Amendments To Authorities Act Will Impede Intermunicipal Cooperation

When the Governor signed Senate Bill No. 612 as Act No. 112 on December 12, 2000, he laid to rest an issue for authorities that had been addressed in several Bills over the preceding years. However, what started as an amendment to the Municipal Authorities Act, to solve an authority problem, now contains provisions applicable to municipalities.

The remote ancestor of this bill was introduced following an attempt by an authority in Chester County to acquire an office building in the City of Harrisburg and lease it to a State agency. That type of project probably would have been illegal under the Authorities Act anyway, but this amendment makes it clear that authorities may not acquire projects "solely for revenue producing purposes", subject to certain limitations.

Much more important, Act 112 creates two new problems for voluntary intermunicipal cooperation. The first problem arises from its provisions restricting the powers of authorities and municipalities to enter into intermunicipal contracts relating to the treatment of sewage. Act 112 provides that where an authority or municipality purports to sell "excess capacity" in a sewage plant to an adjacent municipality or authority, it may not charge an initial fee in excess of the tapping fee (actually the capacity component) it charges to its new users within its boundaries.

The Authorities Act has always contained a provision requiring authority rates to be "reasonable and uniform." However, several judicial decisions have made it clear that this requirement does not apply to payments which are provided in agreements freely entered by authorities with other authorities or municipalities. This is because authorities and municipalities all have to have been given the power to enter into contracts, and this power would be severely eroded if one party to a contract could seek to evade it by having a court declare it unfair.

Tapping fees are charges, like sewer rentals, which are imposed on users unilaterally, pursuant to a resolution. Because they are not subject to negotiation or specified in a contract, they are required to be uniform and comply with a formula in the Authorities Act. However, Act 112 now is attempting to regulate the provisions of intermunicipal contracts.

One practical problem with Act 112 is that in some cases, an authority or municipality operating a sewage or water system may determine that it will not impose a tapping fee as high as the maximum that it might charge under the Act. Any municipality which has made such a determination to charge a reduced tapping fee, now will not be able to charge an adjacent municipality a greater amount, even though the charge might be part of a contract containing other provisions justifying the amount.

If the legislature determined that excessive initial contributions were being provided in intermunicipal contracts, it would have been more sensible to prohibit the charging of a fee to an outside municipality exceeding an amount which could be charged to an inside customer under the provisions of the Act. However, by limiting the amount of the charge to that actually imposed within the selling municipality, the legislature, in effect, has made it much less likely that excess capacity will be sold to outlying municipalities.

This amendment does not apply to charges for capacity in a water system. It also does not apply where, pursuant to an agreement, new capacity is constructed by one municipality for another. That presumably is not "surplus."

It is most unclear whether this amendment to the Authorities Act may be applied legally to a municipality that is governed by one of the other municipal codes, rather than by the Authorities Act. The title of a statute is supposed to summarize its contents. However, the title of Act 112 gives no notice that it is restricting the power of boroughs or townships. Of course, there is a provision in the Municipal Planning Code that prohibits municipalities from charging tapping fees in excess of those provided in the Authorities Act. However, charges negotiated by intermunicipal contract are not really tapping fees.

The second unfortunate restriction in Act No. 112 relates to the appointment of authority board members. For many years, municipalities had the power to appoint as board members persons who are non-residents of the municipality but who do reside in a municipality into which the service area of the authority extends. This has been used as a method of giving representation to an outlying municipality which is served by an authority. The elimination may create obstacles in developing new intermunicipal arrangements and in preserving existing ones.

There is an alternative procedure for board representation. That is to convert the authority into a joint authority, by admitting the outlying municipality as a member. The new member may be given any number of board seats acceptable to the parties. This is a useful device, but it does give much broader powers to the adjacent municipality than merely having the original municipality agree that it will appoint a resident of the outlying municipality. One difference under this procedure is that the governing body of the municipality which becomes the new member obtains the right to designate, itself, the board members. Also, the municipal members of a joint authority are contingently the owners of its assets, in the event of its dissolution. And finally, all municipal members must approve any amendments to the Articles of Incorporation of a joint authority. These powers are not often too important, but they may make it less likely that municipalities will adopt the joint authority approach as a substitute for using the rescinded power to appoint non-resident board members.

This restriction on board appointments could also provide an impetus for legislation, frequently proposed in the past, providing that where an authority has a substantial outside service area, the incorporating municipality would be required to provide a board seat, or appoint a resident of, the outlying area. A simpler solution would be to repeal the restriction.