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.

History

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.

Sales Of Capacity

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...