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08/25/2019 01:46 AM
Pennsylvania House of Representatives
https://www.legis.state.pa.us/cfdocs/Legis/CSM/showMemoPublic.cfm?chamber=H&SPick=20190&cosponId=28719
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House of Representatives
Session of 2019 - 2020 Regular Session

MEMORANDUM

Posted: March 8, 2019 02:17 PM
From: Representative Andrew Lewis
To: All House members
Subject: Municipal Debt Reform Bill #2 Ethics Commission & Municipal Authorities
 

In the very near future Representatives Gleim, 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 (RepGleim)
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)

The Senate Local Government Committee held hearings in the fall of 2012 to examine the financial situation surrounding the Harrisburg Authority and its relationship to the fiscal distress of the City of Harrisburg. The hearings were in response to a forensic audit which cast serious doubt on the ability of current state laws to protect communities against transactions which threaten their fiscal stability. Several state laws designed to prevent unsound projects and borrowing were called into question by the hearings, including laws pertaining to performance bond requirements and conflict of interest prohibitions.

The findings of the forensic audit and the testimony from the two (2) hearings also touched on certain aspects of the Public Official and Employee Ethics Act (the “Ethics Act”) and the Municipal Authorities Act of Act 1945 (“Municipal Authorities Act”).

The Ethics Act , Act 93 of 1998, Chapter 11, 65 Pa.C.S. § 1101 et seq., provides that public office is a public trust and that any effort to realize personal financial gain through public office other than compensation provided by law is a violation of that trust.

Title 53 Pa Municipality Authorities Act of 1945 contains a provision that is unique in PA statutes. Section 5614(e) of Title 53 states that any contract entered into by an authority where there is such a conflict of interest is void. The said provision does not seem to be geared at going after the member or officer or employee of the authority who has the conflict. There is no enforcement mechanism against the offender in the Municipality Authorities Act.

This would specifically incorporate a reference to the Municipal Authorities Act (Title 53) section in the Ethics Act (Title 65) as one of the prohibited conflicts of interest acts and would empower appropriate agencies with enforcement and prosecution powers. This would confer explicit jurisdiction upon the Ethics Commission to get involved if the need arises.

Finally, this legislation would amend Title 53 Pa. Consolidated Statutes to require proceeds from borrowing under the Local Government Unit Debt Act shall not be used for any purpose unrelated to the project for which the debt was incurred, nor placed in any account used by the authority or any other local government unit for any unrelated purpose.

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



Introduced as HB883