§ 8263 — Trustee for bondholders

Pennsylvania § 8263

• Jurisdiction: Pennsylvania
• Title 53: MUNICIPALITIES GENERALLY
• Part: PART VII
• Ch. 82: MISCELLANEOUS PROVISIONS
• Subch.: REMEDIES

Text

(a) Appointment.--Notwithstanding any provision in the bonds or notes or in any authorizing ordinance, if a local government unit defaults in the payment of the principal of or the interest on any series of bonds or notes after it becomes due, whether at the stated maturity or upon call for prior redemption, and the default continues for 30 days or if the local government unit fails to comply with any provision of the bonds or notes, or in any authorizing resolution or indenture of trust, the holders of 25% in aggregate principal amount of the bonds or notes of the series then outstanding, by an instrument or instruments filed in the office of the recorder of deeds in the county in which the local government unit is located, signed and acknowledged as a deed to be recorded, may appoint a trustee, who may be the sinking fund depository, to represent the holders of all the bonds or notes, and the representation shall be exclusive for the purposes provided in this section.

(b) Powers and duties.--The trustee may and, upon written request of the holders of 25% in principal amount of the bonds or notes then outstanding and upon being furnished with indemnity satisfactory to it, shall, in his or its own name, take one or more of the following actions, and the taking of such action shall preclude similar action whether previously or subsequently initiated by individual holders of bonds or notes:

(1) By mandamus or other proceeding at law or in equity, enforce all rights of the holders of the bonds or notes, including, in the case of revenue or guaranteed revenue obligations, the right to require the local government unit to:

(i) impose and collect rents, rates, tolls and charges adequate to carry out any agreement or covenant as to or pledge of the rents, rates, tolls or charges for the use of the project or projects financed by the bonds or notes; or

(ii) carry out any other agreements with the holders of the bonds or notes.

(2) Bring suit on the bonds or notes without the necessity for producing the bonds or notes, and with the same effect as a suit by any holder.

(3) In the case of revenue or guaranteed revenue bonds or notes, require the local government unit to account, as if it were the trustee of an express trust for the holders of the bonds or notes, for any pledged revenues received.

(4) In the case of general obligation bonds or notes, petition the court to levy, after a hearing upon such notice to the owners of assessable real estate as the court may prescribe, the amount due before or after the exercise of any right of acceleration on the bonds or notes, plus estimated costs of collection as an assessment upon the properties benefited by the improvement pursuant to the front-foot rule if the project is an assessable improvement, otherwise upon all taxable real estate and other property subject to ad valorem taxation in the local government unit, in proportion to the value thereof as assessed for tax purposes, and the trustee may collect or cause the local government unit to collect such assessments as by foreclosure of a mortgage or security interest on the realty or other property if not paid on demand.

(5) In the case of guaranteed revenue bonds or notes or a guarantee of authority obligations or unpaid lease rentals under leases evidencing the acquisition of capital assets, to petition the court to levy, after hearing upon the notice to the owners of assessable real estate and other property subject to ad valorem taxation as the court may prescribe, the amount due on the guaranty or under the lease plus estimated costs of collection as an annual assessment for the current and future years upon all taxable real estate and other properties subject to ad valorem taxation in the local government unit in proportion to the value thereof as assessed for tax purposes, and the trustee may collect or cause the local government unit to collect the assessments as by foreclosure of a mortgage or security interest on the realty or other property if not paid on demand. The levy shall bear interest, until paid, at a rate sufficient to cover accruing interest on the bonds or notes.

(6) By suit in equity, enjoin any acts or things which may be unlawful or in violation of the rights of the holders of the bonds, notes, guaranty or authority obligations under a lease evidencing the acquisition of capital assets.

(7) After 30 days' prior written notice to the local government unit and subject to any limitations in the bond ordinance or relevant indenture, declare the unpaid principal of all the bonds or notes to be immediately due and payable with interest at the rates stated in the bonds until final payment. If all defaults are made good, the trustee may annul the declaration and its consequences.

Any assessment levied pursuant to paragraphs (4) and (5) shall have the same priority and preference as to other liens or mortgages on the real estate or security interests in fixtures thereon or other property as a lien for unpaid taxes.

(c) Installment payments.--The court of common pleas in cases of extreme hardship may provide for the payment of sums levied in five or fewer annual installments with interest at a rate sufficient to cover the interest accruing on the bonds or notes.

(d) Trustee or fiscal agent under original issue.--If a trustee or fiscal agent for the bondholders or noteholders was appointed in connection with the original issue of the bonds or notes and is willing to serve and exercise the powers conferred upon a trustee appointed by this section, the trustee appointed in the manner provided in this section shall have the powers set forth unless the appointment under this section was executed by or pursuant to the authority of the holders of a principal amount of the bonds or notes sufficient to remove the originally appointed trustee or fiscal agent.

Legislative History

Cross References.Section 8263 is referred to in section 8262 of this title.