NORTHAMPTON v. DEPT. OF CMN'TY & ECO. DEV.

Decision Date16 June 2003
Citation825 A.2d 1245,573 Pa. 401
PartiesCOUNTY OF NORTHAMPTON v. DEPARTMENT OF COMMUNITY AND ECONOMIC DEVELOPMENT. Appeal of Bernard V. O'Hare, III, Joseph Deraymond, William H. Hummel, Bernard J. Berg, and James E. Byrne, Intervenors and Department of Community and Economic Development.
CourtPennsylvania Supreme Court

George A. Michak, Nancy J. Kippenhan, Harrisburg, for Dept. of Community and Economic Development.

Bernard V. O'Hare, III, Pro Se.

Joseph Deraymond, Pro Se.

Bernard J. Berg, Pro Se.

James E. Byrne, Pro Se.

William H. Hummel, Pro Se.

William Paul Leeson, Bethlehem, for County of Northampton.

Before: CAPPY, C.J., and CASTILLE, NIGRO, NEWMAN, SAYLOR, EAKIN and LAMB, JJ.

OPINION

JUSTICE SAYLOR.

The issue under review is whether, absent well-pleaded allegations of fraud, the Commonwealth of Pennsylvania, Department of Community and Economic Development is precluded from conducting evidentiary hearings in proceedings under the Local Government Unit Debt Act.

In June of 2000, Northampton County Council ("Council") enacted an ordinance authorizing financing for up to $125 million in capital improvements via issuance of thirty-year bonds by the Northampton County General Purpose Authority (the "Authority"), guaranteed by the County's pledge of full faith and credit. As required by the Local Government Unit Debt Act,1 which establishes an exclusive and uniform procedure pursuant to which a local government may incur indebtedness on bonds or notes, see 53 Pa.C.S. § 8001(d), the County commenced a proceeding with the Department of Community and Economic Development (the "Department"),2 charged with administration of the Debt Act. Subsequently, five citizen-taxpayers ("Complainants"), filed a complaint before the Department pursuant to Section 8211 of the Act, 53 Pa.C.S. § 8211, challenging the validity of the indebtedness proceedings. Complainants asserted, inter alia, that Council had failed to obtain statutorily mandated, realistic cost estimates prior to enacting the bond ordinance. See 53 Pa.C.S. § 8006 (prescribing that, prior to the issuance of any guaranty to finance any project involving construction or acquisition, a municipality must obtain "realistic cost estimates through actual bids, option agreements or professional estimates from registered architects, professional engineers or other persons qualified by experience"). The County's answer contained general denials of Complainants' averments; no affidavit or other documentation demonstrating the procurement of cost estimates was provided, however.

Although the Department rejected the majority of the challenges raised by Complainants, a presiding officer scheduled hearings directed, inter alia, to the question of whether the required cost estimates had in fact been obtained. The County opposed the hearings on the ground that, pursuant to prevailing Commonwealth Court jurisprudence, the Department lacked the ability to conduct an evidentiary hearing absent allegations of fraud. In this regard, the County cited to Ward v. Commonwealth, Dep't of Cmty. Affairs, 685 A.2d 1061 (Pa.Cmwlth.1996); Borough of Brentwood v. Department of Cmty. Affairs, 657 A.2d 1025 (Pa.Cmwlth.1995); Simonetti v. Commonwealth, Dep't of Cmty. Affairs, 651 A.2d 626 (Pa.Cmwlth.1994), and Bethel Park Citizens for Better Educ. Less Taxes (BELT) by DeHuff v. Commonwealth, Dep't of Cmty. Affairs, 128 Pa.Cmwlth. 439, 563 A.2d 969 (1989). The Department, however, took the position that such decisions were distinguishable, and, moreover, the General Assembly had expressly invested in it jurisdiction and authority to "hear and determine all procedural and substantive matters arising from the proceedings of a local government unit taken under [the Debt Act]." See 53 Pa. C.S. § 8211(d). Additionally, the Department invoked its duly promulgated regulations. See, e.g., 12 Pa.Code § 11.12(a) (prescribing that the Department "with or without motion, may schedule a hearing to hear and determine procedural and substantive matters within [its] jurisdiction"). The presiding officer therefore conducted the hearings, and the Department issued an extensive opinion concluding, inter alia, that the County had failed to obtain the requisite estimates. See O'Hare v. County of Northampton, LGUDA-85, slip op. (DCED Mar. 20, 2001). Accordingly, the Department declined to lend its approval to the bond issue.

In making this determination, the Department acknowledged the salutary purposes underlying the Debt Act and associated constraints on its jurisdiction. See id. at 26 (recognizing that " `[t]he purpose of the Debt Act is to require disclosure of a project in order to ensure lawfulness and public notice, while respecting the discretion and latitude necessary for a governmental body to pursue a major construction project in a reasonable and business-like way'" (quoting Borough of Brentwood, 657 A.2d at 1027 n. 5)). More specifically, the Department recognized the Commonwealth Court's admonition that " `[a]dministrative and judicial authorities will neither invade nor supplant the legislative competence of the local government unit[ ], absent a showing of fraud or abuse.'" O'Hare, slip op. at 26 (quoting Borough of Brentwood, 657 A.2d at 1028). Nevertheless, the Department reasoned that "[i]n order to receive the benefit of this presumption of legitimacy, however, the responsible local government unit must have exercised its own prerogative and legislative competence in the first instance." O'Hare, slip op. at 26-27. In this regard, the Department explained:

While the Department will not substitute its judgment as to the sufficiency of realistic cost estimates for that of the responsible local government unit, section 8006 of the Debt Act requires such estimates to have actually been obtained.... The record in this case shows no such independent review or acceptance of realistic cost estimates provided to Council by the issuers or by others.

Id. at 27.

The County filed a timely petition for review in the Commonwealth Court designating the Department as a respondent under Rule of Appellate Procedure 1513(b). Complainants intervened under Rule 1531.

On review, a panel of the Commonwealth Court reversed in a published opinion, holding that the Department erred in conducting a hearing in the absence of any averment of fraud. See County of Northampton v. Department of Cmty. and Econ. Dev., 785 A.2d 1082, 1086 (Pa.Cmwlth. 2001)

. The panel observed that, although the Debt Act provides a means by which taxpayers may challenge before the Department the validity of proceedings in which a local government has incurred bonded indebtedness, the inquiry is strictly limited to procedural and substantive matters involving the regularity of the proceedings, the validity of the bonds, and the legality of the purpose for which such obligations are to be issued. See id. at 1084 (citing Borough of Brentwood, 657 A.2d at 1027). The panel emphasized that Section 8111 of the Act, 53 Pa.C.S. § 8111, which delineates the items that must be included in a local government's submission to the Department, contains no requirement of an averment (or specification in an underlying ordinance) that realistic cost estimates were obtained. See County of Northampton,

785 A.2d at 1086. While recognizing that procurement of cost estimates is explicitly required under Section 8006 of the Act, the panel nonetheless determined that, absent a well-pleaded averment of fraud, the Department lacked the ability to inquire beyond the four corners of the County's submission. See County of Northampton,

785 A.2d at 1085-86. In this regard, the panel referred to the line of cases invoked by the County before the Department, and, in particular, to Borough of Brentwood and Simonetti. See, e.g., Borough of Brentwood, 657 A.2d at 1027 ("[O]nly if fraudulent conduct is alleged and supported by specific allegations, is an evidentiary hearing before the [Department] appropriate, as fraud goes to `the heart of the legality of the proceedings.' " (citation omitted)); Simonetti, 651 A.2d at 629 (same). Additionally, the panel reiterated a concern that:

"A requirement that an evidentiary hearing be held in all instances would permit disgruntled taxpayers, who were unable to convince the [local government unit] that its decision was unwise or incorrect, to raise legal roadblocks which would delay or even block such a decision.... In general, administrative and judicial authorities will neither invade nor supplant the legislative competence of the local government unit, absent a showing of fraud or abuse."

County of Northampton, 785 A.2d at 1086 (quoting Simonetti, 651 A.2d at 628-29; citations omitted) (alterations in original).

Complainants sought allowance of appeal by this Court, and the Department filed a response supporting their position.3

Presently, the Department challenges the Commonwealth Court's view of the agency's powers as overly restrictive, contending that it stands in "stark and inexplicable contrast" to the express, statutory grant of authority to the Department to hear and determine all procedural and substantive matters arising from the proceedings of a local government unit taken under the Debt Act. Petition for Allowance of Appeal at 9; see 53 Pa.C.S. § 8211(d). The Department traces the derivation of the fraud requirement to a misreading by the subsequent Commonwealth Court panels of the court's decision in Bethel Park. In that case, in proceedings under the Act, the Department merely determined, and the Commonwealth Court agreed, that a hearing was unnecessary to address the relevant challenge since there was no valid factual dispute, and therefore, the matter presented purely legal questions. See Bethel Park, 128 Pa.Cmwlth. at 444-45, 563 A.2d at 972. The Department emphasizes that Bethel Park did not indicate that an allegation of fraud was an essential prerequisite to a Department...

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