GOP Senator Plans Bills To Overhaul Municipal Debt Laws

Wilkes-Barre Citizens Voice

A Republican state senator is preparing legislation to ban use by municipalities of complex financial transactions known as “swaps” and provide tighter state oversight of municipal debt in response to a fiscal crisis in the city of Harrisburg.

Sen. Mike Folmer, R-48, Lebanon, plans to introduce the legislation in the new session that starts in January. He said the bills will affect municipalities across the state.

The ban would close a financing mechanism know as interest-rate swap agreements first made available to municipalities under a 2003 state law.

In addition to the swaps ban, Mr. Folmer wants to give the state Department of Community and Economic Development stricter criteria under the Local Government Debt Unit Act for approval of a municipal debt financing that is “self-liquidating” through steady revenue from, for example, parking fees.

He proposes to add criminal penalties for officials filing false certifications that municipal debt is self- liquidating.

DCED certifies about 1,000 municipal debt financing plans annually to determine if they are self-liquidating, but this is mainly a legal review to ensure debt statements and other documents are in order.

The senator is also preparing a bill to amend the state Sewer Rental Act to require formal justifications for sewer rates and charges.

Mr. Folmer wants a special prosecutor appointed to investigate how a massive $300 million debt tied to Harrisburg’s trash incinerator has pushed that city to the brink of bankruptcy.

A forensic audit has raised questions about how bonds issued to meet new federal environmental standards piled up the debt.

“I want to ensure the flaws, weaknesses and mistakes that cause these financial problems will not be replicated in other municipalities across the state,” added Mr. Folmer.

Mr. Folmer participated in hearings this fall by the Senate Local Government Committee on municipal debt issues highlighted by the Harrisburg incinerator debt.

Now he is moving on his own ahead of a bipartisan effort by panel chairman John Eichelberger, R-30, Hollidaysburg, and ranking Democrat John Blake, D-22, Archbald; to develop legislation to provide more taxpayer protection against “irresponsible debt” as Mr. Blake described it.

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