipality.
7 (c) Investigation.--After receiving the petition but before
8 the public hearing, the secretary may make an investigation into
9 the financial affairs of the municipality. The results of the
10 investigation or any study previously conducted by the
11 department under section 121 shall be placed in the record of
12 the public hearing.
13 (d) Notice.--The secretary shall publish notice of the
14 hearing in accordance with the act of July 3, 1986 (P.L.388,
15 No.84), known as the Sunshine Act, at least once in a newspaper
16 with general circulation in the subject municipality and shall
17 give written notice by certified mail, with return receipt
18 requested, upon the municipal clerk or municipal secretary, the
19 mayor, the municipal solicitor, each member of the governing
20 body of the municipality and the petitioner.
21 (e) Hearing officer.--The secretary or an official of the
22 department designated by the secretary shall conduct the public
23 hearing to hear testimony of the petitioners and other
24 interested persons.
25 (f) Determination.--Within 30 days after the hearing, the
26 secretary shall issue an administrative determination of whether
27 the municipality is financially distressed and reasons for the
28 determination.
29 (g) Appeal.--A determination by the secretary under this act
30 is appealable pursuant to Title 2 of the Pennsylvania
19870S0136B2480 - 18 -
1 Consolidated Statutes (relating to administrative law and
2 procedure).
3 Section 204. Commonwealth funds.
4 No municipality shall be deemed to be distressed by reason of
5 circumstances arising as a result of the failure of the
6 Commonwealth to make any payment of money, including any Federal
7 money which passes through the Commonwealth, due the
8 municipality at the time such payment is due.
9 SUBCHAPTER B
10 COORDINATOR
11 Section 221. Designation.
12 (a) Appointment.--No later than 30 days following a
13 determination of municipal financial distress under section 203,
14 the secretary shall appoint a coordinator who shall prepare a
15 plan addressing the municipality's financial problems.
16 (b) Qualifications.--The coordinator may be an employee of
17 the department, furnished with additional staff or consultant
18 assistance, if needed, or may be a consultant or consulting
19 firm. No elected or appointed official or employee of the
20 municipality shall be eligible for serving as coordinator. The
21 coordinator shall be experienced in municipal administration and
22 finance.
23 (c) Compensation.--The department shall be responsible for
24 compensating the coordinator appointed by the secretary for
25 reasonable salary and expenses. Notwithstanding any law to the
26 contrary, the appointment of a plan coordinator shall not be
27 subject to contractual competitive bidding procedures.
28 (d) Duties.--The coordinator shall prepare and administer a
29 plan designed to relieve the financial distress of the
30 municipality which he has been appointed to serve.
19870S0136B2480 - 19 -
1 (e) Powers.--The coordinator may apply for grants and loans
2 pursuant to Chapter 3, as he deems necessary.
3 Section 222. Access to information.
4 The coordinator shall have full access to all municipal
5 records. If the coordinator believes that an official or
6 employee of the municipality is not answering questions
7 accurately or completely or is not furnishing information
8 requested, the coordinator may notify the official or employee,
9 in writing, to furnish answers to questions or to furnish
10 documents or records, or both. If the official or employee
11 refuses, the coordinator may seek a subpoena in the court of
12 common pleas to compel testimony and furnish records and
13 documents. An action is mandamus shall lie to enforce the
14 provisions of this section.
15 Section 223. Public and private meetings.
16 (a) Public meetings authorized.--The coordinator may hold
17 public meetings as defined in the act of July 3, 1986 (P.L.388,
18 No.84), known as the Sunshine Act, in connection with plan
19 preparation.
20 (b) Private meetings authorized.--Notwithstanding the
21 provisions of the Sunshine Act, private negotiation sessions may
22 be conducted by the coordinator between the municipality and the
23 individual creditors in an effort to obtain the consent of each
24 creditor to the proposed adjustment and handling of specific
25 claims against the municipality.
26 Section 224. Coordinator barred from elective office.
27 The coordinator may not run for an elected office of the
28 municipality or its coterminous political subdivisions within
29 two years after the final adoption of a plan pursuant to this
30 act.
19870S0136B2480 - 20 -
1 SUBCHAPTER C
2 COORDINATOR'S PLAN
3 Section 241. Contents.
4 A plan formulated by the appointed coordinator shall be
5 consistent with applicable law and shall include any of the
6 following factors which are relevant to alleviating the
7 financially distressed status of the municipality:
8 (1) Projections of revenues and expenditures for the
9 current year and the next two years, both assuming the
10 continuation of present operations and as impacted by the
11 measures in the plan.
12 (2) Recommendations which will:
13 (i) Satisfy judgments, past due accounts payable,
14 and past due and payable payroll and fringe benefits.
15 (ii) Eliminate deficits and deficit funds.
16 (iii) Restore to special fund accounts money from
17 those accounts that was used for purposes other than
18 those specifically authorized.
19 (iv) Balance the budget, avoid future deficits in
20 funds and maintain current payments of payroll, fringe
21 benefits and accounts through possible revenue
22 enhancement recommendations, including tax or fee
23 changes.
24 (v) Avoid a fiscal emergency condition in the
25 future.
26 (vi) Enhance the ability of the municipality to
27 negotiate new general obligation bonds, lease rental
28 debt, funded debt and tax and revenue anticipation
29 borrowing.
30 (vii) Consider changes in accounting and automation
19870S0136B2480 - 21 -
1 procedures for the financial benefit of the municipality.
2 (viii) Propose a reduction of debt due on specific
3 claims by an amortized or lump sum payment considered to
4 be the most reasonable disposition of each claim possible
5 for the municipality considering the totality of
6 circumstances.
7 (3) Possible changes in collective bargaining agreements
8 and permanent and temporary staffing level changes or changes
9 in organization.
10 (4) Recommended changes in municipal ordinances or
11 rules.
12 (5) Recommendations for special audits or further
13 studies.
14 (6) An analysis of whether conditions set forth in
15 section 261 exist, whether specific exclusive Federal
16 remedies could help relieve the municipality's financial
17 distress and whether filing a Federal debt adjustment action
18 under Subchapter D is deemed to be appropriate.
19 (7) An analysis of whether the economic conditions of
20 the municipality are so severe that it is reasonable to
21 conclude that the municipality is no longer viable and should
22 consolidate or merge with an adjacent municipality or
23 municipalities pursuant to Chapter 4.
24 Section 242. Publication.
25 (a) Filing.--Within 90 days of being named, the coordinator
26 shall formulate a plan for relieving the municipality's
27 financial distress and shall deliver true and correct copies of
28 it to:
29 (1) The municipal clerk or municipal secretary, who
30 shall immediately place the copy on file for public
19870S0136B2480 - 22 -
1 inspection in the municipal office.
2 (2) The secretary.
3 (3) Each member of the municipal governing body.
4 (4) The mayor.
5 (5) The chief financial officer of the municipality.
6 (6) The solicitor of the municipal governing body.
7 (7) All parties who have petitioned the secretary under
8 section 203.
9 (b) Date of filing.--For purposes of this section, the date
10 of filing the plan shall be the date on which the municipal
11 clerk or municipal secretary places a true and correct copy of
12 the plan on file for public inspection in the municipal office.
13 (c) Notices of plan.--
14 (1) On the date of filing, notice that a plan has been
15 filed and is open for public inspection in the municipal
16 office shall be published by the coordinator in the county
17 legal reporter and in one or more newspapers with general
18 circulation serving the area in which the municipality is
19 located. The cost for publishing the notice shall be borne by
20 the department. The notice shall set forth the following
21 information:
22 (i) That a plan regarding the coordination and
23 relief of the municipality's financial distress was filed
24 pursuant to this act.
25 (ii) The date and place of filing.
26 (iii) That the public has 15 days from the date of
27 filing in which to file written comments on the plan.
28 (iv) The name and address of the coordinator to whom
29 written comments should be sent.
30 (v) Summary of the plan.
19870S0136B2480 - 23 -
1 (2) Notice of a coordinator's public meeting on the plan
2 shall be published by the coordinator in the county legal
3 reporter and in one or more newspaper with general
4 circulation serving the area in which the municipality is
5 located. The department shall bear the cost for publishing
6 the notice. The notice shall contain the following
7 information:
8 (i) That the purpose of the coordinator's public
9 meeting is to receive public comments on the plan.
10 (ii) The date and place of the meeting.
11 (3) The coordinator may combine the publication of the
12 notice that a plan has been filed with the publication of the
13 notice of the public meeting.
14 (d) Comment period.--Written comments on the plan may be
15 filed with the coordinator. Written comments shall be made no
16 later than 15 days after the date of filing. Written comments
17 judged by the coordinator to have value to the plan may be used
18 to develop a revised plan.
19 (e) Coordinator's public meeting.--A meeting conducted by
20 the coordinator in the municipality shall be set for a date not
21 later than 20 days after the date of filing the plan. The
22 coordinator shall request in writing that the chief executive
23 officer, each member of the municipal governing body and the
24 chief financial officer of the municipality to be present at the
25 coordinator's meeting. Comments on the plan shall be received by
26 the coordinator at that time.
27 Section 243. Review of plan.
28 (a) General rule.--The coordinator, in his discretion, shall
29 consider comments made on the plan. Creditors who do not consent
30 to the handling of their claim by the plan, shall notify the
19870S0136B2480 - 24 -
1 coordinator of their rejection of the plan not later than ten
2 days before the public meeting scheduled by the governing body
3 under section 245.
4 (b) Rejected claims.--If a creditor has rejected the plan,
5 the coordinator shall make a written report to the governing
6 body stating whether the timing and amount of payment or
7 proposed resolution of the claim is the best disposition the
8 municipality can make.
9 (c) Additional negotiations authorized.--Additional
10 negotiations between the municipality and creditors rejecting
11 the plan shall be encouraged and presided over by the
12 coordinator.
13 (d) Governing body proposals.--The governing body of the
14 municipality may propose to the coordinator resolutions of
15 claims which have been the reason for rejection of the proposed
16 plan, and the coordinator may revise the plan accordingly.
17 (e) Revision on own initiative.--Nothing in this section
18 shall preclude the coordinator from revising a plan of his own
19 initiative.
20 Section 244. Revision.
21 Neither the secretary nor the chief executive officer or the
22 governing body, as appropriate, may revise the coordinator's
23 plan. However, the coordinator shall consult with the secretary
24 and either the chief executive officer or the governing body
25 throughout the revision of the plan and shall give consideration
26 to comments they may propose.
27 Section 245. Adoption by municipality.
28 Not later than 15 days following the coordinator's public
29 meeting, the municipal governing body shall either enact an
30 ordinance approving the implementation of the plan, including
19870S0136B2480 - 25 -
1 enactment of necessary related ordinances and revisions to
2 ordinances, or shall reject the plan and proceed under section
3 246. If the ordinance takes effect in a municipality operating
4 under an optional plan form of government or a home rule
5 charter, the chief executive officer may issue an order
6 directing the implementation of the plan no later than seven
7 days from the enactment of the ordinance by the governing body.
8 Section 246. Preparation and action on alternate plan.
9 (a) Chief executive officer's plan.--If the governing body
10 of a municipality that operates under an optional plan form of
11 government or a home rule charter enacts an ordinance directing
12 implementation of the coordinator's plan and the chief executive
13 officer refuses or fails to issue an order as provided in
14 section 245, or if the governing body refuses to enact an
15 ordinance approving the coordinator's plan, then the chief
16 executive officer, within 14 days of the action or refusal to
17 act on the ordinance by the governing body, shall develop a
18 plan, including a signed order implementing it, which shall be
19 the subject of a public meeting no later than ten days following
20 its completion.
21 (1) The chief executive officer may conduct private
22 sessions before the public meeting with individual creditors
23 in an effort to obtain the consent of each creditor to
24 proposed adjustment and handling of specific claims against
25 the municipality. An agreement reached as a result of these
26 private sessions shall become a matter of record and part of
27 the proceedings of the public meeting conducted pursuant to
28 this subsection.
29 (2) The chief executive officer shall be responsible for
30 placing notice that a public meeting will be held on his
19870S0136B2480 - 26 -
1 plan. Notice shall be published in the same manner as
2 provided in section 242(c). The coordinator shall attend the
3 public meeting and furnish written and oral comments on the
4 chief executive officer's plan.
5 (b) Governing body's plan.--In the case of a municipality
6 operating under a form of government other than an optional plan
7 form of government or a home rule charter, if the governing body
8 by majority vote refuses to enact an ordinance approving and
9 implementing the coordinator's plan as provided in section 245,
10 then within 14 days of its refusal the governing body shall
11 develop a plan which shall be the subject of a public meeting
12 held not later than ten days following plan completion.
13 (1) The governing body may conduct private sessions
14 before the public meeting with individual creditors in an
15 effort to obtain consent of each creditor to proposed
16 adjustment and handling of specific claims against the
17 municipality. An agreement reached as a result of these
18 private sessions shall become a matter of record and part of
19 the proceedings of the public meeting conducted pursuant to
20 this subsection.
21 (2) The governing body shall be responsible for placing
22 notice that a public meeting will be held on its plan. Notice
23 shall be published in the same manner as provided in section
24 242(c). The coordinator shall attend the public meeting and
25 furnish written and oral comments on the governing body's
26 plan.
27 (c) Approval or rejection of plan.--Following the public
28 meeting on the chief executive officer's plan or the governing
29 body's plan, the governing body may enact an ordinance,
30 including necessary related implementing ordinances or revisions
19870S0136B2480 - 27 -
1 to ordinances, approving the plan.
2 (d) Review by secretary.--
3 (1) If an ordinance is enacted approving a plan under
4 this section, it shall be forwarded to the secretary for
5 determination that the plan, when implemented, will overcome
6 the municipality's financial distress.
7 (2) If the secretary is of the opinion that the plan,
8 when implemented, will overcome the municipality's financial
9 distress, the secretary shall so inform the municipality.
10 (3) If the secretary is of the opinion that the plan,
11 when implemented, will not overcome the municipality's
12 financial problems, the secretary shall inform the
13 municipality of the following:
14 (i) The secretary's determination.
15 (ii) The reasons for the determination.
16 (iii) The applicability of sections 251 and 264 to
17 the municipality.
18 Section 247. Plan implementation.
19 (a) Coordinator's plan.--If the coordinator's plan is
20 adopted by the municipal governing body, the coordinator shall
21 be charged with implementing his plan and shall:
22 (1) Give written notice of plan adoption to creditors,
23 collective bargaining units and other parties who will be
24 directly affected by plan implementation. In the notice he
25 shall outline the provisions of the plan and specify how that
26 person's claim or interest will be treated.
27 (2) Initiate plan implementation and continue its
28 implementation for at least four months.
29 (3) Oversee completion of the plan either by directly
30 controlling the implementation process or by turning the
19870S0136B2480 - 28 -
1 implementation process over to a person designated by the
2 governing body or by the chief executive officer, as the case
3 may be. The person designated shall supply the coordinator
4 with monthly reports.
5 (4) Terminate the plan upon its completion.
6 (5) Suggest amendments to the plan which may be
7 necessary to implement or complete the plan.
8 (b) Chief executive officer's plan.--If the plan adopted is
9 the plan proposed by the chief executive officer in an optional
10 plan form of government or home rule charter, the chief
11 executive officer shall have the duties of the coordinator set
12 forth in subsection (a).
13 (c) Municipal governing body's plan.--If the plan adopted is
14 the plan proposed by the municipal governing body, a person
15 designated by the governing body shall have the duties of the
16 coordinator set forth in subsection (a).
17 Section 248. Failure to adopt or implement plan.
18 If no plan is adopted or implemented pursuant to this
19 chapter, then sections 251 and 264 shall apply.
20 Section 249. Plan amendments.
21 An amendment to an adopted plan may be initiated by the
22 coordinator, the chief executive officer, or the governing body
23 of a municipality, as the case may be. The adoption of an
24 amendment shall be by ordinance.
25 Section 250. Debt provisions.
26 Adoption of a plan by ordinance is a condition precedent for
27 the approval of long-term debt or funding debt under the act of
28 July 12, 1972 (P.L.781, No.185), known as the Local Government
29 Unit Debt Act. A debt financing provision of the plan may be
30 waived by agreement of the lender and the municipality; but any
19870S0136B2480 - 29 -
1 such waiving must be expressly set forth in the indenture or
2 contract securing the debt.
3 Section 251. Commonwealth agency payments or assistance.
4 (a) Withholding of certain Commonwealth funds.--Except as
5 provided in section 302(b), upon certification by the secretary
6 that a financially distressed municipality has failed to adopt a
7 plan or implement an adopted plan as proposed under this act or
8 has adopted a plan which is inadequate to address the
9 municipality's financial distress, the municipality shall not
10 receive a grant, loan, entitlement or payment from the
11 Commonwealth or any of its agencies. Moneys withheld shall be
12 held in escrow by the Commonwealth until the secretary has
13 rescinded the certification.
14 (b) Exceptions to the withholding of Commonwealth funds.--
15 Notwithstanding the provisions of subsection (a), the following
16 funds shall not be withheld from a municipality.
17 (1) Capital projects under contract in progress.
18 (2) Moneys received by a municipality from an agency of
19 the Commonwealth or the Federal Government subsequent to the
20 declaration of a disaster resulting from a catastrophe.
21 (3) Pension fund disbursements made pursuant to State
22 law.
23 Section 252. Plan not affected by certain collective bargaining
24 agreements or settlements.
25 A collective bargaining agreement or arbitration settlement
26 executed after the adoption of a plan shall not in any manner
27 violate, expand or diminish its provisions.
28 Section 253. Termination of status.
29 (a) Determination by secretary.--Following a duly advertised
30 public hearing with notices given as provided in section 203,
19870S0136B2480 - 30 -
1 the secretary may issue a determination that the conditions
2 which led to the earlier determination of municipal financial
3 distress municipality are no longer applicable. The
4 determination shall rescind the status of municipal financial
5 distress and shall include a statement of facts as part of the
6 final order.
7 (b) Determination upon petition by a municipality.--A
8 financially distressed municipality may petition the secretary
9 to make a determination that the conditions which led to the
10 earlier determination of municipal financial distress are no
11 longer present. Upon receiving the petition, the secretary may
12 issue a determination to rescind following a duly advertised
13 public hearing with notices given as provided in section 203.
14 SUBCHAPTER D
15 APPLICATION OF FEDERAL LAW
16 Section 261. Filing municipal debt adjustment under Federal
17 law.
18 (a) Authorization.--In the event one of the following
19 conditions is present, a municipality is hereby authorized to
20 file a municipal debt adjustment action pursuant to the
21 Bankruptcy Code (11 U.S.C. § 101 et seq.):
22 (1) After recommendation by the plan coordinator
23 pursuant to section 241(6).
24 (2) Imminent jeopardy of an action by a creditor,
25 claimant or supplier of goods or services which is likely to
26 substantially interrupt or restrict the continued ability of
27 the municipality to provide health or safety services to its
28 citizens.
29 (3) One or more creditors of the municipality have
30 rejected the proposed or adopted plan, and efforts to
19870S0136B2480 - 31 -
1 negotiate resolution of their claims have been unsuccessful
2 for a ten-day period.
3 (4) A condition substantially affecting the
4 municipality's financial distress is potentially solvable
5 only by utilizing a remedy exclusively available to the
6 municipality through the Federal Municipal Debt Readjustment
7 Act (48 Stat. 798).
8 (5) A majority of the current or immediately preceding
9 governing body of a municipality determined to be financially
10 distressed has failed to adopt a plan or to carry out the
11 recommendations of the coordinator pursuant to this act.
12 (b) Majority vote.--This authority may be exercised only
13 upon the vote by a majority of the municipality's governing
14 body.
15 Section 262. Significance and duty on filing Federal action.
16 (a) Status.--A municipality which files a municipal debt
17 adjustment action under Federal law shall be deemed to be a
18 financially distressed municipality under this act.
19 (b) Notice.--The municipality shall immediately notify the
20 secretary and the plan coordinator, if one has been assigned, of
21 the Federal filing.
22 (c) Appointment of coordinator.--Upon receipt of notice of
23 filing of the Federal action by a municipality, the secretary
24 shall appoint a plan coordinator under section 221, if none had
25 yet been appointed. The coordinator shall formulate a plan
26 approvable by the Federal court.
27 Section 263. Application of this act during Federal action.
28 (a) Existing plan.--After filing a Federal municipal debt
29 adjustment action, if there is a plan in process under the terms
30 of this act, the municipality shall utilize the plan and the
19870S0136B2480 - 32 -
1 expertise of the plan coordinator, among others available to it,
2 to work out a revised plan to be proposed through the Federal
3 action, adapting it to incorporate Federal remedies which are
4 appropriate in the circumstances.
5 (b) Necessary plan development.--A municipality which files
6 a municipal debt adjustment action under Federal law, whether or
7 not a proceeding under this act had been commenced as of the
8 date of such filing, shall utilize the procedures set up by this
9 act concurrently with the processing of the Federal action, so
10 as to efficiently expedite the formulation of a plan, its timely
11 confirmation by the Federal court having jurisdiction of the
12 Federal action and its adoption by ordinance.
13 (c) Plan implementation.--After adoption of a plan by the
14 municipality as an ordinance and confirmation of the plan by the
15 Federal court, implementation of the plan shall be coordinated
16 through this act and in accordance with requirements set by the
17 Federal court.
18 Section 264. Suspension of Commonwealth funding.
19 (a) General rule.--A municipality which remains classified
20 as financially distressed by the department and has failed to
21 adopt or implement a plan within a period set by the Federal
22 court, or has failed or refused to follow a recommendation by a
23 coordinator, shall be notified in writing by the coordinator
24 that he is requesting the secretary to issue a suspension of
25 Commonwealth funding to the municipality for its failure to take
26 the steps enumerated in the notice.
27 (b) Municipality's response.--The municipality shall have
28 ten days from the date of the coordinator's notice in which to
29 show cause to the secretary and the coordinator why Commonwealth
30 funding to the municipality should not be suspended.
19870S0136B2480 - 33 -
1 (c) Certification.--If the municipality has not adequately
2 shown cause to the secretary and coordinator why such action
3 should not be taken, the secretary, within 20 days of the
4 coordinator's request, shall certify to the municipality in
5 writing that each grant, loan, entitlement or payment by the
6 Commonwealth or any of its agencies shall be suspended pending
7 adoption of a plan calculated to fully resolve the
8 municipality's financial distress. Suspended funds shall be held
9 in escrow by the Commonwealth until the secretary has rescinded
10 the certification.
11 (d) Exception.--Notwithstanding the provisions of subsection
12 (c), the following funds shall not be withheld from a
13 municipality:
14 (1) Capital projects under contract in progress.
15 (2) Moneys received by a municipality from an agency of
16 the Commonwealth or the Federal Government subsequent to the
17 declaration of a disaster resulting from a catastrophe.
18 (3) Pension fund disbursements made pursuant to State
19 law.
20 (4) A grant or loan made pursuant to section 302(b) of
21 this act.
22 CHAPTER 3
23 EMERGENCY FINANCIAL AID FOR DISTRESSED MUNICIPALITIES
24 Section 301. Program.
25 (a) Establishment.--There is hereby established within the
26 department a program to provide emergency grants and loans to
27 municipalities declared to be distressed in accordance with this
28 act.
29 (b) Nature of loans.--All loans granted by the department
30 shall be free from interest and repayable according to a
19870S0136B2480 - 34 -
1 schedule which will not hinder the satisfactory completion of a
2 plan adopted and implemented under this act.
3 Section 302. Grant and loan procedure.
4 (a) General provisions.--A financially distressed
5 municipality or the coordinator may apply to the secretary for a
6 grant or loan subsequent to the adoption of a plan by a
7 municipality pursuant to Chapter 2. In cases where the plan
8 finally adopted has been formulated by the chief executive
9 officer or governing body, the chief executive officer or a
10 person designated by the governing body may apply to the
11 secretary for a grant or loan.
12 (b) Immediate emergencies.--In cases where a municipality
13 has been declared distressed but prior to final adoption of a
14 plan, the municipality or the coordinator appointed may apply to
15 the department for an expedited loan or grant to immediately
16 assist the distressed municipality if either of the following
17 conditions exists:
18 (1) The applicant verifies that he believes the
19 municipality is in imminent danger of insolvency.
20 (2) The applicant verifies that he believes there is a
21 clear and present danger to the health and safety of
22 residents of the municipality.
23 (c) Approval.--
24 (1) Upon receipt of an application under subsection (a),
25 the secretary shall set a date for a hearing to be held not
26 sooner than ten days nor later than 30 days from the date of
27 receipt of the application. At the hearing the secretary
28 shall receive evidence which sets forth the necessity for the
29 moneys requested. The hearing shall be conducted at an
30 acceptable location within the municipality to accommodate
19870S0136B2480 - 35 -
1 all interested parties. If satisfied that sufficient evidence
2 exists to warrant a grant or loan, the secretary shall
3 approve the application and order the department to
4 distribute moneys requested subject to the limitations set
5 forth in section 303(c).
6 (2) Upon receipt of an application under subsection (b),
7 the secretary shall review all data immediately available and
8 shall determine whether emergency funds are warranted. If
9 warranted, the secretary shall approve the application and
10 order the department to distribute moneys requested. The
11 secretary or the applicant may request a hearing to provide
12 additional evidence of emergency need, but if requested, the
13 hearing shall be held not later than 15 days from the date
14 the application is received.
15 Either determination is appealable under Title 2 of the
16 Pennsylvania Consolidated Statutes (relating to administrative
17 law and procedures).
18 Section 303. Limitations.
19 (a) Use.--No loan or grant given to a financially distressed
20 municipality by the department shall be used by the municipality
21 to pay debts incurred by the municipality prior to the
22 determination by the secretary that the municipality is
23 financially distressed.
24 (b) Eligibility.--Cities of the first and second class and
25 counties may not apply for a grant or loan under this act.
26 (c) Amount.--The secretary shall not approve an application
27 to any one municipality for an amount which will substantially
28 impair the department's ability to distribute the remaining sum
29 fairly and equitably to other applicants or potential
30 applicants.
19870S0136B2480 - 36 -
1 Section 304. Expiration.
2 This chapter shall expire June 30, 1990.
3 CHAPTER 4
4 CONSOLIDATION OR MERGER OF ECONOMICALLY NONVIABLE
5 MUNICIPALITIES
6 SUBCHAPTER A
7 GENERAL PROVISIONS
8 Section 401. Determination.
9 If a municipality has been determined to be financially
10 distressed pursuant to this act and the coordinator has further
11 determined under section 241 that consolidation or merger of the
12 municipality with an adjacent municipality or municipalities is
13 in the public interest, then the municipality may utilize the
14 provisions of this chapter.
15 Section 402. Procedure for consolidation or merger.
16 Two or more municipalities may be consolidated or merged into
17 a single municipality, whether within the same or different
18 counties, if each of the municipalities is contiguous to at
19 least one of the other consolidating or merging municipalities,
20 and if together such municipalities would form a consolidated or
21 merged municipality. Consolidation or merger may be commenced by
22 one of the following:
23 (1) Joint agreement of the governing bodies of the
24 municipalities proposed for consolidation or merger approved
25 by ordinance.
26 (2) Initiative of electors.
27 Section 403. Joint agreement of governing bodies.
28 (a) General rule.--The governing body of each municipality
29 to be consolidated or merged shall enter into a joint agreement
30 under the official seal of each municipality to consolidate or
19870S0136B2480 - 37 -
1 merge into one municipality.
2 (b) Elements.--The joint agreement shall set forth:
3 (1) The name of each municipality that is a party to the
4 agreement.
5 (2) The name and the territorial boundaries of the
6 consolidated or merged municipality.
7 (3) The type and class of the consolidated or merged
8 municipality.
9 (4) 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 home
13 rule charter or an optional plan of government previously
14 adopted by one of the consolidating or merging
15 municipalities.
16 (5) 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 (6) Terms for:
21 (i) The disposition of existing assets of each
22 municipality.
23 (ii) The liquidation of existing indebtedness of
24 each municipality.
25 (iii) The assumption, assignment or disposition of
26 existing liabilities of each municipality, either
27 jointly, separately or in certain defined proportions, by
28 separate rates of taxation within each of the constituent
29 municipalities until consolidation or merger becomes
30 effective pursuant to section 407.
19870S0136B2480 - 38 -
1 (iv) The implementation of a legally consistent
2 uniform tax system throughout the consolidated or merged
3 municipality which provides the revenue necessary to fund
4 required municipal services.
5 (7) The governmental organization of the consolidated or
6 merged municipality insofar as it concerns elected officers.
7 (8) A transitional plan and schedule applicable to
8 elected officers. The transitional plan shall provide for the
9 abolition of the elected offices of each component
10 municipality and the termination of the terms of office of
11 the elected officials of each municipality and for the
12 election of the first officers of the consolidated or merged
13 municipality so that election and tenure shall conform to
14 those in other municipalities of the same kind and class in
15 the Commonwealth with properly staggered terms where required
16 or desired.
17 (9) The common administration and enforcement of
18 ordinances enforced uniformly within the consolidated or
19 merged municipality.
20 Section 404. Initiative of electors.
21 (a) General rule.--In order for consolidation or merger
22 proceedings to be initiated by petition of electors, petitions
23 containing signatures of at least 5% of the electors voting for
24 the Office of Governor in the last gubernatorial general
25 election in each municipality proposed to be consolidated or
26 merged shall be filed with the county board of elections of the
27 county in which the municipality, or the greater portion of its
28 territory, is located.
29 (b) Notice to governing bodies affected.--When election
30 officials find that a petition is in proper order, they shall
19870S0136B2480 - 39 -
1 send copies of the initiative petition without the signatures
2 thereon to the governing bodies of each of the municipalities
3 affected by the proposed consolidation or merger.
4 (c) Contents.--A petition shall set forth:
5 (1) The name of the municipality from which the signers
6 of the petition were obtained.
7 (2) The names of the municipalities proposed to be
8 consolidated or merged.
9 (3) The name of the consolidated or merged municipality.
10 (4) The type and class of the consolidated or merged
11 municipality.
12 (5) Whether the consolidated or merged municipality
13 shall be governed solely by the code and other general laws
14 applicable to the kind and class of the consolidated or
15 merged municipality, or whether it shall be governed by a
16 home rule charter or an optional plan of government
17 previously adopted by one of the consolidating or merging
18 municipalities.
19 (6) The number of wards, if any, into which the
20 consolidated or merged municipality will be divided for the
21 purpose of electing all or some members of its governing
22 body.
23 (d) Filing of petition.--The consolidation or merger
24 petition shall be filed with the election officials not later
25 than the 13th Tuesday prior to the next primary, municipal or
26 general election. The petition and proceedings therein shall be
27 in the manner and subject to the provisions of the election laws
28 which relate to the signing, filing and adjudication of
29 nomination petitions insofar as such provisions are applicable,
30 except that no referendum petition shall be signed or circulated
19870S0136B2480 - 40 -
1 prior to the 20th Tuesday before the election, nor later than
2 the 13th Tuesday before the election.
3 Section 405. Conduct of referenda.
4 (a) Duty to place on ballot.--Following initiation of
5 proceedings for consolidation or merger by the procedures set
6 forth either in section 403 or 404, the question of
7 consolidation or merger shall be placed before the electors of
8 each of the municipalities proposed to be consolidated or
9 merged. A referendum shall be held at the first primary,
10 municipal or general election after either:
11 (1) the date of the general agreement entered into under
12 the provisions of section 403; or
13 (2) the date of filing of the petition filed under the
14 provisions of section 404.
15 (b) Approval.--Consolidation or merger shall not be
16 effective unless the referendum question is approved by a
17 majority of the electors voting in each of the municipalities in
18 which the referendum is held. If in any one of the
19 municipalities in which the referendum is held a majority in
20 favor of consolidation or merger does not result, the referendum
21 shall fail and consolidation or merger shall not take place. The
22 question described in the consolidation or merger proposal shall
23 not be voted on again for a period of five years.
24 Section 406. Consolidation or merger agreement.
25 (a) Form.--Upon favorable action by the electorate on
26 consolidation or merger, in cases where consolidation or merger
27 was initiated otherwise than by joint agreement of municipal
28 governing bodies under section 403, the governing bodies of the
29 municipalities to be consolidated or merged shall meet within 60
30 days after the certification of the favorable vote and shall
19870S0136B2480 - 41 -
1 make a consolidation or merger agreement, as follows:
2 (1) If the governing body, or part of the governing
3 body, of the consolidated or merged municipality is to be
4 elected on a ward basis, the agreement shall set forth the
5 ward boundaries and the ward designation, by number, and the
6 number of members of the municipal governing body to be
7 elected from each ward.
8 (2) The agreement shall set forth terms for:
9 (i) The disposition of the existing assets of each
10 municipality.
11 (ii) The liquidation of the existing indebtedness of
12 each municipality.
13 (iii) The assumption, assignment, and disposition of
14 the existing liabilities of each municipality, either
15 jointly, separately or in certain defined proportions, by
16 separate rates of taxation within each of the constituent
17 municipalities until consolidation or merger becomes
18 effective pursuant to section 407.
19 (3) The agreement shall set forth the governmental
20 organization of the consolidated or merged municipality,
21 insofar as it concerns elected officers, and shall contain a
22 transitional plan and schedule applicable to elected
23 officers. The agreement shall provide for the abolition of
24 elected offices and for the termination of the terms of
25 office of elected officers of each municipality being merged
26 or consolidated, and the election of the first officers of
27 the consolidated or merged municipality so that election and
28 tenure shall conform to those in other municipalities of the
29 same kind and class in the Commonwealth, with properly
30 staggered terms, where required or desired.
19870S0136B2480 - 42 -
1 (4) The agreement shall provide for common
2 administration and enforcement of ordinances to be enforced
3 uniformly within the consolidated or merged municipality.
4 (5) The agreement shall also provide, consistent with
5 exiting law, for the implementation of an uniform tax system
6 throughout the consolidated or merged municipality which
7 shall provide the revenue necessary to fund required
8 municipal services.
9 (b) Filing.--A copy of the consolidation or merger agreement
10 shall be filed with the Department of Community Affairs, the
11 Department of Transportation, the Governor's Office of Policy
12 Development or its successor, the Department of Education, State
13 Tax Equalization Board, the Legislative Reapportionment
14 Commission and the court of common pleas and the board of county
15 commissioners of the county or counties in which municipalities
16 affected are located.
17 Section 407. Effectuation of consolidation or merger.
18 Municipalities consolidated or merged shall continue to be
19 governed as before consolidation or merger until the first
20 Monday of January following the municipal election next
21 succeeding the election at which consolidation or merger
22 referenda were held. At that municipal election, the necessary
23 officers of the consolidated or merged municipality shall be
24 elected in accordance with the terms of the general law
25 affecting municipalities of the kind or class of the
26 consolidated or merged municipality, or, in case of a
27 consolidated or merged municipality operating under a home rule
28 charter or optional plan of government, in accordance with the
29 charter or optional plan or with general law affecting home rule
30 or optional plan municipalities, as applicable. The officers
19870S0136B2480 - 43 -
1 elected at that municipal election shall be elected for terms of
2 office under the plan and schedule set forth in the
3 consolidation or merger agreement authorized by section 403 or
4 406, as the case may be. They shall take office as officers of
5 the consolidated or merged municipality on the first Monday of
6 January following the municipal election at which they were
7 elected, and thereupon, the consolidated or merged municipality
8 shall begin to function and the former municipalities
9 consolidated or merged into it shall be abolished.
10 Section 408. Collective bargaining agreements; furlough of
11 employees; disputes.
12 (a) Collective bargaining contracts, agreements or
13 arbitration awards.--A collective bargaining agreement or
14 contract in existence in a municipality or an arbitration award
15 in effect in a municipality prior to a consolidation or merger
16 shall remain effective after consolidation or merger until the
17 contract, agreements, or awards expire. After the expiration of
18 the contracts, agreements or awards, a subsequent collective
19 bargaining agreement, contract or award shall not impair the
20 implementation of a plan adopted pursuant to this act.
21 (b) Reduction in existing work force.--Subsequent to
22 consolidation or merger, the consolidated or merged municipality
23 may, in accordance with existing contracts or arbitration award
24 provisions and consistent with applicable laws, reduce the
25 number of uniformed and nonuniformed employees to avoid
26 overstaffing and duplication of positions in the consolidated or
27 merged municipality. If a consolidated or merged municipality
28 determines in its discretion that it is necessary to increase
29 the number of uniformed or nonuniformed employees, employees of
30 the constituent municipalities shall be reinstated in the order
19870S0136B2480 - 44 -
1 of their seniority if they had been previously furloughed.
2 (c) Disputes.--The Pennsylvania Labor Relations Board shall
3 have jurisdiction to determine labor disputes or controversies,
4 except those arising out of interpretation or construction of a
5 collective bargaining agreement containing provision for binding
6 arbitration, between the consolidated or merged municipality and
7 its employees.
8 (d) Effect on existing law.--Nothing in this section shall
9 prohibit a consolidated or merged municipality from exercising
10 its powers and responsibilities pursuant to provisions of law
11 related to collective bargaining, including, but not limited to,
12 the act of June 24, 1968 (P.L.237, No.111), referred to as the
13 Policemen and Firemen Collective Bargaining Act, and the act of
14 July 23, 1970 (P.L.563, No.195), known as the Public Employe
15 Relations Act.
16 Section 409. Procedures.
17 (a) Ordinance book.--After consolidation or merger becomes
18 effective, a new ordinance book shall be used by the
19 municipality and the first document to be recorded in it shall
20 be the consolidation or merger agreement.
21 (b) Ordinance codification.--No later than two years after
22 consolidation or merger goes into effect, codification of all
23 the ordinances of the municipality shall be completed. This
24 shall include tabulation or indexing of those ordinances of the
25 component municipalities that are of permanent effect in the
26 consolidated or merged municipality.
27 (c) Vesting of rights, privileges, property and
28 obligations.--All rights, privileges and franchises of each
29 component municipality and all property belonging to each
30 component municipality shall be vested in the consolidated or
19870S0136B2480 - 45 -
1 merged municipality. The title to real estate vested in any of
2 those municipalities shall not revert or be in any way impaired
3 by reason of the consolidation or merger. All liens and rights
4 of creditors shall be preserved. Agreements and contracts shall
5 remain in force. Debts, liabilities and duties of each of the
6 municipalities shall be attached to the consolidated or merged
7 municipality and may be enforced against it.
8 SUBCHAPTER B
9 ECONOMIC ASSISTANCE
10 Section 421. Eligibility.
11 In the event a municipality has been determined to be
12 distressed pursuant to section 203(f) and has subsequently
13 consolidated or merged under provisions of this chapter, the
14 consolidated or merged municipality shall be eligible for
15 economic and community development assistance as provided in
16 section 422.
17 Section 422. Priority.
18 Notwithstanding law to the contrary, if the electors of two
19 or more municipalities at least one of which has been determined
20 to be distressed pursuant to section 203(f), have voted to
21 approve the consolidation or merger of those municipalities, the
22 consolidated or merged municipality shall receive priority in
23 all economic and community development programs funded by the
24 Commonwealth. The secretary, upon notification of consolidation
25 or merger of such municipalities shall notify Commonwealth
26 agencies that the consolidated or merged municipality shall
27 receive priority in funding as provided in this subchapter.
28 Nothing in this subchapter shall be construed to give priority
29 over economic and community development assistance already
30 approved and encumbered by the Commonwealth or its agencies to
19870S0136B2480 - 46 -
1 any of the following:
2 (1) A municipality which is not financially distressed
3 under this act.
4 (2) A municipality which has been declared distressed
5 under section 203(f) but has not been subjected to the
6 funding restrictions under section 251 or 264.
7 Section 423. Listing of eligible municipalities.
8 A consolidated or merged municipality which is given priority
9 as provided in this subchapter shall be given preference in
10 economic and community development assistance over other
11 potential eligible municipalities on the basis of the date of
12 notification by the secretary to Commonwealth agencies as
13 provided in section 422.
14 CHAPTER 5
15 FUNDING
16 Section 501. Appropriation.
17 The sum of $5,000,000, appropriated under section 210 of the
18 act of July 1, 1986 (P.L.1776, No.5A), known as the General
19 Appropriation Act of 1986, shall be used to carry out the
20 provisions of this act. The appropriation shall be distributed
21 as follows:
22 (1) $500,000 shall be used by the department for
23 administrative expenses necessary to carry out the provisions
24 of this act.
25 (2) $4,500,000 shall be used to provide grants and loans
26 to municipalities determined to be financially distressed
27 pursuant to this act.
28 CHAPTER 6
29 TECHNICAL PROVISIONS
30 Section 601. Repeals.
19870S0136B2480 - 47 -
1 Section 2501-C(e) and (f) of the act of April 9, 1929
2 (P.L.177, No.175), known as The Administrative Code of 1929, are
3 repealed insofar as they are inconsistent with this act.
4 The act of June 11, 1935 (P.L.323, No.146), entitled "An act
5 designating the Department of Internal Affairs as the agency of
6 the Commonwealth to approve or disapprove petitions to courts,
7 and plans for the readjustment of debts of political
8 subdivisions, under the act of Congress relating to the
9 bankruptcy of political subdivisions; and defining the powers
10 and duties of said department in relation thereto," is repealed
11 insofar as it related to a municipality as defined in section
12 103 of this act.
13 Section 602. Expiration.
14 Section 203(a)(5) shall expire upon publication in the
15 Pennsylvania Bulletin of the notice required under section
16 121(g).
17 Section 603. Effective date.
18 This act shall take effect in 60 days.
19 SECTION 1. SECTIONS 201(8), 242(A), 244 AND 245 OF THE ACT <--
20 OF JULY 10, 1987 (P.L.246, NO.47), KNOWN AS THE FINANCIALLY
21 DISTRESSED MUNICIPALITIES ACT, ARE AMENDED TO READ:
22 SECTION 201. CRITERIA.
23 THE EVALUATION OF A MUNICIPALITY'S FINANCIAL STABILITY BY THE
24 DEPARTMENT UNDER SECTION 121 SHALL INCLUDE EACH OF THE FOLLOWING
25 CRITERIA. IF AT LEAST ONE CRITERION IS PRESENT AND THE
26 DEPARTMENT ASSESSES PURSUANT TO SECTION 121(B) THAT IT IS A
27 VALID INDICATION OF MUNICIPAL FINANCIAL DISTRESS, THEN THE
28 DEPARTMENT SHALL EXERCISE ITS POWERS AND DUTIES PURSUANT TO
29 SECTION 121.
30 * * *
19870S0136B2480 - 48 -
1 (8) THE MUNICIPALITY HAS FAILED TO MAKE THE BUDGETED
2 PAYMENT OF ITS MINIMUM MUNICIPAL OBLIGATION AS REQUIRED BY
3 SECTION 302, 303 OR 602 OF THE ACT OF DECEMBER 18, 1984
4 (P.L.1005, NO.205), KNOWN AS THE MUNICIPAL PENSION PLAN
5 FUNDING STANDARD AND RECOVERY ACT, WITH RESPECT TO A PENSION
6 FUND DURING THE FISCAL YEAR FOR WHICH THE PAYMENT WAS
7 BUDGETED AND HAS FAILED TO TAKE ACTION WITHIN THAT TIME
8 PERIOD TO MAKE REQUIRED PAYMENTS.
9 * * *
10 SECTION 242. PUBLICATION.
11 (A) FILING.--WITHIN 90 DAYS OF [BEING NAMED] AN EXECUTED
12 CONTRACT BETWEEN THE DEPARTMENT AND THE COORDINATOR, THE
13 COORDINATOR SHALL FORMULATE A PLAN FOR RELIEVING THE
14 MUNICIPALITY'S FINANCIAL DISTRESS AND SHALL DELIVER TRUE AND
15 CORRECT COPIES OF IT TO:
16 (1) THE MUNICIPAL CLERK OR MUNICIPAL SECRETARY, WHO
17 SHALL IMMEDIATELY PLACE THE COPY ON FILE FOR PUBLIC
18 INSPECTION IN THE MUNICIPAL OFFICE.
19 (2) THE SECRETARY.
20 (3) EACH MEMBER OF THE MUNICIPAL GOVERNING BODY.
21 (4) THE MAYOR.
22 (5) THE CHIEF FINANCIAL OFFICER OF THE MUNICIPALITY.
23 (6) THE SOLICITOR OF THE MUNICIPAL GOVERNING BODY.
24 (7) ALL PARTIES WHO HAVE PETITIONED THE SECRETARY UNDER
25 SECTION 203.
26 * * *
27 SECTION 244. REVISION.
28 NEITHER THE SECRETARY NOR THE CHIEF EXECUTIVE OFFICER OR THE
29 GOVERNING BODY, AS APPROPRIATE, MAY REVISE THE COORDINATOR'S
30 PLAN. HOWEVER, IF THE COORDINATOR DECIDES TO REVISE THE PLAN,
19870S0136B2480 - 49 -
1 THE COORDINATOR SHALL CONSULT WITH THE SECRETARY AND EITHER THE
2 CHIEF EXECUTIVE OFFICER OR THE GOVERNING BODY THROUGHOUT THE
3 REVISION OF THE PLAN AND SHALL GIVE CONSIDERATION TO COMMENTS
4 THEY MAY PROPOSE. A REVISED PLAN SHALL BE COMPLETED AND
5 DELIVERED TO EACH PARTY CITED IN SECTION 242(A)(1) THROUGH (7)
6 WITHIN 10 DAYS FROM THE DATE OF THE COORDINATOR'S PUBLIC MEETING
7 ON THE ORIGINAL PLAN.
8 SECTION 245. ADOPTION BY MUNICIPALITY.
9 NOT LATER THAN [15] 25 DAYS FOLLOWING THE COORDINATOR'S
10 PUBLIC MEETING, THE MUNICIPAL GOVERNING BODY SHALL EITHER ENACT
11 AN ORDINANCE APPROVING THE IMPLEMENTATION OF THE PLAN, INCLUDING
12 ENACTMENT OF NECESSARY RELATED ORDINANCES AND REVISIONS TO
13 ORDINANCES, OR SHALL REJECT THE PLAN AND PROCEED UNDER SECTION
14 246. IF THE ORDINANCE TAKES EFFECT IN A MUNICIPALITY OPERATING
15 UNDER AN OPTIONAL PLAN FORM OF GOVERNMENT OR A HOME RULE
16 CHARTER, THE CHIEF EXECUTIVE OFFICER MAY ISSUE AN ORDER
17 DIRECTING THE IMPLEMENTATION OF THE PLAN NO LATER THAN SEVEN
18 DAYS FROM THE ENACTMENT OF THE ORDINANCE BY THE GOVERNING BODY.
19 SECTION 2. SECTION 301 OF THE ACT IS AMENDED BY ADDING A
20 SUBSECTION TO READ:
21 SECTION 301. PROGRAM.
22 * * *
23 (C) REVOLVING FUND.--THERE IS HEREBY CREATED IN THE STATE
24 TREASURY THE FINANCIALLY DISTRESSED MUNICIPALITIES REVOLVING AID
25 FUND. REPAYMENT OF PRINCIPAL ON ALL LOANS MADE UNDER THIS ACT
26 SHALL BE DEPOSITED IN THE FUND. ANY INTEREST EARNED ON MONEYS IN
27 THIS FUND SHALL BE DEPOSITED IN THE FUND. ALL MONEYS IN THE FUND
28 MAY BE USED TO MAKE LOANS FOR THE PURPOSES OF THIS ACT.
29 SECTION 3. SECTION 304 OF THE ACT IS REPEALED.
30 SECTION 4. SECTION 602 OF THE ACT IS AMENDED TO READ:
19870S0136B2480 - 50 -
1 SECTION 602. EXPIRATION.
2 SECTION 203(A)(5) SHALL EXPIRE UPON PUBLICATION IN THE
3 PENNSYLVANIA BULLETIN OF THE NOTICE REQUIRED UNDER SECTION
4 [121(G)] 121(F).
5 SECTION 5. THIS ACT SHALL TAKE EFFECT IMMEDIATELY.
L19L53RDG/19870S0136B2480 - 51 -