Authorities

Chapter 11:
Authorities

What is an Authority?

The Authority in the Commonwealth of Pennsylvania is a special type of local government (sometimes called a government unit). Authorities provide services to residents of a community—usually water and sewer services. But there are other types of Authorities, too. These include Parking Authorities, Housing Authorities, Port Authorities, and Transportation Authorities, to name a few. These units of government handle day-to-day operations and planning. They take away the need for county or local governments to directly provide these services.

Sometimes communities give tax dollars to help the Authority operate, but many Authorities collect their own revenue. This support comes from fees charged for services, like a water bill or a sewer bill. Authorities can also borrow money to build or repair water pipelines, sewer plants, and other needed facilities.

An Introduction to Authorities

The Municipality Authorities Act of 1945 describes why Pennsylvania needs Authorities. It describes the Authority as “a body corporate and politic” that can legally acquire, construct, finance, improve, maintain and operate projects needed by a community. Authorities can also make loans and they can borrow money and issue public bonds to pay for projects.

The mission of an Authority is to serve a public purpose. Before Authorities existed municipalities would need to fund large public works projects, but they did not have the permission of the state to raise funds through taxes. At first money was raised by selling revenue bonds. Money needed to pay off loans was included in the service fees and passed onto the user of the service. It was these fees that were used to apply for a bond as proof a loan could be paid.

During the time of the Depression in the 1930s the federal government gave money to the states for public works projects. Building these projects (roads, water systems, parks, etc.) helped the economy because the projects provided needed jobs. These federal grants had to be matched (meaning the community has to pay some of the cost of project to get the federal funds). Many communities could not pay their matching share, often because the state did not allow them to borrow the needed money. Many states (Pennsylvania was the third state to do this) passed laws that let municipalities create Authorities. This was Pennsylvania’s first Authorities Act of 1935. Authorities could borrow more money than the Pennsylvania Constitution allowed municipalities to borrow. Often money for projects was raised by issuing revenue bonds.

The Municipalities Authorities Act of 1935 was later replaced with the Municipalities Authorities Act of 1945. This law gave Authorities more choices in how they operate and pay for services.

An Authority can be organized by any county, city, town, borough, township, or school district of the Commonwealth. However, Authorities are not a part of the municipal government, nor is an Authority to be viewed as a representative of the municipality. An Authority is an independent agency of the Commonwealth and is recognized as such. In other words an Authority can be viewed as a public corporation doing the administration of government. It is important to understand that an Authority is a legal entity with the power to borrow money, purchase and own property, and collect user fees. Authorities can, and often are, the funding agent for large projects such as building parking garages, stadiums, and waste water plants.

An Authority is established by ordinance by one or more municipalities and can work by itself or jointly with municipalities. The governing bodies of the municipality appoint members to serve on the Authority Board. An Authority Board consists of no less than five members. In the case of a joint municipal authority, a member from each participating municipality should be appointed to the Board. The board carries on the work of the authority, acquires property, appoints officers and employees, undertakes projects, makes regulations and sets charges, and collects revenue from services of the facilities or projects. For more information go to www.municipalauthorities.org/pdfs/Municipality_Authorities_Act.pdf.

Reasons for Creating an Authority

There are two reasons to create an Authority. One is administrative and the other is financial. Authorities typically provide a service to its customers and use a business model instead to provide the public sector types of services. It is believed that a separate running Authority is more efficient. Also, the long term planning that a Authority must do is better suited for a business model.

Authorities usually set their rates. This way costs are met and no other people are needed to make decisions. Fees are set to meet the needs of the Authority and the public. This is very different from elected officials who need to review their own budgets and set tax rates. Separate fees make sure that future services will be provided and that future needs will be met. However, the local community must cooperate for the success of the Authority. It is the community and its elected officials who appoint the members of the Board that runs the Authority. A more detailed explanation can be found at www.newpa.com.

The second reason for the creation of an Authority is for financial concerns. Before new laws brought reforms in 1972 through a constitutional amendment, Pennsylvania local governments were faced with unrealistic debt limits. The Government Unit Debt Act changed all that by putting dollar limits based upon total revenues collected by the government unit (meaning the Authority itself). This allowed loans to build public services without having the municipality raise the money. However, it was the first limitation for loaning money that gave rise to the number of Authorities in existence today.

A user charge billed by an Authority is a more fair way to raise money than taxes. Fees shift the cost of Authority services to those who use their services. Further, fees can be adjusted by the amount of service used. For instance, a resident who uses 5,000 gallons of water each month will pay less than the resident that uses 10,000 gallons.

Authorities have some advantages over private companies that may provide similar services. Authorities, because they are units of government, do not pay corporate or sales taxes when they purchase supplies. Authorities can also issue tax exempt debt at a lower rate than private corporations. And, fees charged to customers do not include a needed return to shareholders. More detail can be found at: www.lgc.state.pa.us/deskbook06/Basics07_Municipal_Authorities.pdf.

Creation and Dissolution of an Authority

There is much planning and debate before an Authority is created. One major need is finding what kinds of services and how much of a needed service must be provided. What and how much is finally decided by the Authority’s governing body (usually called a Board). Decisions then include if the services are best delivered by an Authority, or by the local government, or by a private contractor. An example is providing water to homes and businesses. Should the water system be built and run by a Water Authority, by the municipality, or by a private company?

Another thing to consider is if the service is required by law. Such laws (often called mandates) may be from the Department of Environmental Protection in Pennsylvania or from the federal Environmental Protection Agency. Sometimes an Authority will bring together a lot of small, privately owned systems.

To create an Authority the governing Board will pass either a resolution or an ordinance expressing its desire to do so. If the Authority is to become a joint authority (one that serves more than one municipality), each municipality must pass or adopt a resolution or ordinance saying it will be part of a joint authority. When that step is done, the Board must decide which project or projects to do. There may also be a resolution to incorporate the new Authority.

No other projects may be taken on by the Authority except the ones passed by resolution. If the local government units do not specify a particular project, the Authority may undertake any project authorized in the Authorities Act.

There is an exception to this when a school district creates an Authority. School District Authorities are restricted to construction of public buildings and other projects related to public schools. The resolution or ordinance adopted by the elected governing body is published in a local paper and legal bulletin, along with a notice of the day the articles of incorporation of the proposed authority will be filed with the Commonwealth of Pennsylvania.

The Articles of Incorporation include the following items:

  1. The name of the authority
  2. The name of the incorporating local units or unit
  3. The names, addresses, and terms of office of the first members of the board of the proposed authority
  4. A listing of the authorities already organized and incorporated by the local government, if any
  5. In the case of a business district authority, a statement that the municipal governing body retains the right to approve any authority plan for providing improvements or administrative services
  6. The authorized projects the authority may undertake
  7. The term of existence of the authority if it is other than the statutory maximum of 50 years
  8. The designation of the service area for the authority.

Once the Secretary of the Commonwealth determines that all the articles of incorporation are in order and have met the current laws, a certificate of incorporation is issued and the Authority’s existence begins from the date of the certificate and lasts for 50 years. It may be extended past 50 years by amendments to the articles of incorporation. Often extensions for the Authority’s existence are done when bond issues are passed.

Mergers of Existing Authorities

Should Authorities wish to join together they must follow a process established by law. This process begins with the municipality or several municipalities together creating a new Authority. The new Authority must clearly state how it will:

  • Create a New Authority and Dissolve the Old Authority
  • Operate the New Authority
  • Follow the Municipal Authorities Act
  • Govern Itself
  • Fund Projects
  • Keep Track of Its Money
  • Transfer Existing Facilities to the New Authority
  • Provide Specific Services Which May Include
    • Sewer Authority
    • Economic Development Authorities
    • Airport Authorities
    • Parking Authorities
    • Transit Authorities
    • Water Authorities
    • Recreation Authorities
    • Solid Waste Authorities
    • Flood Control Authorities
    • Business District Authorities
    • Community Facilities Authorities
    • School Financing Authorities
    • Local Government Facility Financing Authorities
    • Nonprofit Institution Financing Authorities
    • Multipurpose Authorities

Who Serves on Authority Boards?

When an Authority is set up by the municipality (or municipalities) it must file to be incorporated. Every incorporated group needs to have a Board and officers. This application to the state has an explanation of how the Board will look and how the municipalities name persons to the Board. Sometimes only elected or appointed officials from a municipality will serve as Board members.

Where Can I Find More Information about Authorities?

Learning about Authorities is not easy. It will take extra reading and studying to understand how they work in Pennsylvania. These sources will help you.

Municipal Authorities have an organization that explains how they work. See www.municipalauthorities.org for more information. To learn more about transportation authorities go to www.portauthority.org/. One example of how a township and authorities work together is found at www.millcreekauthority.org. An example of a Housing Authority is found at www.chesterha.org for Chester County.