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.

On February 12, 2018 the Trump Administration released its long-awaited Infrastructure Plan. A copy of the legislative outline for the Plan can be accessed here. The Plan calls for $1.5 Trillion in new infrastructure investment over the next ten years – although only $200 Billion of that will be in the form of new federal spending.

Included in the $200 Billion of new federal spending is a $6 Billion expansion of tax-exempt Private Activity Bonds. The Plan would:

  • Broaden the types of projects which qualify for financing through PAB’s: The Plan would add several new types of projects which would qualify for tax-exempt financing, including stormwater and flood control projects, rural broadband service facilities, and environmental remediation projects for Brownfield and Superfund sites, as well as expand the types of projects permitted to be financed under existing project categories.
  • Liberalize governmental ownership requirements: Under current law, certain PAB-financed projects must be owned by the government; an existing safe harbor permits certain leases with a term of up to 80% of the economic life of the project. The Plan would modify the safe harbor to permit leases with a term of up to 95% of the economic life of the project.
  • Remove volume caps: The Plan would remove existing volume caps on PAB issuance imposed under Sections 142 and 146 to permit unlimited volume of PAB’s issued for public purpose infrastructure projects.
  • Add new remedial action provisions: The Plan would amend the change-in-use provisions contained in Section 150 of the Code (and apparently overturn existing Treasury regulations on remedial action) to preserve the tax-exempt status of governmental bonds, specifically with regard to leases of projects of projects financed by governmental bonds.
  • Eliminate the AMT penalty for purchasers of PAB‘s: The Plan would eliminate PAB’s as an item of tax preference for purposes of the Alternative Minimum Tax imposed on individuals.

The Plan put forth by the Administration is simply an outline of what it would like to see in legislation that has yet to be drafted. There is no guarantee that all of the above-described proposals will make their way into an actual bill, let alone be approved by Congress. We expect that there will be much discussion and debate in the coming weeks and months as Congress considers the Administration’s Plan and prepares formal legislation on the topic.

Stay tuned for more updates as the story unfolds!

On December 4, 2017, the Supreme Court of the United States heard oral arguments in Christie v. National Collegiate Athletic Association, No. 16-476, regarding the constitutionality of the Professional and Amateur Sports Protection Act (“PASPA”), a federal law that prohibits states from authorizing and regulating sports wagering. The case could have significant implications for legal and regulated gambling across the country, including Pennsylvania, where the General Assembly recently passed legislation that would authorize sports wagering in the Commonwealth if PASPA is found to be unconstitutional or is repealed by Congress. Continue Reading Sports Wagering in Pennsylvania Could Soon Become a Reality

On December 20, 2017 Congress passed the Tax Cuts and Jobs Act (TCJA).  The legislation was signed by President Trump on December 22, 2017 and many key provisions of the law became effective on December 31, 2017.

The purpose of the TCJA was to stimulate economic growth through a major overhaul of the Internal Revenue Code.  One of the signature elements of the TCJA is the reduction of the federal corporate tax rate from 35% to 21%.  While this may be good news to the business community generally, the rate reduction presents potential unique problems for conduit borrowers, such as 501(c)(3) organizations, and lenders under tax-exempt bank loan structures. Continue Reading Review and Analysis of Tax-Exempt Loan Documents Following Tax Cuts and Jobs Act

The Financial Services and Public Finance Group of McNees Wallace & Nurick LLC is pleased to announce that we are now able to assist issuers and obligated person clients in complying with their continuing disclosure requirements under SEC Rule 15c2-12.

Effective January 2, 2018, Penny Pollick has joined our team as a Continuing Disclosure Specialist.  Penny, together with our public finance professionals, can offer such continuing disclosure-related services as creating and maintaining compliance templates for operating and financial data, undertaking continuing disclosure filings for issuer and obligated parties and creating model policies and procedures.  Additionally, we will monitor continuing disclosure trends, review and provide advice on current continuing disclosure obligations and provide continuing disclosure training as requested and required.

We will also provide continuing disclosure compliance review services for underwriters and financial advisors to determine whether remedial action and disclosure of past filing failures is necessary prior to the publication of preliminary offering documents.

If interested in learning more about these services, please contact Penny at ppollick@mcneeslaw.com.

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.

To all our readers – thanks for visiting! And may you all have a happy and prosperous new year!

– Tim Horstmann

2018 will be a year of monumental tax law changes following the recent approval by the House and Senate of the Tax Cuts and Jobs Act. President Donald Trump is expected to sign the bill into law in the coming days. While the Act in its final form contains some provisions that hurt the tax-exempt municipal bond industry, many detrimental provisions included in prior versions of the bill were dropped. Continue Reading House, Senate Pass Tax Cuts and Jobs Act; Private Activity Bonds Saved

After several months of negotiation, and amid a larger debate on gaming expansion, the Pennsylvania General Assembly passed Act 42 of 2017, a sweeping gambling reform bill. For municipalities in Pennsylvania, Act 42 has two notable provisions, one of limited impact on municipalities hosting casinos and the other of potentially much greater impact. Continue Reading Pennsylvania Expands Casino Gambling—What Is the Impact on Municipalities?

Last September, the Pennsylvania Supreme Court struck down a vital component of the Commonwealth’s Gaming Act, known as the “local share assessment” – a section of law that provides local governments with a significant funding stream backed by an assessment on certain gross revenue from casinos located in or around their municipality. The court’s ruling, prompted by a lawsuit filed by Mount Airy Casino, located in Monroe County, put in jeopardy hundreds of millions of dollars in local funding for counties and municipalities across the Commonwealth. Continue Reading PA General Assembly Attempts Fix to Local Gaming Funding in Casino Reform Bill

Chairman Kevin Brady of the U.S. House of Representatives, Committee on Ways and Means today introduced the “Tax Cuts and Jobs Act,” H.R. 1, and it does not contain good news for municipal issuers of tax-exempt bonds and private sector entities able to borrow on a tax-exempt basis.

Among other things, H.R. 1 would eliminate municipalities’ ability to issue advance refunding bonds, i.e. refunding bonds where the refunding occurs more than 90 days after the date of issuance. Congress already had heavily restricted the issuance of advance refunding bonds through the enactment of the 1986 Internal Revenue Code, which limited governmental and 501(c)(3) bond issues to a single advance refunding. Beginning in 2018, advance refundings could not be issued on a tax-exempt basis.

H.R. 1 would also eliminate all private activity bonds, currently authorized under sections 142 (exempt facility bonds), 143 (certain mortgage bonds), 144 (small issue bonds), and 145 (501(c)(3) bonds). Again, beginning in 2018, all such private activity bonds could not be issued on a tax-exempt basis.

The bill would also eliminate municipalities’ ability to issue bonds to finance professional sports stadiums – a controversial ability in its own right that seems unlikely to generate the kind of opposition that may be seen on the other proposals (unless you’re Jerry Jones).

These proposals, if enacted, would apparently not affect existing bonds issued and outstanding prior to the effective date. However, preliminary analysis suggests that any change in the terms of an existing bond resulting in a “reissuance” for tax purposes would result in a loss of tax-exempt status, if the reissued bond fell within one of the disfavored categories.

With H.R. 1 just being introduced today, it remains to be seen what becomes of it. However, the Trump Administration and Congressional Republicans have made it clear that they want to pass this bill before the end of 2017. Municipalities, 501(c)(3) organizations, and other private businesses affected by it may have to move fast if they want to push for changes to the bill.