PRINTER'S NO. 2539
No. 1943 Session of 2003
INTRODUCED BY NICKOL, CAPPELLI, CRAHALLA, DENLINGER, FRANKEL,
GANNON, GEIST, GRUCELA, HESS, JAMES, KOTIK, LAUGHLIN,
MAITLAND, McILHATTAN, R. MILLER, NAILOR, PHILLIPS, REICHLEY,
SAYLOR, SCHRODER, SEMMEL, STEIL, STERN, E. Z. TAYLOR, THOMAS,
TURZAI, WASHINGTON, WATSON, YOUNGBLOOD, GINGRICH AND FREEMAN,
SEPTEMBER 8, 2003
REFERRED TO COMMITTEE ON URBAN AFFAIRS, SEPTEMBER 8, 2003
AN ACT
1 Amending Title 53 (Municipalities Generally) of the Pennsylvania
2 Consolidated Statutes, further providing for definitions
3 relating to local government unit debt; authorizing qualified
4 prepayment agreements; and further providing for limitations
5 on stated maturity dates relating to bonds and notes.
6 The General Assembly of the Commonwealth of Pennsylvania
7 hereby enacts as follows:
8 Section 1. The definitions of "debt" and "project" in
9 section 8002(a) and (c) of Title 53 of the Pennsylvania
10 Consolidated Statutes are amended and the subsections are
11 amended by adding definitions to read:
12 § 8002. Definitions.
13 (a) Classification of debt.--With respect to classifications
14 of debt and subject to additional definitions contained in
15 subsequent provisions of this subpart which are applicable to
16 specific provisions of this subpart, the following words and
17 phrases when used in this subpart shall have the meanings given
1 to them in this section unless the context clearly indicates
2 otherwise:
3 "Debt." The amount of all obligations for the payment of
4 money incurred by the local government unit, whether due and
5 payable in all events, or only upon the performances of work,
6 possession of property as lessee, rendering of services by
7 others or other contingency, and the principal amount due on any
8 bonds or notes issued to pay the local government's obligations
9 under a qualified prepayment agreement, except the following:
10 (1) Current obligations for the full payment of which
11 current revenues have been appropriated, including tax
12 anticipation notes and current obligations under a qualified
13 prepayment agreement, and current payments for the funding of
14 pension plans.
15 (2) Obligations under contracts for supplies, services,
16 health insurance premiums and reserves and pensions allocable
17 to current operating expenses of future years in which the
18 supplies are to be expended or furnished, the services
19 rendered or the pensions or health insurance premiums or
20 reserves are paid.
21 (3) Rentals or payments payable in future years under
22 leases, guaranties, subsidy contracts or other forms of
23 agreement not evidencing the acquisition of capital assets.
24 This exception shall not apply to rentals or payments under
25 any instruments which would constitute lease rental debt but
26 for the fact that the lessor or obligee is not an entity
27 described in section 8004(a)(1) (relating to when lease or
28 other agreement evidences acquisition of capital asset).
29 (4) Interest or assumed taxes payable on bonds or notes
30 which interest or taxes [is] are not yet overdue.
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1 "Debt management plan." A written debt management plan of
2 the local government unit that includes a plain English analysis
3 of the following:
4 (1) The benefits and costs of entering into a qualified
5 prepayment agreement.
6 (2) The early termination, involuntary termination,
7 default and cost considerations associated with a qualified
8 prepayment agreement.
9 * * *
10 (c) Other definitions.--Subject to additional definitions
11 contained in subsequent provisions of this subpart which are
12 applicable to specific provisions of this subpart, the following
13 words and phrases when used in this subpart shall have the
14 meanings given to them in this section unless the context
15 clearly indicates otherwise:
16 * * *
17 "Project." Includes any of the following:
18 (1) Items of construction, acquisition, extraordinary
19 maintenance or repair which have been undertaken by a local
20 government unit.
21 (2) Preliminary studies, surveying, planning, testing or
22 design work for any undertaking described in paragraph (1).
23 (3) Lands or rights in land to be acquired.
24 (4) Furnishings, machinery, apparatus or equipment
25 normally classified as capital items, but these items must
26 have a useful life of five years or more if financed
27 separately and not as a part of a construction or acquisition
28 project.
29 (5) The local government unit's share of the cost of a
30 project undertaken jointly with one or more other local
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1 government units or the Commonwealth or one of its agencies.
2 (6) Countywide revision of assessment of real property.
3 (7) Funding of all or any portion of a reserve, or a
4 contribution toward a combined reserve, pool or other
5 arrangement, relating to self-insurance, which has been
6 established by one or more local government units pursuant to
7 42 Pa.C.S. § 8564 (relating to liability insurance and self-
8 insurance) up to, but not exceeding, the amount provided in
9 section 8007 (relating to cost of project).
10 (8) Funding of an unfunded actuarial accrued liability
11 or a portion of an unfunded actuarial accrued liability.
12 (9) Funding or refunding of debt incurred for any or all
13 of the foregoing purposes.
14 (9.1) Funding of a qualified prepayment agreement.
15 (10) Any combination of any or all of the foregoing as
16 any or all of the above may be designated as a project by the
17 governing body for the financing of which it desires to incur
18 debt.
19 (11) Any deficit to be funded by bonds or notes as
20 provided in this subpart or the creation of a revolving fund
21 for specific improvements.
22 (12) Where a local government unit has adopted a capital
23 budget, any unfunded portion of the capital budget selected
24 by ordinance for current funding.
25 "Qualified prepayment agreement." An agreement entered into
26 by a local government unit in accordance with and fulfilling the
27 requirements of section 8102.1 (relating to qualified prepayment
28 agreements), the term of which is more than one year but not
29 more than five years for health insurance premiums or reserves
30 for self-insurance, including those established pursuant to 42
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1 Pa.C.S. § 8564 (relating to liability insurance and self-
2 insurance) under which the local government unit is obligated to
3 pay substantially all of the amounts due under the agreement in
4 the first year of the term thereof.
5 * * *
6 Section 2. The heading of section 8005 of Title 53 is
7 amended and the section is amended by adding a subsection to
8 read:
9 § 8005. Classification and authority to issue bonds and notes
10 and enter into qualified prepayment agreements.
11 * * *
12 (e) Authority to enter into qualified prepayment
13 agreements.--Notwithstanding any other law, a local government
14 unit may enter into a qualified prepayment agreement by
15 ordinance or resolution advertised under section 8003(a)
16 (relating to advertisement and effectiveness of ordinances). The
17 obligations of the local government unit under the qualified
18 prepayment agreement shall be enforceable against the local
19 government unit in accordance with the terms of the qualified
20 prepayment agreement.
21 Section 3. Title 53 is amended by adding a section to read:
22 § 8102.1. Qualified prepayment agreements.
23 (a) General rule.--Notwithstanding any other law to the
24 contrary, a local government unit may negotiate and enter into
25 qualified prepayment agreements consistent with the provisions
26 of this section. The local government unit shall authorize and
27 award each qualified prepayment agreement by ordinance or
28 resolution advertised under section 8003(a) (relating to
29 advertisement and effectiveness of ordinances).
30 (b) Contents of ordinances.--Notwithstanding any other
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1 provision of this subpart to the contrary, an ordinance or
2 resolution under subsection (a) shall be sufficient if it
3 contains all of the following:
4 (1) The terms of the qualified prepayment agreement.
5 (2) A debt management plan.
6 (c) Requirements for agreement.--A qualified prepayment
7 agreement shall include provisions for a performance bond,
8 establishment of an escrow account or other tool, as
9 appropriate, which affords protection to the local government
10 unit for its faithful performance if:
11 (1) the term of the agreement is in excess of three
12 years; or
13 (2) the total amount due under the agreement is in
14 excess of $1,000,000.
15 Section 4. Section 8142(a)(2) of Title 53 is amended by
16 adding a subparagraph to read:
17 § 8142. Limitations on stated maturity dates.
18 (a) General rule.--No bonds or notes shall be issued with a
19 stated maturity date exceeding the sooner to occur of:
20 * * *
21 (2) * * *
22 (v) Where a project consists of the funding of all
23 or a portion of the amounts due under a qualified
24 prepayment agreement, the useful life shall be deemed to
25 be no longer than five years.
26 * * *
27 Section 5. This act shall take effect immediately.
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