Blake, Bipartisan Coalition Discuss Municipal Debt Reform Legislation

HARRISBURG, May 10, 2017 — State Senator John Blake (D-22) today joined a bipartisan group of legislators that included Senators Mike Folmer (R-48), John Eichelberger (R-30) and John DiSanto (R-15) and State Representatives Francis Ryan (R-101) and Patty Kim (D-103) to highlight a bipartisan municipal debt reform package to address financial transactions that led to the fiscal distress of Harrisburg and other municipalities.

“It is imperative that we continue to legislate protections in law to ensure accountability and transparency in publicly funded activities,” Senator Blake said.  “This bipartisan package of legislation protects the public interest; improves transparency and accountability; and insists upon ethical conduct when local elected and appointed officials vote to issue debt backed up by taxpayer dollars.  It is my hope that these bills move quickly through the legislative process and get to the Governor’s desk for his signature.”  

Senator Blake is the prime sponsor of Senate Bill 491 (Ethics Commission and Municipal Authorities).

“Tax and rate payers across Pennsylvania assume there are protections in the law to stop public entities from losing public funds on risky investments, or contractors that go under during a project, or engaging in unethical financial practices; currently, these protections don’t exist,” said Senator Eichelberger, prime sponsor of Senate Bill 490 (Local Government Debt Act) and Senate Bill 493 (Bonds and Municipal Debt).  “Our bipartisan package of bills will correct these inadequacies.”

Senator Folmer, prime sponsor of Senate Bill 492 (“Swaps” Restrictions) continued, “As the Grand Jury report on the Harrisburg incinerator called the City’s financial transactions ‘a reckless bet,’ I believe swaps are gambling with taxpayers’ moneys.  If municipal or school district officials guess wrong, taxpayers are on the hook for any losses incurred.” 

Representative Ryan will introduce companion legislation in the House.  “As part of a comprehensive financial rescue plan, it is essential that reforms be enacted at the state and municipal levels to ensure our financial viability into the future,” Representative Ryan said.

Attorney General Josh Shapiro recently released a Grand Jury report on the financial transactions of the Harrisburg incinerator.  While a number of the Attorney General’s recommendations on the Harrisburg incinerator are covered by the previously mentioned bills, three additional bills will be introduced to include all of the recommendations.

Senator Blake will introduce Senate Bill 694 to amend the Commonwealth Attorneys Act.  Senator DiSanto will introduce Senate Bill 695 to amend the statute of limitations regarding public officials and employees.  “Public officials need to be held to a high standard and face accountability when they violate the public trust.  This legislation, recommended in a recent report by the Attorney General, will clarify the statute of limitations on crimes related to public employment and provide sufficient time for investigations to be conducted after someone has left office,” Senator DiSanto said.  Senator Folmer will introduce Senate Bill 696 to expand public bidding requirements for professional services.

Representative Kim will introduce similar companion bills in the House.  “I believe if these reform bills were law 20 years ago, Harrisburg’s financial status would look completely different and on better footing today,” Representative Kim said.

Senate Bills 490-493 are currently in the Senate Local Government Committee.  Senate Bills 694-696 will be introduced shortly.

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Sen. Blake Hears Pros, Cons of Bills to Improve State Oversight of Muni Financial Deals

HARRISBURG, Sept. 9, 2013 – Officials representing school districts, associations, public finance firms and the City of Philadelphia pressed state Sen. John Blake and members of the Senate Local Government Committee today to tread carefully on legislation designed to better safeguard local governments venturing into complicated financial deals with taxpayer dollars.

The hearing followed similar recent public meetings that emphasized the need for better state oversight of municipal financial deals, especially those involving interest rate management agreements, or swaps.

Blake (D-Lackawanna/Luzerne/Monroe) introduced Senate Bill 902 in May as part of a package of bills that would better shield school districts and municipalities from bad deals that could – and have – cost taxpayers millions of dollars.

“There remains exposure to the Pennsylvania taxpayer if we don’t do something here,” Blake said. “And that’s what prompts the legislation that is before you. We need to ensure greater transparency and accountability when local governments or local municipal authorities incur debt that is to be paid off by taxpayers.”

SB 902 would allow the State Ethics Commission to investigate alleged ethical violations by people involved in municipal financial transactions. The Ethics Commission does not have this jurisdiction today.  It would further require that any debt incurred by a municipal authority be used solely for the public purposes intended at the time of the borrowing.

School districts and local governments throughout the state have been tied up in more than $17 billion in swaps deals between 2003 and last year.

While some swaps deals benefitted a number of local school districts and municipal authorities, Blake said the problem is some of these deals have not turned out well for taxpayers. Or, the deals impose refinancing difficulties because they inhibit local organizations from exiting them.

“Disentanglement is the word,” Blake said. “When local leaders try to get out of past deals they can get stuck, and it can end up costing taxpayers millions more on the way out than it cost them on the way in.”

Sen. Blake noted the testimony of former state Auditor General Jack Wagner, who said he believes swaps “are nothing more than a form of gambling with public funds,” and the differences between the Bethlehem Area and the Great Valley school districts.

Former Bethlehem School Board Vice President Judith Dexter said swaps “almost bankrupted” the school district while Great Valley Director of Business Affairs Charles Linderman said swaps have helped his district pay for important projects and have “resulted in a positive cash flow for the district.”

“With regard to the reforms suggested on local government debt and swaps, we need to consider all the testimony received today and get this right. We need to ensure capital markets can meet the needs of local governments while not exposing taxpayers to unnecessary risks and costs,” Blake said.

Blake’s SB 902 is part of a package of bipartisan bills proposed by Sens. Rob Teplitz (D-Dauphin), John Eichelberger (R-Bedford) and Mike Folmer (R-Lebanon).