THE GENERAL ASSEMBLY OF PENNSYLVANIA

SENATE BILL

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

REFERRED TO COMMUNITY, ECONOMIC AND RECREATIONAL DEVELOPMENT, JUNE 17, 2011  

AN ACT

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

act empowering the Department of Community Affairs to declare

certain municipalities as financially distressed; providing

for the restructuring of debt of financially distressed

municipalities; limiting the ability of financially

distressed municipalities to obtain government funding;

authorizing municipalities to participate in Federal debt

adjustment actions and bankruptcy actions under certain

circumstances; and providing for consolidation or merger of

contiguous municipalities to relieve financial distress,"

further providing for Commonwealth agency payments or

assistance; providing for the establishment of a management

board for distressed third class cities and for powers of

management boards; prohibiting distressed third class cities

from filing Federal bankruptcy petitions; and making

editorial changes.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  Section 251(a) of the act of July 10, 1987

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

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

subsection to read:

Section 251.  Commonwealth agency payments or assistance.

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

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

[secretary] department that a financially distressed

municipality has failed to adopt a plan or implement an adopted

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

inadequate to address the municipality's financial distress, the

municipality shall not receive a grant, loan, entitlement or

payment from the Commonwealth or any of its agencies. Moneys

withheld shall be held in escrow by the Commonwealth until the

[secretary] department has rescinded the certification.

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

the failure of a distressed city or a management board

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

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

accordance with section 605.

* * *

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

CHAPTER 6

CITIES OF THE THIRD CLASS

Section 601.  Definitions.

"City."  A city of the third class.

"Controlled authority."  A municipal authority, parking

authority or other authority which is directly or indirectly

controlled by a distressed city or to which a distressed city

has powers of appointment.

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

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

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

any authority or other corporate entity which directly performs

a governmental function on behalf of the city and which is

directly or indirectly controlled by the city or to which the

city has direct or indirect power of appointment or has pledged

or designated the city's revenues or the city's credit.

"Management board."  The city management board.

Section 602.  Applicability.

A distressed city shall be subject to the provisions of this

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

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

this chapter shall prevail.

Section 603.  Management board.

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

if a distressed city fails to adopt or implement the

coordinator's plan in accordance with sections 245 and 247(a). A

distressed city shall be deemed to have failed to adopt and

implement the coordinator's plan if it takes any action to

approve an alternative plan under section 246.

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

subsection (a) shall be comprised of the following:

(1)  Two members appointed by the Governor.

(2)  One member appointed by the board of commissioners

of the county.

(c)  Experience.--All members and their designees shall:

(1)  Have experience in finance or management.

(2)  Be residents of this Commonwealth.

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

the determination by the department that the requirements of

subsection (a) have occurred. Members shall select a chairperson

who shall serve for a term of two years. Members appointed by

the Governor shall have a term coterminous with the appointing

authority. A member appointed by the county commissioners shall

have a term coterminous with the chairman of the board of

commissioners. If a vacancy occurs, the appointing authority who

originally appointed the management board member whose seat has

become vacant shall appoint a successor member within 30 days of

the vacancy. A member appointed to fill a vacancy occurring

prior to the expiration of a term shall serve the unexpired

term.

(e)  Organization.--The Governor shall set a date, time and

place for the initial organization meeting of the management

board within five days of the appointment of the members of the

management board. The initial organizational meeting shall be

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

Members shall elect other officers as they deem necessary.

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

the management board shall meet as frequently as it deems

appropriate but at least once during each quarter of the fiscal

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

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

two members of the management board. A majority of the

management board shall constitute a quorum. All actions of the

management board shall be taken by a majority of the management

board. The following statutes shall apply to the management

board:

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

(relating to ethics standards and financial disclosure).

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

as the State Adverse Interest Act.

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

the Right-to-Know Law.

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

remuneration but shall be entitled to reimbursement for all

reasonable and necessary expenses.

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

and other support to the management board. The management board

may contract for or receive the loan of services of other

individuals employed by other government agencies.

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

under this chapter shall constitute a public authority and

instrumentality of the Commonwealth, exercising the powers of

the Commonwealth. The exercise of the powers of the management

board shall be deemed to be an essential government function.

Section 604.  Powers and duties.

The management board shall have the following powers and

duties:

(1)  To implement the coordinator's plan.

(2)  To make changes to the coordinator's plan as

necessary to achieve financial stability of the distressed

city.

(3)  To negotiate intergovernmental cooperation

agreements with distressed cities and other political

subdivisions in order to eliminate and avoid deficits,

maintain sound budgetary practices and avoid interruption of

municipal services.

(4)  To make annual reports for submission to the

department within 120 days after the close of the distressed

city's fiscal year.

(5)  To have all powers necessary or appropriate to cause

the sale, lease or other disposition of the distressed city's

assets under section 605.

Section 605.  Sale of assets.

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

authority to determine by a majority vote that it is in the best

financial interests of the distressed city to sell, lease or

dispose of assets determined by the management board to be

nonessential and owned by the distressed city or by an

authority, including a controlled authority.

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

shall:

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

disposition and direct the appropriate officials of the

distressed city or controlled authority to take all action

necessary or appropriate for the consummation of the sale,

lease or other disposition of assets.

(2)  Direct the sale, lease or other disposal of assets

in conformity with all applicable competitive bidding

requirements.

(3)  Undertake a competitive bidding process, determine

the winning bidder and enter into an agreement of sale, lease

or other disposition with the winning bidder.

(4)  Take all action necessary to complete the sale,

lease or disposition of the assets.

(c)  Approval.--The approval of the governing body or chief

executive officer of the distressed city shall not be required

to complete a sale, lease or other disposition under this

section.

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

disposition of assets of a distressed city shall be applied to

the payment of any unpaid debt obligations owed by the

distressed city, as determined by the management board. Any

proceeds remaining after the payment of these obligations shall

be applied at the discretion of the management board to

restructure or to provide escrow for the payment of the

distressed city's future debt obligations.

(e)  Enforcement.--The powers and authority of a management

board under this chapter shall be enforceable by a suit brought

by the management board in the court of common pleas. The court

may direct the appropriate officials of a distressed city or

controlled authority by order of mandamus to perform any act

necessary to consummate the sale, lease or other disposition of

assets as required under this chapter.

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

controlled authority is not taking the action necessary to sell,

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

management board members of the authority and appoint new

management board members.

Section 606.  Effect on contracts.

(a)  Contracts and collective bargaining agreements.--

(1)  A contract or collective bargaining agreement in

existence in a distressed city prior to the approval of a

coordinator's plan or the establishment of a management board

shall remain in effect after approval of the plan until the

contract or agreement expires.

(2)  Following approval of the coordinator's plan, a

distressed city shall execute contracts and collective

bargaining agreements in compliance with the plan. If a

management board has been appointed, the distressed city

shall execute contracts and agreements only with the approval

of the management board.

(b)  Arbitration.--Following approval of the coordinator's

plan or the appointment of a management board, a determination

of a board of arbitration established under the act of June 24,

1968 (P.L.237, No.111), referred to as the Policemen and Firemen

Collective Bargaining Act, providing for an increase in wages or

fringe benefits of any employee of a distressed city shall, in

addition to considering any standard or factor required to be

considered by law, take into consideration and accord

substantial weight to:

(1)  The approved financial plan or the determination of

the management board.

(2)  Relevant market factors, such as the financial

situation of the distressed city, inflation, productivity,

size of work force and pay and benefit levels in economically

and demographically comparable political subdivisions.

(c)  Determination.--A determination shall be in writing and

a copy shall be forwarded to each party to the dispute and to

the board of arbitration. A determination of the board of

arbitration which provides for an increase in wages or fringe

benefits of an employee of an assisted city shall state with

specificity in writing all factors which the board of

arbitration took into account in considering and giving

substantial weight to the factors referred to under subsection

(b)(1).

(d)  Parties.--A party to a proceeding before a board of

arbitration or the management board may appeal to the court of

common pleas to review:

(1)  Consideration under subsection (b)(1).

(2)  Failure of the board of arbitration to issue a

determination under subsection (c).

(e)  Appeal.--An appeal under subsection (d) must be

commenced not later than 30 days after the issuance of a final

determination by the board of arbitration.

(f)  Decision.--The decision of the board of arbitration

shall be vacated and remanded to the board of arbitration if the

court finds:

(1)  That the board of arbitration failed to take into

consideration and accord substantial weight to the factors

referred to under subsection (b).

(2)  That the board of arbitration has failed to issue a

determination under subsection (c).

(g)  Proposed revision.--If, after exhaustion of all appeals,

the final arbitration award is not in compliance with the

approved financial plan or is unacceptable to the management

board, the award shall be void.

Section 607.  Limitation on bankruptcy.

Notwithstanding any other provision of law, including section

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

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

or any other Federal bankruptcy law, and no government agency

may authorize the distressed city to become a debtor under 11

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

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

act are renumbered to read:

CHAPTER [6] 20

TECHNICAL PROVISIONS

Section [601] 2001.  Repeals.

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

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

repealed insofar as they are inconsistent with this act.

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

designating the Department of Internal Affairs as the agency of

the Commonwealth to approve or disapprove petitions to courts,

and plans for the readjustment of debts of political

subdivisions, under the act of Congress relating to the

bankruptcy of political subdivisions; and defining the powers

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

insofar as it relates to a municipality as defined in section

103 of this act.

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

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

Section [602] 2002.  Expiration.

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

Pennsylvania Bulletin of the notice required under section

121(f).

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

Section [603] 2003.  Effective date.

This act shall take effect in 60 days.

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

provision of this act or its application to any person or

circumstance is held invalid, the invalidity shall not affect

other provisions or applications of this act which can be given

effect without the invalid provision or application.

Section 7.  This act shall take effect immediately.