The Pennsylvania General Assembly recently amended codes for Boroughs, Townships of the First Class and Incorporated Towns (“2018 Municipalities”) to authorize sales of personal property having a value less than $2,000 without advertising for and receiving bids and awarding the sale to the highest bidder (the “2018 Amendments”). The 2018 Amendments are important because they reduce the costs of legal advertising and staff time previously required for a sale of personalty having a fair market value of at least $1,000. The 2018 Amendments are further important because they create a level playing field for 2018 Municipalities consistent with the 2017 amendment by the General Assembly to the Second Class Township Code regarding Townships of the Second Class for sales of personalty having a fair market value of less than $2,000 (the “2017 Amendment,” and together with the 2018 Amendments, collectively the “Amendments”). The increase from $1,000 to $2,000 balances transparency in local government with cost savings for sales of an increasingly larger group of personalty.
The General Assembly has drafted municipal codes for accountability and uniform administration of Incorporated Towns, Boroughs, Townships of the Second Class and Townships of the First Class (the “Municipal Codes”). Sales of personal property are subject to advertisement in newspapers of general circulation, receipt of bids by a municipality and award to the highest bidder. Any other procedure reduces transparency because the public does not know without notice what sales a municipality undertakes. The concept of “notice” in Municipal Codes preceded the Internet, leaving newspapers as the standard for notifying the public. As to sales of personal property, the general public has a right to bid, not just to be aware of the transactions. The costs of preparing notices of sale of personalty, measured by time of municipal staff and advertising fees for such notices in newspapers, together with the costs of reviewing and awarding bids, can easily approach the value of the personalty. It would disserve the taxpayers to have the cost of such sales exceed the consideration received by the municipality. Municipal Codes allow sale by electronic auction but even the opportunity to submit electronic bids must be advertised by notice in newspapers. If no bids are received, the advertisement must run a second time. Accordingly, it is an economic benefit not to have to advertise sales of municipal personalty having a value between $1,000 as stated under the prior versions of the Municipal Codes but less than $2,000 under the Amendments.
On July 7, 2017, Governor Wolf approved the 2017 Amendment to benefit Townships of the Second Class. It was introduced by Senator John R. Gordner (R-27) as S.B. 365 and became Act 21 of 2017, effective September 5, 2017. It provides that Second Class Townships must advertise for bids in the sale of personalty having an estimated fair market value of $2,000 or more. The Second Class Township Code further provides that if an electronic auction is held, the advertisement must include “the Internet address or means of accessing the electronic auction and the date, time and duration of the public auction.” 53 P.S. §66504(a). The advertisement must appear at least ten days before the opening of bids or public auction. If no bids are received, the Township must advertise a second time for bids or public auction. If no bids are received on second advertisement, the Township may, pursuant to a procedure adopted by resolution, sell the personalty without further advertisement. The 2017 Amendment further confirms that no advertisement and bids are required if the personalty has an estimated fair market value less than $2,000 but that the sale without advertisement must be by procedure adopted by resolution. 53 P.S. §66504(b).
The 2018 Amendments were introduced in the Senate by Senator Scott Hutchinson (R-21) and consist of amendments to the Borough Code under S.B. 947 which became Act 150 of 2018; amendments to the First Class Township Code under S.B. 948 which became Act 151 of 2018; and amendments to the Incorporated Town Code under S.B. 949 which became Act 152 of 2018. Act 150 of 2018 amended 53 P.S.§66504(a) and (b); Act 151 of 2018 amended 53 P.S.§56501(I); and Act 152 of 2018 amended 53 P.S.§53201.1(b). The codes for these 2018 Municipalities are substantially similar to the Second Class Township Code as to advertising and bidding requirements.
Fortunately, the General Assembly has provided exceptions to these advertising and bidding requirements for transfers of personalty valued at $2,000 or more in the Municipal Codes. First, no such procedure is required for trade-ins or exchange for new personal property. Second, as expressed in the First Class Township Code, this procedure does not apply in sales or transfers to a county, city, borough, town or township, institution district, school district, volunteer ambulance service, volunteer rescue squad located in the Township, an authority, a nonprofit corporation engaged in community industrial, commercial or affordable housing development or reuse (the “Personalty Transfer Exceptions”). These Personalty Transfer Exceptions do not apply to personalty held to conduct existing governmental functions. 53 P.S.§56501(II).
The newspaper advertising requirement arises in the Municipal Codes and relates to pre-Internet concepts of notice. The Newspaper Advertising Act of 1929, 45 Pa.C.S.A.§101, et seq., contains the definition for a “newspaper of general circulation” where advertisements for sale of personalty must be placed. Such a newspaper is “issued daily, or not less than once a week, intended for general distribution and circulation, and sold at fixed prices per copy per week, per month, or per annum, to subscribers and readers without regard to business, trade, profession or class.” 45 Pa.C.S.A.§101(a). With the current decline in sales of paper copies for newspapers and the ascension of the Internet, the Newspaper Advertising Act is unlikely to be repealed without economic harm to newspaper publishers.
The second statute that affects the Municipal Codes for sales of personalty is the Nonreceipt of Bids section in Trade and Commerce, 73 P.S.§1641 (the “Non-receipt Law”). It applies to sales and purchases by political subdivisions, municipalities, municipal authorities and transportation authorities (each, a “Public Entity”). The Non-receipt Law authorizes a readvertisement for bids when no bids are received on the first advertisement. If no bids are received within 15 days of the second advertisement, the Public Entity may enter into negotiations for the private sale of the personalty. The Public Entity must publicly announce the identity of the parties, the sales price and other material terms at a regular or special meeting of its governing body. The private sale may be authorized at least 30 days following that announcement. 73 P.S.§1641(b).
Municipal Codes require procedures to be adopted by resolution of the governing body to implement personalty sales both (1) after non-receipt of bids following second advertisement and (2) where the fair market value of goods to be sold is less than $2,000. See the Second Class Township Code at 53 P.S. §66504(a) and (b). The procedures in the Non-receipt Law could be embodied in the resolution for a Public Entity to govern transfers of personalty following non-receipt of bids after the second advertisement, including a delay of 15 days following the readvertisement to begin private negotiations. Further, the procedures in the Non-receipt Law of public announcement at a meeting of the governing body and delay of 30 days to consummate the sale could apply to sales of personalty valued at less than $2,000.
Governor Wolf approved each of the bills comprising the 2018 Amendments on October 24, 2018, and they took effect 60 days thereafter on December 24, 2018. The 2018 Amendments are important because they maintain transparency of administration while reducing expenses of municipalities in selling relatively inexpensive personal property and creating uniformity with prior legislation benefitting Second Class Townships. Without a repeal of the Newspaper Advertising Act of 1929 or its applicability under the Municipal Codes, we can expect that the effects of conventional economic inflation will cause the Municipalities to ask the General Assembly again to increase further the stated value of personal property exempt from advertising and receipt of highest bid before sale.
ã2019 Robert J. Hobaugh, Jr.