House votes to mandate ethics requirements for Act 47 coordinators

HARRISBURG, Sept. 23 – The state House of Representatives today passed legislation that would require compliance with ethics statutes for Act 47 coordinators appointed to assist financially distressed municipalities, according to the bill’s sponsor Rep. Robert Freeman.

It also would prohibit a coordinator or receiver from receiving any compensation, fee or commission from the distressed municipality.

“This proposal, which was drafted by the state Local Government Commission, would ensure that people who are appointed to help troubled municipalities are not compromised financially in any way whatsoever, so they can provide an honest assessment of the local issues,” said Freeman, D-Northampton.

Act 47 contains separate qualifications for a person or consulting firm to be appointed as a recovery coordinator or receiver. Those qualifications currently do not prohibit a coordinator from engaging in conduct that would violate the Ethics Act or the State Adverse Interest Act, even though a receiver does have that prohibition. These acts require covered individuals to avoid conflicts of interest, nepotism and self-dealing in contracts, among other things.

In addition, the coordinator or receiver could not receive any compensation, fee or commission in accordance with any sale or lease of property or other financial transaction involving the distressed municipality or an authority controlled by the distressed municipality, under Freeman’s bill.

Violation of these prohibitions by a coordinator would constitute grounds for the termination of the contract with the Pennsylvania Department of Community and Economic Development.

Finally, the bill would clarify that its ethics requirements do not bar an individual coordinator, receiver or other legal or financial consultant from qualifying for a contract to serve the same municipality under a separate program in Act 47.

Freeman said it is common, for example, for a financial consultant hired by a local government or DCED during the Early Intervention Program to ultimately serve as the recovery coordinator if the municipality later becomes a distressed municipality under the act.

House Bill 1246 moves to the state Senate for consideration.