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12 Pa. Code § 115.3. Determination of municipal financial distress.

§ 115.3. Determination of municipal financial distress.

 (a)  The criteria used in the determination of municipal financial distress will be the criteria in section 201 of the act (53 P. S. §  11701.201). The criteria are:

   (1)  The municipality has maintained a deficit over a 3-year period, with a deficit of at least 1% in each of the previous fiscal years.

   (2)  The municipality’s expenditures have exceeded revenues for a period of at least 3 years.

   (3)  The municipality has defaulted in payment of principal or interest on a bond or note, or in payment of rentals due an authority.

   (4)  The municipality has missed a payroll for 30 days.

   (5)  The municipality has failed to make required payments to judgment creditors for 30 days beyond the date of the recording of the judgment.

   (6)  The municipality, for a period of at least 30 days beyond the due date, has failed to forward taxes withheld on the income of employes, or has failed to transfer employer or employe contributions for Social Security.

   (7)  The municipality has accumulated and has operated for each of 2 successive years a deficit equal to at least 5% of its revenues.

   (8)  The municipality has failed to make the budgeted payment of its minimum municipal obligation as required by section 302 of the Municipal Pension Plan Funding Standard and Recovery Act (53 P. S. §  895.302), with respect to a pension fund during the fiscal year for which the payment was budgeted, and has failed to take action within that time period to make required payments.

   (9)  A municipality has sought to negotiate resolution or adjustment of a claim in excess of 30% against a fund or budget, and has failed to reach an agreement with creditors.

   (10)  A municipality has filed a Municipal Debt Readjustment Plan, under 11 U.S.C.A. § §  901—946 (relating to adjustment of debts of a municipality).

   (11)  The municipality has experienced a decrease in a quantified level of municipal service from the preceding fiscal year, which has resulted from the municipality reaching its legal limit in levying real estate taxes for general purposes. For determining levels of municipal service for the year 1987, the Department will utilize annual statistical data since the year 1982 to determine a pattern of decrease in delivery of municipal services since 1982.

 (b)  The Department may review and assess relevant information on the municipality’s financial condition to determine whether the existence of section 201 factors validly indicate the fiscal distress of the municipality.

 (c)  The procedures for securing municipal distress determination are as follows:

   (1)  A municipal financial distress determination may be initiated by one or more of the following:

     (i)   The Department, under section 202(1) of the act.

     (ii)   A creditor with matured claim to whom the municipality owes at least $10,000 if the creditor agrees to forbear legal action under section 202(3) of the act.

     (iii)   Ten percent of the number of electors of the municipality who voted at the last municipal election, under section 202(4) of the act (53 P. S. §  11701.202(4)).

     (iv)   A trustee of a municipal pension fund, an actuary for a pension fund or at least 10% of the beneficiaries of a pension fund, under section 202(5) of the act.

     (v)   Ten percent of the employes of the municipality who have not been paid in over 30 days from the time of a missed payroll, under section 202(6) of the act.

     (vi)   The trustees or paying agents of a municipal bond indenture.

     (vii)   The elected auditors, appointed independent auditors or elected controllers of a municipality, under section 202(8) of the act.

     (viii)   The governing body of the municipality, upon passing a resolution by a majority vote of the governing body after special public meeting advertised as provided by law.

   (2)  A party with standing may petition the Secretary for a determination that the municipality involved is a financially distressed municipality. The petition shall be signed by a party with standing, and it shall be sealed and notarized. The petition shall:

     (i)   Allege the petitioner has standing.

     (ii)   State why the petitioner believes the municipality is distressed under section 201 of the act. If the petitioner is a municipality, the petition may state why manifestation of section 201 criteria is imminent and inevitable, instead of why the petitioner believes the municipality is distressed under section 201 of the act.

     (iii)   Include a listing of judgments recorded against the municipality.

     (iv)   Include material allegations justifying the relief afforded by the act.

 (d)  The Department will use a standardized form reflecting criteria in section 201 of the act to allow filing for a determination of distress by those parties with standing to seek the determination.

 (e)  The Department may conduct a consultative investigation and hold public hearings to determine whether a municipality meets the criteria for a determination of distress under the act.

 (f)  A municipality will not be deemed to be distressed for circumstances from the Commonwealth’s failure to make a payment of money due the municipality, including Federal money which passes through the Commonwealth, due the municipality when the payment is due.

 (g)  If a determination of distress is made, the Department will appoint a coordinator within 30 days of the determination.

 (h)  A distress determination will remain in effect until rescinded by the Secretary.

 (i)  If a municipal debt adjustment under 11 U.S.C.A. § §  901—946 has occurred, the municipality will be deemed to be distressed under the act and a coordinator will be appointed.

 (j)  It is the policy of the Department to encourage the development of recovery plans and to provide emergency grants and loans to restore basic municipal services to minimal levels consistent with public health and safety.

 (k)  This determination is subject to appeal by the municipality under 2 Pa.C.S. § §  101—754 (relating to administrative law and procedure).


   The provisions of this §  115.3 adopted July 7, 1989, effective July 8, 1989, 19 Pa.B. 2948; corrected July 21, 1989, effective July 8, 1989, 19 Pa.B. 3104.

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