On October 11, 2018, the Commonwealth Court of Pennsylvania (“Court”) vacated the Pennsylvania Public Utility Commission (“PUC”) Order approving the acquisition of the wastewater system assets of New Garden Township and New Garden Sewer Authority (collectively “New Garden”) by Aqua Pennsylvania Wastewater, Inc. (“Aqua”). Aqua’s Application sought PUC approval of the acquisition, a Certificate of Public Convenience to furnish wastewater service to customers in and around the service territory of New Garden, and, approval of a rate base predicated on the acquisition price, rate commitments and transaction costs. Continue Reading Commonwealth Court Requires Reexamination of PA Monetization Deal
On May 23, the Pennsylvania House of Representatives approved Senate Bill 234, which creates the Property Assessed Clean Energy (PACE) Program. SB 234, which was approved by the Senate in January of this year, would help owners of agricultural, commercial and industrial properties obtain low-cost, long-term financing for energy efficiency, water conservation and renewable energy projects. The program would not include multifamily housing or other residential property. Continue Reading Pennsylvania Legislature Approves New Municipal Alternative Energy Program
Sewage backups tend to make relationships between landowners and their municipal sewer authorities rather, well, messy. When property is impacted by a sewer authority’s negligence, landowners would typically find a remedy in a trespass action. However, a recent decision by the Commonwealth Court of Pennsylvania holds that repeated sewage backups may cause a de facto taking under the Pennsylvania Eminent Domain code, requiring compensation to the landowner. This is yet another area of concern and possible liability for municipal authority operators. Continue Reading Sewer Authorities Could Owe Compensation for Repeated Sewage Overflows
Across much of the United States, the number of municipalities imposing stormwater management fees upon property owners has increased dramatically in recent years. The rising prevalence of stormwater management fees has predictably led to local and state court challenges by businesses, as non-residential property owners are typically more severely impacted by stormwater management fees in comparison to residential property owners. Affected businesses have questioned whether parcel-based stormwater fees constitute legitimate fees for services rendered or are simply revenue-generating taxes in disguise.
State courts have issued conflicting rulings on this question. In the heartland, the Supreme Court of Missouri issued a 2013 decision striking down stormwater management fees and requiring municipalities to fund stormwater management programs through tax revenues. In the northeast, the Supreme Court of Maine conversely issued a 2012 decision affirming a stormwater management fee program as a fee for services rendered.
It now appears that Pennsylvania jurisdictions will have an opportunity to weigh-in on this critical debate. In January 2018, the Chester Business Association filed injunctions seeking to block imposition of a stormwater management fee proposed by the Stormwater Authority of Chester. Similarly, an attorney and property owner in the city of New Castle filed a complaint with the Lawrence County Court of Common Pleas requesting that the court void stormwater management fees to be collected by the New Castle Sanitation Authority.
While the outcome of these cases remains uncertain, any decisions in these jurisdictions may not be dispositive as to rulings in other Pennsylvania jurisdictions, as stormwater management fees are complex and can be developed based on a variety of different models. For both municipalities and businesses impacted by stormwater management fees, effective stakeholder engagement can ensure that legitimate stormwater management fees serve their intended purpose and avoid overly burdening property owners. Attorneys at McNees can assist with review, analysis, and if necessary, litigation of stormwater management fees.
As we prepare to say goodbye to 2017 and welcome a new year, we thought we’d take a moment and revisit some of our favorite stories from the last twelve months that we’ve followed on the McNees Public Sector Blog.
- A kinder, gentler Internal Revenue Service? Perhaps in response to the Trump Administration’s “less is more” approach to regulation, 2017 saw several announcements from the IRS that were favorably received by the municipal bond industry. In January the IRS published new guidance on management contracts involving bond-financed facilities, which reintroduced old concepts following a less-than-favorable response to a prior announcement. In June, new IRS regulations on the determination of issue price went into effect, and despite some initial headaches, the new regulations appear to be working well and have been incorporated by underwriters and bond counsel. In October, the IRS published new proposed regulations interpreting the public hearing requirement for private activity bonds, which as promised featured a long-hoped-for “remedial action” option. And finally, an early Christmas present for bond lawyers everywhere: in October the IRS announced that it was withdrawing its much-despised “political subdivision” proposed regulations.
- While the IRS appeared to get President Trump’s “less regulation” message, the SEC and MSRB continued their aggressive enforcement efforts. In March the SEC voted to formally propose amendments to Rule 15c2-12 to beef up required disclosures by municipalities in connection with bank loans. And in August, the MSRB issued a warning to municipal issuers to avoid involvement in the selection of underwriter’s counsel. All indications are that the SEC and MSRB will continue to aggressively police the municipal bond industry in 2018.
- The Pennsylvania budget situation continued to be a mess. Governor Wolf’s budget proposal featured a variety of tax increases, which were soundly rejected by the Republican-led legislature. A spending plan was quickly agreed to, but without the revenue needed to pay for it. The final spending plan again avoids broad-based tax increases (at the relief of many) in favor of one-time revenues from a securitization of Tobacco Settlement Funds, among other things.
- For local governments, high fixed costs and declining revenues continued to be a problem in 2017. Generating revenue through asset monetization remained an option for struggling municipalities faced with severe blight and new government mandates, including stormwater management.
- And finally, Tax Reform! The end of 2017 saw the passage of the Tax Cuts and Jobs Act, the first successful attempt at comprehensive tax reform since the passage of the 1986 Code. A number of versions of the bill were introduced, some of which would have been devastating on the municipal bond industry. We wrote about the impact of the final legislation on the municipal bond industry here.
To all our readers – thanks for visiting! And may you all have a happy and prosperous new year!
– Tim Horstmann
Monetization is the process of converting assets into economic value. Looking for options to generate greater revenue, municipalities and public sector entities have begun to consider the transfer to private operators of a greater variety of public assets than in the past. There has also been the development recently of more creative and profitable public-private partnerships. Continue Reading Generating Value from Public Assets
A bill introduced by Representative Kate Harper (R-Montgomery) would impose a new public meeting requirement on municipalities considering selling or leasing their water or sewer systems. The bill was recently approved in the House unanimously, and has been referred to the Senate Consumer Protection and Professional Licensure Committee.
House Bill 477 would require municipalities to hold at least one public meeting prior to entering into an agreement to sell or lease a municipal-owned or operated water or sewer system. The bill would also apply to systems operated by municipal authorities, if the transaction contemplated the dissolution of the authority by the municipality. The meeting would have to be advertised at least twice, on successive weeks, not more than 60 nor fewer than 7 days before the date of the meeting. If the system served customers outside of the municipality considering the sale or lease, public notice would also have to be provided in the municipalities where those customers resided.
Additionally, the potential purchaser or lessee of the system would be required to attend the meeting – presumably to present its plans for the system and to answer questions.
In the event the Senate acts favorably on the proposal, and the Governor signs it, the new public meeting requirement would go into effect in 60 days. Municipalities considering selling or leasing their water or sewer systems should keep a close eye on the status of House Bill 477 to ensure they comply with its requirements in the event it become law.
McNees attorneys Tim Horstmann, Ade Bakare and Kathy Pape recently provided an update on municipal storm water management to the membership of the Pennsylvania State Association of Boroughs. Their presentation addressed recent changes in Pennsylvania laws governing municipal storm water management in boroughs, permissible user fee structures, and additional funding streams that are available to municipalities to pay for necessary projects.
Interested in learning more? A copy of the Power Point presentation is available online.
For Pennsylvania municipalities facing a rising tide of costs from implementing storm water management plans, the available funding options vary depending on where you are and what you are – but that could change as soon as later this year. The General Assembly has passed several laws that authorize certain municipalities and municipal authorities to impose “reasonable and uniform” fees to fund storm water management plans – and several additional bills are pending that, if passed, would extend these funding mechanisms to municipal entities across most of Pennsylvania. Continue Reading New Funding Mechanisms for Municipal Stormwater Management
On May 18, 2017, House Bill 1405 was introduced into the Pennsylvania General Assembly. The proposed legislation, which would restrict a municipality’s ability to utilize revenue generated by a municipal electric system, would significantly impact 35 municipalities in PA that purchase wholesale power on behalf of residents and distribute the power through municipal-owned electric distribution system. Continue Reading Electric Costs in Ellwood City Spur Proposed Legislation to Restrict Use of Electric Revenue to Fund Municipal Operations