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By Jamie Serra
Tuesday August 06, 2013 at 4:22 pm

The emergence of authorities in Pennsylvania began in the 1930’s as part of the Federal Government’s fiscal recovery policy. At that time, the federal government was issuing grants to states for public works projects to stimulate employment.

Cash strapped states were precluded from receiving funds if they were unable to match federal contributions. To complicate matters further, many states had restrictive prohibitions on debt limits.

The answer was the creation of Municipal Authorities, third parties that provided a solution to this financing problem by borrowing outside of constitutional limitations.

These limits spurred the creation of a vast majority of authorities that are in existence today. The following chart provides a summary of activities authorities in Pennsylvania engage in today.

When used properly, authorities provide flexible financing mechanisms for local government to make investments in their communities. Although when they’re abused and mismanaged they have the potential to create financial burdens on residents of the area they operate within.

This is the reason why four Senators have introduced a package of bills aimed at reforming municipal finance. Senator Eichelberger (R - 30) and Blake (D - 22) saw movement on their bills throughout the budget process where both SB901 and SB902 have received first consideration in the Senate prior to the General Assembly’s summer break.

Here’s footage of the Local Government committee taking up SB901 and SB902 on June 26, 2013. Attorney Lee Derr, counsel for Senator Eichelberger, describes both initiatives before the committee and provides a brief synopsis as to why they are necessary.

Senator Rob Teplitz (D - 15) citied that 108 of Pennsylvania's 500 school districts and 105 local government units have amassed $17.25 billion in public debt tied to swaps with his introduction of SB904, an initiative that would prohibit cities of the first class from entering into swap agreements.

Teplitz's bill is a companion piece to Senator Mike Folmer's SB903, which would prohibit the use of swaps for all other local governments units within the Commonwealth.

This is a long-form look into municipal finance. Stay tuned as we obtain more data and information from various departments and government units.

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