§8002. Definitions.

(a) Classification of debt.--With respect to classifications of debt and subject to additional definitions contained in subsequent provisions of this subpart which are applicable to specific provisions of this subpart, the following words and phrases when used in this subpart shall have the meanings given to them in this section unless the context clearly indicates otherwise:

"Debt." The amount of all obligations for the payment of money incurred by the local government unit, whether due and payable in all events, or only upon the performances of work, possession of property as lessee, rendering of services by others or other contingency, except the following:

(1) Current obligations for the full payment of which current revenues have been appropriated, including tax anticipation notes, and current payments for the funding of pension plans.

(2) Obligations under contracts for supplies, services and pensions allocable to current operating expenses of future years in which the supplies are to be expended or furnished, the services rendered or the pensions paid.

(3) Rentals or payments payable in future years under leases, guaranties, subsidy contracts or other forms of agreement not evidencing the acquisition of capital assets. This exception shall not apply to rentals or payments under any instruments which would constitute lease rental debt but for the fact that the lessor or obligee is not an entity described in section 8004(a)(1) (relating to when lease or other agreement evidences acquisition of capital asset).

(4) Interest or assumed taxes payable on bonds or notes which interest or taxes are not yet overdue.

(5) Obligations incurred and payments, including periodic scheduled payments and termination payments, payable pursuant to a qualified interest rate management agreement.

"Electoral debt." All net debt incurred with the assent of the electors, given as provided in this subpart whether issued by a local government unit or through an authority.

"Lease rental debt." The principal amount of authority bonds or notes or bonds or notes of another local government unit to be repaid from payments of the local government unit made pursuant to leases, guaranties, subsidy contracts or other forms of agreement where those payments are or may be made out of the tax and other general revenues of a local government unit under leases, guaranties, subsidy contracts or other forms of agreement which evidence the acquisition of capital assets, excluding any amount which has been approved by the electors.

"Net lease rental debt." A portion of lease rental debt as determined under Subchapter B (relating to limitations on debt of local government units).

"Net nonelectoral debt." A portion of nonelectoral debt as determined in accordance with Subchapter B (relating to limitations on debt of local government units).

"Nonelectoral debt." All debt determined as provided in this subpart, incurred or authorized to be incurred, except electoral debt and lease rental debt, in each case whether authorized before or after July 12, 1972, and whether before or after the debt is incurred.

(b) Exclusions from debt.--With respect to exclusions from any particular category of debt and subject to additional definitions contained in subsequent provisions of this subpart which are applicable to specific provisions of this subpart, the following words and phrases when used in this subpart shall have the meanings given to them in this section unless the context clearly indicates otherwise:

"Self-liquidating debt." Debt payable solely from rents, rates or other charges to the ultimate users of the project, to be financed in whole or in part by that debt, or payable solely from special levies or assessments of benefits lawfully earmarked exclusively for that purpose. The term also includes debt or any portion thereof at the time qualified as self-liquidating pursuant to this subpart, whether or not solely payable from those sources. The term "ultimate users" includes the local government unit itself only where its use of the project is incidental to the use of the project by other users.

"Subsidized debt." The amount of debt which is self-liquidating to the local government unit because the annual debt service on the amount for the fiscal year next following the time of determination will be covered by one of the following:

(1) Payments of subsidies on account of the cost of the project or on account of operations, but measured by the cost of the project, or which will be covered by capital account reimbursements, which subsidies or reimbursements will be paid by either the Commonwealth or the Federal Government, or both, where such payments under the legislation in force at the time of determination are stated to be of a recurring nature, if the Commonwealth or the Federal Government shall have preliminarily or finally qualified the project for the subsidy or reimbursement, all as determined under section 8024 (relating to exclusion of subsidized debt from net nonelectoral debt or net lease rental debt).

(2) Payments under a subsidy contract with another local government unit or under a subsidy contract with an authority, and the amount is lawful lease rental debt as to the other local government unit as determined under section 8024.

(c) Other definitions.--Subject to additional definitions contained in subsequent provisions of this subpart which are applicable to specific provisions of this subpart, the following words and phrases when used in this subpart shall have the meanings given to them in this section unless the context clearly indicates otherwise:

"Accountant." A certified public accountant or public accountant or a firm of either of them.

"Authority." An authority or nonprofit corporation organized under any statute by or on behalf of the Commonwealth or any local government unit or jointly by any one or more of them.

"Bond or note." Any instrument issued by a local government unit imposing an obligation for the repayment of money borrowed, but not including a guaranty endorsed on an instrument issued by an authority. Unless otherwise indicated, the term does not include tax anticipation notes. A bond or a note which is a security as defined in 13 Pa.C.S. Div. 8 (relating to investment securities) shall be governed by 13 Pa.C.S. Div. 8, and every other bond or note shall be governed by 13 Pa.C.S. Div. 3 (relating to negotiable instruments), except in each case as otherwise provided in this subchapter.

"Borrowing base." The annual arithmetic average of the total revenues for the three full fiscal years ended next preceding the date of the incurring of nonelectoral debt or lease rental debt as set forth in a certificate stating the total revenues in each of these years and stating the average, executed by the authorized officials of the local government unit or by an independent accountant. If, within that three-year period, there has been an expansion or contraction of the territorial or functional jurisdiction of a local government unit through transfer, merger, annexation or assumption, in whole or in part, in relation to another local government unit or an authority, the borrowing base shall be calculated as if the expansion or contraction had occurred within or prior to the commencement of the three-year period in the manner as the statutes, charter provisions or court decree provide or direct or, in the absence of those provisions, as the department approves.

"Department." The Department of Community and Economic Development of the Commonwealth.

"General obligation." In the title of a bond or note, means a bond or note for the payment of which the full faith, credit and taxing power of the local government unit is pledged, for the payment of which the local government unit has entered into the required covenant under section 8104 (relating to covenant to pay bonds or notes or a guaranty) and for the payment of which no specific revenues are pledged.

"Governing body." The authorities in each local government unit authorized by law to levy taxes or fix the tax rate of the local government unit. The term also includes the school board of a school district and the board or officers authorized to make binding commitments for joint local government units, even though that body has no power to levy taxes.

"Guaranteed revenue." In the title of a bond or note, means a bond or note of a local government unit payable in whole or in part from pledged revenues, but which becomes wholly or partly a general obligation of the local government unit, as guarantor in the event of deficiency in the pledged revenues.

"Guaranty." A guaranty, whether conditional or unconditional and whether full or partial, to or for the benefit of holders of bonds or notes of the local government unit or holders of bonds or notes or other obligations of an authority or another local government unit, of the payment of the principal of and interest on the bonds or notes, the premium, if any, and assumed taxes, if any, on those obligations.

"Incur" or "incurred." When used with respect to debt, means the point in time when, in the case of debt assented to by the electors, the assent has been given, and, in the case of nonelectoral or other debt, the first ordinance or, in the case of small borrowings under section 8109 (relating to small borrowing for capital purposes), the resolution authorizing the debt has been finally enacted or adopted, unless the authority for the debt has been canceled or terminated as provided in this subpart. Final enactment or adoption means the final act necessary to make an ordinance or resolution, as the case may be, effective pursuant to all requirements of law, including any necessary approval by a mayor or other executive officer or failure of action by the mayor or officer within a specified statutory time limit, or passage over the veto of a mayor or of the officer, but does not include any required advertising subsequent to the date of adoption by the governing body of the local governing unit.

"Independent financial advisor." A person or entity experienced in the financial aspects and risks of interest rate management agreements who is retained by a local government unit to advise the local government unit with respect to a qualified interest rate management agreement. The independent financial advisor may not be the other party or an affiliate or agent of the other party on a qualified interest rate management agreement with respect to which the independent financial advisor is advising a local government unit. For purposes of sections 8281(b)(2) and (e)(5) (relating to qualified interest rate management agreements), the independent financial advisor may be retained by a public authority.

"Interest rate management plan." A written plan prepared or reviewed by an independent financial advisor with respect to a qualified interest rate management agreement, which includes:

(1) A schedule listing the amount of debt outstanding for each outstanding debt issue of the local government unit and the expected annual debt service on that debt. In the case of variable rate debt, the schedule shall set forth the estimated annual debt service thereon and annual debt service on the debt calculated at the maximum rate specified for the variable rate debt.

(2) A schedule listing the notional amounts outstanding of each previously executed qualified interest rate management agreement which is then in effect.

(3) A schedule listing all consulting, advisory, brokerage or similar fees, paid or payable by the local government unit in connection with the qualified interest rate management agreement, and a schedule of any finder's fees, consulting fees or brokerage fees, paid or payable by the other party in connection with the qualified interest rate management agreement.

(4) A schedule listing the estimated and maximum periodic scheduled payments to be paid by the local government unit and to be received by the local government unit from the other party in each year during the term of the qualified interest rate management agreement.

(5) An analysis of the interest rate risk, basis risk, termination risk, credit risk, market-access risk and other risks of entering into the qualified interest rate management agreement. This paragraph includes schedules of the estimated and maximum scheduled periodic payments which would be due under the qualified interest rate management agreement.

(6) An analysis of the interest rate risk, basis risk, termination risk, credit risk, market-access risk and other risks to the local government unit of the net payments due for all debt outstanding and all qualified interest rate management agreements of the local government unit. This paragraph includes schedules of the estimated and maximum net payments of total debt service and scheduled, periodic, net payments, which would be due under all of the qualified interest rate management agreements.

(7) The local government unit's plan to monitor interest rate risk, basis risk, termination risk, credit risk, market-access risk and other risks. This paragraph includes the valuation of the market or termination value of all outstanding qualified interest rate management agreements.

"Issue." All bonds authorized to be sold in respect of a particular project, whether authorized to be sold at one time or from time to time in one or more series.

"Local government unit." A county, county institution district, city, borough, incorporated town, township, school district or any similar, general or limited purpose unit of local government or any unit created by joint action of two or more local government units which is authorized to be created by law. The term does not include a city or county of the first class, an authority as defined in this section or any unit created by joint action of two or more local government units which have not been granted by statute the power to issue bonds. The term includes school districts of the first class presently operating under a home rule charter or home rule charter supplement, and the provisions of this subpart shall govern over inconsistent charter provisions.

"Ordinance." The formal action of a local government unit, whether, under the law applicable to the local government unit, the action is taken by ordinance or by resolution, to which the requirements of section 8003 (relating to advertisement and effectiveness of ordinances) applies.

"Project." Includes any of the following:

(1) Items of construction, acquisition, extraordinary maintenance or repair which have been undertaken by a local government unit.

(2) Preliminary studies, surveying, planning, testing or design work for any undertaking described in paragraph (1).

(3) Lands or rights in land to be acquired.

(4) Furnishings, machinery, apparatus or equipment normally classified as capital items, but these items must have a useful life of five years or more if financed separately and not as a part of a construction or acquisition project.

(5) The local government unit's share of the cost of a project undertaken jointly with one or more other local government units or the Commonwealth or one of its agencies.

(6) Countywide revision of assessment of real property.

(7) Funding of all or any portion of a reserve, or a contribution toward a combined reserve, pool or other arrangement, relating to self-insurance, which has been established by one or more local government units pursuant to 42 Pa.C.S. § 8564 (relating to liability insurance and self-insurance) up to, but not exceeding, the amount provided in section 8007 (relating to cost of project).

(8) Funding of an unfunded actuarial accrued liability or a portion of an unfunded actuarial accrued liability.

(9) Funding or refunding of debt incurred for any or all of the foregoing purposes.

(10) Any combination of any or all of the foregoing as any or all of the above may be designated as a project by the governing body for the financing of which it desires to incur debt.

(11) Any deficit to be funded by bonds or notes as provided in this subpart or the creation of a revolving fund for specific improvements.

(12) Where a local government unit has adopted a capital budget, any unfunded portion of the capital budget selected by ordinance for current funding.

"Qualified interest rate management agreement." An agreement, including a confirmation evidencing a transaction effected under a master agreement, entered into by a local government unit in accordance with and fulfilling the requirements of section 8281 (relating to qualified interest rate management agreements), which agreement in the judgment of the local government unit is designed to manage interest rate risk or interest cost of the local government unit on any debt a local government unit is authorized to incur under this subpart, including, but not limited to, swaps, interest rate caps, collars, corridors, ceiling and floor agreements, forward agreements, float agreements and other similar arrangements which in the judgment of the local government unit will assist the local government unit in managing the interest rate risk or interest cost of the local government unit.

"Resolution." A formal action of a governmental unit other than an ordinance, whether, under the law applicable to the local government unit, the action is taken by ordinance or by resolution, to which section 8003 (relating to advertisement and effectiveness of ordinances) does not apply.

"Revenue." In the title of a bond or note not preceded by the word "guaranteed," means a bond or note payable solely from user charges, rates, revenues, rentals, fees, special assessments and receipts pledged for the purpose.

"Series." All the bonds or notes to be sold and delivered at one time in respect of one project or of any two or more projects which have been combined for purposes of financing or where the bonds or notes have been combined for sale as provided in this subpart.

"Sinking fund." The special fund created pursuant to section 8221 (relating to creation of sinking funds and deposits, reserves and surplus funds) for the payment of the principal of and interest on bonds or notes, premium, if any, and assumed taxes, if any, or for the payment of a guaranty.

"Tax anticipation notes." Notes issued in anticipation of taxes, in anticipation of revenues or in anticipation of both as designated in the notes.

"Total revenues." All moneys received by the local government unit in a fiscal year from whatever source derived, except the following:

(1) Subsidies or reimbursements from the Federal Government or from the Commonwealth measured by the cost of or given or paid on account of a particular project financed by debt.

(2) Project revenues, rates, receipts, user charges, special assessments and special levies which are or will be pledged or budgeted for specific self-liquidating debt or for payments under leases, guaranties, subsidy contracts or other forms of agreement which could constitute lease rental debt except that the payments are payable solely from these sources, but that portion thereof that has been returned to or retained by the local government unit shall not be excluded.

(3) Interest on moneys in sinking funds, reserves and other funds, which interest is pledged or budgeted for the payment or security of outstanding debt, and interest on bond or note proceeds, if similarly pledged.

(4) Grants and gifts in aid of or measured by the construction or acquisition of specified projects.

(5) Proceeds from the disposition of capital assets, and other nonrecurring items, including bond or note proceeds not considered income under generally accepted municipal accounting principles.

"Unfunded actuarial accrued liability." With respect to a local government unit retirement system, pension plan or pension trust fund, the excess of the actuarial accrued liability over the actuarial value of assets of the retirement system, pension plan or pension trust fund, computed as follows:

(1) In the case of a local government unit that is subject to the act of December 18, 1984 (P.L.1005, No.205), known as the Municipal Pension Plan Funding Standard and Recovery Act, in accordance with the requirements of that act.

(2) In the case of a local government unit that is not subject to the Municipal Pension Plan Funding Standard and Recovery Act, in accordance with the applicable laws for that local government unit regarding minimum funding requirements for the unit's retirement system, pension plan or pension trust fund or, if there are no such laws, in accordance with the ordinance, resolution or contract under which the local government unit participates in the retirement system, pension plan or pension trust fund.

In the case of a local government unit that participates in a retirement system, pension plan or pension trust fund for employees of more than one local government unit, including an association of local government units cooperating under Subchapter A of Chapter 23 (relating to intergovernmental cooperation), the term includes the local government unit's pro rata share of the total unfunded actuarial accrued liability of the retirement system, pension plan or pension trust fund, as the pro rata share may be determined under the applicable laws or, if there are no applicable laws, under the ordinance, resolution or contract under which the local government unit participates in the retirement system, pension plan or pension trust fund.

(May 5, 1998, P.L.301, No.50, eff. 60 days; Sept. 24, 2003, P.L.110, No.23, eff. imd.)

Notation

2003 Amendment.  Act 23 amended the def. of "debt" in subsec. (a) and added the defs. of "independent financial advisor," "interest rate management plan" and "qualified interest rate management agreement" in subsec. (c).

1998 Amendment.  Act 50 amended the defs. of "bond or note" and "department" in subsec. (c).

Cross References.  Section 8002 is referred to in sections 5602, 8022, 8101, 8210 of this title.