Updates in the Inflation Reduction Act could provide tax credits as an avenue for funding opportunities for municipalities to make seemingly impossible project possible. McNees invites you to join our panel of industry experts led by attorney Ryan Gonder for a roundtable discussion on:

  • An overview of the recent changes in the Inflation Reduction Act
  • Eligibility and process for funding municipal projects
  • Examples/case studies of current projects in Pennsylvania

Register Here

Roundtable Guests:
Dr. Brian Regli
Office of the Governor, Commonwealth of Pennsylvania
Executive Director, Critical Investments  
Ryan Brockman
Raymond James
Vice President  
Jason Wert, P.E., BCEE
Rettew
Market Leader – Water, Renewables and Energy Production
Kevin Sunday
McNees Wallace & Nurick
Policy Advisor  
Ryan Gonder, moderator
McNees Wallace & Nurick
Attorney, Public Finance and Government Services
Event Details:  
Date: Wed., January 17  
Time: Noon – 1:30 p.m.  
Location: This event is virtual. A link to join the webinar will be sent to registered attendees before the event.

 

The Pennsylvania Commonwealth Court recently issued a long-awaited opinion in a prevailing wage appeal brought by Ursinus College, captioned at Ursinus College v. Prevailing Wage Appeals Board, No. 828 C.D. 2021 (Pa. Commw. Ct. 2022). The College was appealing a decision by the Pennsylvania Prevailing Wage Appeals Board (the “Board”) finding that the Pennsylvania Prevailing Wage Act (the “Act”) applied to a construction project financed by the College (the “Project”), using municipal bonds issued by the Montgomery County Higher Education and Health Authority (the “Authority”). Read our prior commentary about the case here.

In an opinion and order issued August 4, 2022, the Commonwealth Court reversed the Board’s decision that the Act applied to the Project. In ruling for the College in its appeal, the court noted that the Project was financed through Bonds issued by the Authority for the benefit of the College. While the Authority issued the Bonds to finance the Project, it did not have any liability for repayment of the debt; the repayment obligation rested solely with the College. As explained in more detail in the amicus briefing, a typical bond transaction for a 501(c)(3) tax-exempt private educational organization, such as a college or university, consists of, among others, the following actors: a borrower, an underwriter, a trustee, and a conduit issuer. The structure used by the College to finance the Project followed this typical structure.

In its Opinion, the court held that the funding structure underpinning the Project did not give rise to a finding of “public work,” and as a result, the relevant provision of the Act did not apply to the Project. The court concluded that the structure of the underlying financing—which included a trust indenture, loan agreement, bond purchase agreement, and closing statement—was such that “the Project was not paid for ‘out of the funds’ of the Authority as a public body, which is what the plain language of Section 2(5) of the Act requires.” Notably, the court reasoned that because “Ursinus, and not the Authority, bore the risk for repaying the bonds, the economic reality of this transaction reveals that the Project is not public work subject to the Act.”

This decision represents a positive development for institutions of higher education, as well as other parties that finance construction projects through public bond offerings. The decision of the Board raised serious concerns that the Act potentially applied to a wide variety of projects that are structured similarly to the transaction described above.

A petition for allowance of appeal to the Supreme Court of Pennsylvania—Pennsylvania’s highest court—was filed on September 6, 2022, by the International Brotherhood of Electrical Workers, Local Union No. 98. The Supreme Court has discretion in determining whether to accept the appeal. The court has several months in which to consider the Union’s request to hear the appeal. A decision on that request to hear the appeal is unlikely before the end of the year. In the event the court accepts case for appeal, the appeal process before the Supreme Court typically takes 9 to 12 months. If the Supreme Court declines to hear the appeal, the decision of the Commonwealth Court stands.

McNees was proud to submit an amicus brief on behalf of a number of its higher education clients in support of the College’s appeal, and is available to assist you with any questions relating to the Prevailing Wage Act and bond financing matters generally. Contact us today if you have questions.

All attorneys representing municipal and other public sector clients should be aware of the potential for a United States Securities and Exchange Commission (SEC) investigation of their clients’ public bond deals.  Issuers generally will hire a team of professionals with specialized experience in public finance to assist them in completing a financing; such professionals commonly include bond counsel, disclosure counsel, and a municipal advisor.  But even the general practice solicitor that handles all day-to-day legal issues for the client will play an important role in the financing process. Continue Reading Solicitors: Help Avoid Targeting by the SEC in Municipal Bond Offerings

Since September 2021, the United States Securities and Exchange Commission (the SEC) has brought five enforcement actions regarding municipal bond financings.  The issuers of these bonds are Sweetwater Union High School District (Texas); Crosby Independent School District (California); Town of Sterlington (Louisiana); City of Rochester (and its school district) (New York); and Johnson City (Texas).  In each case, the issuers and other involved parties were charged with providing false and misleading information to municipal bond investors.  Enforcement was not limited to entities; individuals representing the issuers were also targeted. Additional information about these cases (and earlier cases) is available on the SEC website, at https://www.sec.gov/municipal/oms-enforcement-actions.html.

Here are seven lessons to be learned from these cases: Continue Reading Seven Lessons to be Learned from Recent SEC Enforcement Actions Involving Municipal Bond Financings

The Securities and Exchange Commission (SEC) recently charged two chief financial officers of school districts with misleading investors in municipal bond offerings.  This should be a warning to municipal CFOs to be very careful to make appropriate disclosures when involved in their public entities’ bond issues.  An SEC official recently stated that “the SEC is committed to holding bad actors in municipal securities offerings accountable for their misconduct.”  Don’t be the CFO bad actor that the SEC targets! Continue Reading Municipal CFOs: Be Careful of your Bond Disclosures; the SEC is Gunning for You

The American Rescue Plan Act (“ARPA”) was enacted in March 2021 providing an unprecedented $1.9 trillion in direct relief to combat the effects Covid-19, whether it be negative economic impacts, public health implications, revenue loss, or identified needs in infrastructure.  Pennsylvania and its municipalities received approximately $14 billon in those federal ARPA funds!

ARPA funds come with certain new reporting requirements.  For municipalities, the first round of that new reporting (the “Project and Expenditure Report”) is due to the U.S. Treasury by April 30, 2022.  Every municipality that received ARPA funds must file this report (even if you haven’t spent anything yet).

Furthermore, and this is especially important, Continue Reading ARPA Reporting due April 30, 2022!

In December 2017, former President Donald Trump signed into law the Tax Cuts and Jobs Act. Among the many provisions of the Act was a provision that eliminated the tax exemption for municipal bonds that advance refunded another series of bonds. Prior to its passage, issuers had the ability to issue such bonds on a tax-exempt basis, and did so for a variety of reasons, including to achieve debt service savings. With the loss of tax-exempt status for advance refunding bonds issued after the passage of the Act, issuers and their advisors have searched for alternatives to the traditional tax-exempt advance refunding model.

In this article, we explore some of the alternatives that issuers have applied to achieve the same or similar benefits that would be achieved with a traditional tax-exempt advance refunding. First, we discuss the use of “forward delivery” bonds, where the bonds are sold, but not delivered to investors until a much later date in the future; second, we consider so-called “Cinderella” bonds, which are issued taxable but later convert to tax-exempt; and finally, “tenders and exchanges,” where issuers, often in conjunction with a current issuance, make an offer to investors to acquire their outstanding bonds, either for purchase or exchange. Continue Reading Four Years On, Alternatives to Tax-Exempt Advance Refundings Continue to Proliferate in Municipal Bond Market

In its recent decision, Appeal of Best Homes DDJ, LLC, 239-40 C.D. 2020 (Dec. 23, 2021), the Pennsylvania Commonwealth Court considered, among other issues, whether MS4 fees imposed by the City of Chester Stormwater Authority constituted an impermissible tax. The case involved a challenge by certain rate/fee-payers that the Authority’s “fees” were actually “taxes” because, according to the Appellants, the fees were revenue-generating and used for projects unrelated to stormwater management.

Holding in favor of the Authority, the Court concluded that the evidence presented by the Appellants was insufficient to meet their burden of proving that the fees were invalid. The Court’s decision is important because it outlines the significant fact evidence required to overturn a stormwater user fee. A full explanation of the Court’s decision, including other legal challenges brought against the Authority, can be found here on our State and Local Tax Blog.

Timothy Horstmann, member of McNees Wallace & Nurick’s Public Finance and Government Services Group, will be discussing the importance of the archival and long-time preservation of electronic documents for Pennsylvania municipalities and townships in an upcoming webinar.

The panel of thought leaders will share tips for how to become PDF/A compliant at little to no cost, important because a Pennsylvania State Archives and Local Government Records Committee policy allows municipalities to maintain electronic records so long as specific requirements are met. Continue Reading McNees Attorney Providing Key Tips, Resources for Townships’ Preservation of E-Documents

McNees Public Finance attorneys Timothy J. Horstmann and Ryan T. Gonder will present “Preparing for an Audit of ARPA Expenditures: What to Do Now,” at the  Pennsylvania State Association of Township Supervisors annual conference in Hershey, Pennsylvania, this April. Continue Reading McNees Public Finance Attorneys to Present on ARPA Expenditures