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On June 27, 2012, Pennsylvania Governor Tom Corbett signed into
law Senate Bill 375, which had been approved by a vote of 47-0 in
the Senate on June 13 and by a vote of 196-0 in the House on June
19. The bill places certain restrictions on municipal water and
sewer authorities' ability to expend resources on activities
not related to their core purpose. By amending Title 53 of the
Pennsylvania Consolidated Statutes to add new Section 5612(a.1),
the bill provides that authority funds may not be used "for
any grant, loan or other expenditure for any purpose other than a
service or project directly related to the mission or purpose of
the authority as set forth in the articles of incorporation or in
the resolution or ordinance establishing the authority." With
limited exceptions, the bill additionally provides ratepayers with
a cause of action in the courts of common pleas to recover improper
expenditures directly from the recipient.
In addition to the limitations on water and sewer authority
expenditures, the bill also contains a provision to ensure that
ratepayers located in municipalities served by certain authorities
are appropriately represented on the board of the authority.
However, this provision is narrowly tailored and may not impact the
majority of existing water and sewer authorities. Specifically, the
provision applies to any water or sewer authority, incorporated by
a single municipality, that serves residents in at least two
counties and has projects in more than two counties where the
combined population of other municipalities served is equal to or
greater than five times the population of the incorporating
municipality.
A "water or sewer project" is defined as any pumping
station, filtering plant, impoundment facility, dam, spillway or
reservoir. Affected authorities have within 90 days after the
effective date of the legislation (or by November 24, 2012) to
replace their existing governing bodies with bodies comprising
three members appointed by the each county in which residential
services are provided and three members appointed by the
incorporating municipality, each member to serve a term of five
years.
While the new provision regarding the composition of governing
bodies is narrowly tailored, the restriction on authority
expenditures is generally applicable and has the potential to
significantly affect all authorities, particularly those that were
incorporated to accomplish very narrow purposes (as evidenced by
the authority's articles of incorporation and/or authorizing
ordinance or resolution). It will be important for authorities to
evaluate ongoing expenditures and reexamine their articles of
incorporation or originating legislation to confirm the breadth of
their mission and authorized services and projects.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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