Municipal Code Relating to Waterworks
Municipal Authorities in Pennsylvania
9th Ed. Aug. 2002II. Creating and Dissolving Authorities
An authority can be organized by any county, city, borough, incorporated town, township or school district of the Commonwealth, acting singly or jointly with one or more other local governments. Home rule municipalities must use the procedures found in the Municipality Authorities Act for creating, dissolving and withdrawing from authorities. 1 Authorities may only be created for the purposes listed in the Act. However, the list contains a great variety of projects an authority may finance, own, operate or lease. These include water distribution systems, sewage systems, mass transit operations, parking facilities, airports, solid waste disposal systems, recreation facilities and school buildings. Projects to supply retail electric power, gas, telephone and cable television service are not included in the list although authorities may cogenerate electricity at their projects. The Act prohibits creation a new authority or expansion of an existing authority into a field that duplicates or competes with existing private enterprises serving substantially the same purposes.
Creation of an Authority
Determining Need. A significant amount of planning and debate must be undertaken before a decision is made to incorporate a municipal authority. Normally the need to provide a service or significantly expand an existing service, be it water distribution and treatment, wastewater collection and treatment, solid waste collection and disposal or public transportation, is the driving force behind the debate. The local elected officials need to assess the alternatives for providing the service, the local government itself, a municipal authority or a private corporation. The decision will be impacted by the demands of federal and state statutes pertaining to and controlling the provision of many public services, including aviation, mass transit, sewer, water and solid waste. Another key element is the desirability of providing the service at a multi-municipal level. A determination initially must be made that the service is needed or required. The requirement for service can come from a various number of sources not the least of which are the courts or other regulatory agencies such as the Environmental Protection Agency (EPA) (at the federal level) or the Department of Environmental Protection (DEP) (at the state level). The need to modernize or consolidate a number of small, independent public or private agencies, such as small water supply systems, may be the driving force. Elected officials, planning commission members, citizens of the municipality or municipalities, businesses and property owners to be affected need to be heard during the planning process. The elected local government officials will make the final decision on how the service will be provided.
Process. When the governing body of a local government decides to create an authority, it adopts a resolution or ordinance expressing its intention. If it is to be a joint authority, each participating unit takes this action. The organizing local unit or units may specify the project or projects to be undertaken by the authority in the ordinance or resolution expressing its intention to incorporate an authority. No other projects can be undertaken by the authority. This can also be done from time to time by subsequent ordinance or resolution. If the local governing body does not specify a project or projects, the authority has the power to undertake any project authorized by the Act. 2 However, authorities created by school districts are restricted to construction of public school buildings and other projects for public school purposes. The resolution or ordinance of the elected governing body is then published in the local newspaper and legal periodical, along with a notice of the day the articles of incorporation of the proposed authority will be filed with the Secretary of the Commonwealth of Pennsylvania.
The articles of incorporation filed with the Secretary include the following items.
1. the name of the authority;
2. the name of the incorporating local unit or units;
3. the names, addresses and terms of office of the first members of the board of the proposed authority;
4. a listing of the authorities already organized by the incorporating local government, if any;
5. in the case of a business district authority, a statement that the municipal governing body retains the right to approve any authority plan for providing improvements or administrative services;
6. the authorized projects the authority may undertake;
7. the term of existence of the authority if it is other than the statutory maximum of 50 years, and
8. designation of the service area for the authority.If the Secretary of the Commonwealth finds the articles of incorporation conform to law, a certificate of incorporation is issued and the existence of the authority begins from the date of the certificate and lasts for 50 years, but it may be extended by amendments to the articles of incorporation.
The Authority Name. The articles of incorporation must specify the name of the authority, a matter more significant than is generally realized. The name of the authority is its first point of contact with the public and the initial impression brought about by the name can be lasting. An overly long or complex name hinders communication. This is also significant when the authority borrows money for its project. It is helpful if the name chosen is readily recognizable as a known place name by people in the financial centers and the investing public who ultimately will be deciding on the terms and rates for lending money to the authority. It is also wise to avoid a name that could generate confusion in identity. In a state with 28 municipalities with Union as part of their name, 27 with Washington, 19 with Jackson, 15 with Pine and 13 with Jefferson, the potential for confusion is real.
Merger of Authorities
The Municipality Authorities Act contains a procedure for the merger or consolidation of authorities, but this procedure is limited only to authorities whose projects are all leased to the same reorganized school district. 3 This provision was added in 1968 following the school consolidation process of the mid 1960s. It was intended to allow the new consolidated school districts to merge the authorities funding their building projects. The Act does not include a general provision governing merger of other types of authorities.
When it becomes desirable to merge other types of authorities, a more roundabout process must be followed. One way this can be done is for the municipality, or municipalities jointly, to create a new authority. In order to transfer the projects of the old authorities to the new one, the municipality or municipalities go through the procedure for assuming the project and then transfer it to the new authority. Then the old authority, with all its obligations paid off, can be terminated by the municipality or municipalities. This procedure sounds cumbersome but has been used a number of times. A second method is also available. Authorities have the power to convey any and all property they own to another entity. They are not limited to conveying their property solely to the incorporating municipality. 4 This can even be done when the authority still has outstanding debt. At times the bond indenture for authority debt will allow the project to be transferred to another authority which in turn assumes the indebtedness. Where this is not possible, the purchasing authority can issue new debt to defease the debt of the selling authority. For authorities with no outstanding debt, this is not a factor. The incorporating municipality has a contingent interest in the assets of the authority so the authority needs to get its approval prior to the sale of the authority’s project to a third party. The sale of an authority’s project will not terminate the existence of the authority. That must be done following the procedure for termination outlined in the Act.
Waterworks
Sale of a borough waterworks may be made the subject of a referendum. Borough council may sell its waterworks or water distribution system by ordinance. The ordinance does not take effect for ten days. During that period a petition signed by ten percent of the registered voters of the borough may be filed staying the sale and forcing a referendum on the issue. 1
After the petition is filed with council, the borough secretary has five days to file the ordinance and protest with the county board of elections. The election board places the question on the ballot at the next primary, general or municipal election occurring at least sixty days subsequent to the secretary’s certification. The election is to be conducted under the terms of the Election Code. The question is to state the nature of the ordinance and provide that a yes vote is to sustain the ordinance and a no vote is to reject it. If approved the ordinance takes effect immediately; if defeated, it is null and void.
Reference
1. 53 P.S. 47409; Borough Code, Section 2409; In re Petition of Werner, 662 A.2d 35, Pa.Cmwlth., 1995.
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