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Senate Bill 1151: Amendment to Municipalities Financial Recovery Act 47, allowing for Receivership.
10/17/11: Senate Bill 1151 passes 177-18. Senate Bill 1151
10/20/11: The Governor signs Senate Bill 1151
Governor’s 10/20 news release:
Governor Corbett Signs Senate Bill 1151
Harrisburg – Governor Tom Corbett today signed into law Senate Bill 1151, a measure that authorizes the governor to declare a fiscal emergency and appoint a receiver to develop and implement a fiscal recovery plan when a distressed third-class city fails to do so under Act 47.
“I remain a strong proponent for municipal governments tackling their own problems and coming together to develop a fiscal recovery plan when necessary,” Corbett said. “But when that fails to happen, the state has to take action to ensure public safety.
“The bill signed into law today will help to enforce Act 47 when municipalities fail to adopt a fiscal recovery plan, making it clear that if there is a failure to act, the state will intervene,” Corbett added. “This legislation does not change the overall goal, and that goal is for distressed third-class cities to adopt and implement a fiscal recovery plan that will lead to solvency.”
Under the new law, the governor can declare a fiscal emergency, after it is determined that a distressed third-class city is insolvent or projected to be insolvent within 180 days, unable to provide citizens with vital services and has failed to adopt a fiscal recovery plan.
Even when fiscal emergency is declared, the distressed third-class city is given a final opportunity to develop a fiscal recovery plan that is acceptable to the secretary of the Department of Community and Economic Development (DCED). If an acceptable plan is adopted, a takeover is averted and the distressed city moves forward with implementing the plan.
When a fiscal emergency is declared, the following actions become available:
· The DCED secretary is granted emergency powers to develop an Emergency Action Plan in the distressed municipality to coordinate vital services and ensure public safety. Services include police and firefighting, water and wastewater, trash collection, payroll, and pension and debt payments.
· The governor can petition the Commonwealth Court for the distressed third-class city to be placed into receivership. The receiver will have 30 days to develop a fiscal recovery plan that will be submitted to the Commonwealth Court for approval. Once approved, the receiver will be charged with implementing the plan and will have control of the municipality’s financial matters relating to the recovery plan.
However, if an acceptable plan is adopted within 30 days of the petition, state intervention is averted and the distressed city moves forward with implementing their approved plan.
Additionally, the bill creates a four-member advisory committee that includes the mayor and city council president of the distressed third-class city, an appointee of the affected county and an appointee of the governor. It also prohibits the levying of a commuter tax on non-residents.
Governor's Declaration of Fiscal Emergency
Governor’s 10/24 news release:
Governor Corbett Declares Fiscal Emergency in City of Harrisburg
Harrisburg – Governor Tom Corbett today declared a fiscal emergency in the distressed city of Harrisburg to ensure that vital municipal services are maintained.
“City council’s failure to enact a recovery plan in order to deal with the city’s distressed finances has led me to declare a fiscal emergency,” Corbett said. “This action ensures that vital services will continue and public safety will be protected.”
In accordance with Act 47 as amended, the governor is authorized to declare a fiscal emergency, after it is determined that a distressed third-class city has failed to adopt a fiscal recovery plan and is insolvent, projected to be insolvent within 180 days or unable to provide citizens with vital services.
The criteria to declare a fiscal emergency in Harrisburg is met because the city council has failed to adopt the Act 47 coordinator’s fiscal recovery plan or the mayor’s fiscal recovery plan, and the city’s continued default on debt obligations related to its resource-recovery facility.
As a result of the declaration, the governor will now direct the secretary of the Department of Community and Economic Development (DCED) — within 10 days –to develop an Emergency Action Plan for the city of Harrisburg to coordinate vital services and ensure public safety. Services include police and firefighting, water and wastewater, trash collection, payroll, and pension and debt payments.
During a fiscal emergency, the city’s authorities and elected officials will continue to carry out the duties of their respective offices as long as no decision or action conflicts with the emergency action plan.
With the signing of this declaration, Harrisburg has a final opportunity to develop or agree to a financial recovery plan that is acceptable to the DCED secretary. Harrisburg city council has a total of 30 days to complete this action, including 20 days to prepare and submit a recovery plan to the DCED secretary, three days for the secretary to review and determine if the plan is sufficient to overcome the city’s financial distress, and seven days to pass an ordinance to enact the agreed-upon recovery plan.
11/3/11: The Secretary of DCED’s Fiscal Emergency Plan for the City of Harrisburg (be sure to scroll side to side as well as up & down to read whole plan)
The Consent Agreement Process
10/31/11: First Public Consent Agreement meeting. Harrisburg elected officials agree to use the Coordinator’s Act 47 Plan as basis for the Consent Agreement, not the Mayor’s Plan.
11/7/11: Second Public Consent Agreement meeting. Harrisburg City Council unanimously agrees to send a letter to the City’s creditors asking for $100 million in concessions.
11/9/11: Letter from Dauphin County in response to City’s concession request. Letter to the City of Harrisburg
11/9/11: Letter from Assured Guaranty in response to City’s concession request. Letter to Mayor Thompson
11/11/11: Letter to City creditors, signed and sent by the Mayor and 3 of 7 City Council members. City of Harrisburg Letter to Creditors
11/14/11: Deadline for the Consent Agreement. The City does not file one with the State.
Petition to Appoint a Receiver for the City of Harrisburg
11/18/11: Directed by the Governor, the Secretary of PA’s Department of Community & Economic Development submits a petition to appoint David Unkovic as Receiver. Petition for Appointment of Receiver
DCED’s 11/18 news release:
Corbett Administration Files Petition to Appoint Receiver for Harrisburg
Harrisburg – Department of Community and Economic Development (DCED) Secretary C. Alan Walker, under the direction of Governor Tom Corbett, filed a petition today with the Commonwealth Court to appoint David Unkovic as the receiver for the distressed City of Harrisburg.
“The city’s failure to come to an agreement on an acceptable recovery plan has forced the commonwealth to take this action,” Corbett said. “As more time goes by without action, the city’s financial situation continues to get worse. With his more than 30 years of experience in public finance, I have the utmost confidence in David Unkovic’s ability to develop and implement solutions that will address the city’s fiscal difficulties and mounting debt.”
Mr. Unkovic has more than 30 years of experience in public finance, primarily as bond counsel on tax-exempt financings for Pennsylvania local governments, authorities, school districts and nonprofit corporations. Unkovic earned his law degree from Harvard Law School and his undergraduate degree in political science, summa cum laude, from the University of Pennsylvania. He has been named a Pennsylvania Super Lawyer by Law & Politics in the area of Bonds and Government Finance.
The commonwealth will also retain the services of McKenna Long & Aldridge LLP, a firm based in Washington, D.C., which was selected because of the expertise and experience of its Municipal Recovery & Restructuring group. The group specializes in the areas of public finance, insolvency, tax, public policy, public-private partnerships, employee benefits and labor, government contracting, government affairs and governance – all important areas that will be addressed in the recovery plan. The firm will also work with the forensic consultants hired by the Harrisburg Authority, to review the incinerator financings.
The governor is authorized by the provisions of Act 47, as amended by Senate Bill 1151, to direct the DCED Secretary to file a petition in Commonwealth Court to appoint a receiver following the declaration of fiscal emergency in a distressed third-class city. Governor Corbett, on Nov. 16, directed Secretary Walker to file a petition with the Commonwealth Court.
The Commonwealth Court is required to hold a hearing within 15 days of the filing and will have 60 days from the date the petition was filed to make a determination. The determination will be based on three main criteria: 30 days have passed since the declaration of fiscal emergency; the governing body of the distressed city has failed to adopt an ordinance to enact an acceptable fiscal recovery plan; and a fiscal emergency continues to exist.
Once appointed, the receiver is tasked with developing and submitting a fiscal recovery plan to the Commonwealth Court, DCED Secretary, city council and the mayor within 30 days of being appointed. The court must conduct a hearing on the recovery plan within 30 days of receipt of the receiver’s plan and confirm a plan within 60 days of receipt.
When a plan is confirmed by the court, a four-member advisory committee will be established that will include the mayor and city council president of Harrisburg, an appointee of the Dauphin County commissioners and an appointee of the governor. The advisory committee will meet with the receiver at least twice a month and will be consulted by the receiver before exercising certain powers and duties.
During receivership, the city’s governing body and authorities will continue to carry out the duties of their respective offices as long as no decision or action conflicts with the receiver’s fiscal recovery plan. The receiver may petition the Commonwealth Court to issue a writ of mandamus if the authorities and elected officials of Harrisburg fail to undertake the actions of the recovery plan.
11/21/11: City Council Majority’s attorney files Preliminary Objections. Objection to Appointment of a Receiver
11/22/11: The Office of the Mayor’s Response to the State Petition for a Receiver: The City of Harrisburg Response & New Matter
11/25/11: City Council Majority’s attorney withdraws his Preliminary Objections after the Federal Court dismisses the City’s Chapter 9 Bankruptcy Petition. Letter to the Commonwealth Court
The Commonwealth Court Confirmation of the Receiver
12/1/11: Commonwealth Court holds a hearing on the appointment of David Unkovic as Receiver for the City of Harrisburg
12/2/11: Commonwealth Court rules in favor of David Unkovic as Receiver. Memorandum and Order for the Appointment of David Unkovic as Receiver of the City of Harrisburg
The Receiver's Financial Recovery Plan
After filing a Motion for Extension on December 16th, the Receiver was granted a 30-day extension and now has until February 6th, 2012 to file a Recovery Plan with Commonwealth Court.
Click link to access the website of: The Office of the Receiver
The Court must hold a hearing on the Receiver’s Recovery Plan within 30 days of its filing and must confirm it (if it meets requirements) within 60 days.