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12/11/2019 06:19 AM
Pennsylvania House of Representatives
https://www.legis.state.pa.us/cfdocs/Legis/CSM/showMemoPublic.cfm?chamber=H&SPick=20190&cosponId=28692
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House of Representatives
Session of 2019 - 2020 Regular Session

MEMORANDUM

Posted: March 7, 2019 09:16 AM
From: Representative Barbara Gleim
To: All House members
Subject: MUNICIPAL DEBT REFORM BILL #1 - Local Government Debt Act
 
In the very near future Representatives Lewis, Mihalik, Gaydos, Ryan and myself will be introducing a series of bills on municipal government reform in conjunction with the Senate to ensure an effective and broad approach to municipal government for the 21st century.

The 2008 financial crisis in the United States and the continued concern about instability in municipal financing in other states as well as in the Commonwealth requires a fresh look at the controls, processes and governance relating to municipal debt so that the risk factors influencing municipalities are known and contained.

The package of bills will be conjoined with RYANs HB320 – SWAPS and Derivatives Restrictions, which has already been introduced and is in the Local Government Committee, making this a total package of five(5) bills

This bill package, which have identical companion bills in the Senate, address:

1. Municipal Debt Reform – Local Government Debt Act (Rep Gleim)
2. Municipal Debt Reform – Ethics Commission and Municipal Authorities (Rep Lewis)
3. Municipal Debt Reform – First Class City Swaps (Rep Mihalek)
4. Municipal Debt Reform – Performance Bonds (Rep Gaydos)
5. RYANs Swaps & Derivatives HB320 (already introduced)

In 2013-2014, the Senate Local Government Committee held hearings to examine the financial situation surrounding the Harrisburg Authority and the fiscal distress of the City of Harrisburg. Those hearings revealed several issues of statewide importance with regard to the process through which municipalities incur debt. A bi-partisan package of bills to address those issues was introduced. We plan to reintroduce the legislation which was had drafted as a result of those hearings.

The bill would make reforms to the Local Government Unit Debt Act (LGUDA). Much of the information presented at the hearings centered on the provisions of the LGUDA (53 Pa.C.S. §§ 8001-8049). That Act provides for review of project financing's by the Department of Community and Economic Development (DCED), defines the different types of debt a municipality may enter into, and sets limits on the amount of debt a municipality can incur without voter approval.

This bill would:
· Establish an actual review process of complicated transactions by DCED before debt is incurred;
· Eliminate the ability to charge a fee for issuing a guarantee;
· Limit the ability of municipalities to provide unlimited guarantees of other entities’ debts;
· Amend the “self-liquidating” and “working capital” definitions to prohibit reimbursements for payments
made under a guarantee or other non-project-related costs;
· Provide for fiduciary duties of those who represent local governments, as well as penalties for false filings.

Please join us in cosponsoring this package of Municipal Debt Reform legislation.



Introduced as HB882