Local governments across the Commonwealth of Pennsylvania are facing budgetary challenges caused by the impact of COVID-19. Many of these fiscal challenges will continue through the 2021 fiscal year. On November 23, 2020, Governor Wolf signed into law Act 114 of 2020 providing counties, cities, boroughs, townships and school districts with the ability to temporarily ease 2021 budgetary shortfalls by the issuance of Tax Anticipation Notes (“TANs”).
Prior to the adoption of Act 114, local governments were obligated to repay TANs no later than the end of its current fiscal year. Therefore, it needed to rely upon tax revenue received during the current fiscal year to pay off any outstanding TANs. Act 114 authorizes the issuance of TANs that mature at the end of the local government’s 2022 fiscal year. Therefore, the local government may use tax revenue it receives over multiple fiscal years to help pay for budgetary shortfalls it may have in 2021. The purpose of Act 114 is to allow local governments to effectively manage cash flow during the COVID-19 emergency.
Any local government considering issuing a TAN should consult with recognized bond counsel to ensure that a TAN is properly structured and authorized under applicable provisions of Pennsylvania’s Local Government Unit Debt Act and the Internal Revenue Code. Feel free to contact any of Stock and Leader’s public finance attorneys with any questions you may have concerning the issuance of TANs.