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1 H M ATTORNEYS AT LAW avvke ci(eori L,IT Srnscak Jjj3 Thomas J. Sniscak (717) x224 tjsniscakthmsieai.com Christopher M. Arfaa (717) x231 Whitney F. Snyder (717) x260 wesnyderhmsiea1.com 100 North Tenth Street, Harrisburg, PA Phone: Fax: VIA ELECTRONIC FILING Rosemary Chiavetta, Secretary Pennsylvania Public Utility Commission Commonwealth Keystone Building 400 North Street, filing Room Harrisburg, PA February 3, 2016 Re: Petition of the Borough of Cornwall for a Declaratory Order That its Provision of Water Service to Isolated Customers Adjoining Its Boundaries Does Not Constitute the Provision of Public Utility Service Under 66 Pa. C.S. 102; Docket No. P ; CORNWALL BOROUGH MUNICIPAL AUTHORITY S EXCEPTIONS Dear Secretary Chiavetta: Enclosed you will find The Cornwall Borough Municipal Authority s Exceptions to Administrative Law Judge David A. Salapa s Recommended Decision issued on January 14, 2016 in the above-captioned matter. MAILING ADDRESS: P.O. BOX 1778 HARRISBURG, PA 17105

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4 BEFORE THE PENNSYLVANIA PUBLIC UTILITY COMMISSION Petition of the Borough of Cornwall for Declaratory Order that the Provision of Water Service to Isolated Customers Adjoining its Boundaries Does Not Constitute Provision of Public Utility Service Under 66 Pa. C.S. 102 Docket No. P EXCEPTIONS OF THE CORNWALL BOROUGH, LEBANON COUNTY, MUNICIPAL AUTHORITY Thomas J. Sniscak, Attorney ID No Christopher M. Arfaa, Attorney ID No Whitney E. Snyder, Attorney ID No HAWKE MCKEON & SNISCAK LLP 100 North Tenth Street Harrisburg, PA Telephone: (717) Facsimile: (717) Dated: February 3, 2016 Counsel for the Cornwall Borough, Lebanon County, Municipal Authority

5 TABLE OF CONTENTS I. Introduction... 1 II. Exceptions... 2 A. Exception No. 1: The ALJ erred by concluding that the water service proposed by the Borough to customers located outside its boundaries does not constitute public utility service subject to the Commission s jurisdiction....2 B. Exception No. 2: The ALJ erred by failing to consider whether stripping outside customers of the Commission s protection is in the public interest C. Exception No. 3: The ALJ erred by striking the Authority s testimony and exhibits regarding the Borough s extreme financial stress and lack of fitness D. Exception No. 4: The ALJ erred by finding that the Borough will not offer water service to additional customers located outside the Borough s boundaries E. Exception No. 5: The ALJ erred by recommending that the Petition be granted without providing directly affected persons due process of law III. Conclusion i

6 TABLE OF AUTHORITIES Cases Borough of Ambridge v. Pa. Pub. Serv. Comm n, 165 A. 47 (Pa. Super. 1933)... 3, 4 Chester Water Auth. v. Pennsylvania Pub. Util. Comm'n, 822 A.2d 146, 151 (Pa. Cmwlth. 2003), rev'd on other grounds, 581 Pa. 640, 868 A.2d 384 (2005) City of Erie v. Pa. Pub. Util. Comm'n, 60 Pa. Commw. 102, 430 A.2d 1037 (1981)... 3 Drexelbrook Associates v. Pa. Pub. Util. Comm n, 418 Pa. 430, 212 A.2d 237 (1965)... 4 Naylor v. Commonwealth, Department of Public Welfare, 54 A.3d 429, (Pa. Cmwlth. 2012)... 8, 16 Waltman v. Pa. PUC... 4, 19 Warwick Water Works, Inc. v. Pa. Pub. Util. Comm n, 699 A.2d 770 (Pa. Cmwlth. 1997)... 4 Administrative Decisions Application of the York Water Co. (York Water) for Approval of (1) the Transfer, by Sale, of Substantially All of the Water Works Prop., & Rights of the Paradise Homes Mobile Park (Paradise Homes) to York Water, & (2) the Right of York Water to Begin to Offer or Furnish Water Serv. to the Pub. in A Portion of Paradise Twp., York Cty., Pennsylvania, A , 2015 WL (Jan. 29, 2015) Collazo v. Stillwater Sewer Corp., Docket No. C , slip op. (Pa. Pub. Util. Comm n Tentative Order entered Jan. 28, 2008)... 4, 5 In Re Final Rulemaking for Revision of Chapters 1, 3 & 5 of Title 52 of Pennsylvania Code Pertaining to Practice, Procedure Before the Comm'n, L , 2006 WL , at *41 (Jan. 4, 2006) In Re Pennsylvania-Am. Water Co, 95 Pa. P.U.C. 86 (Feb. 13, 2001) Megargel's Golf, Inc., 59 Pa. P.U.C. 517 (1985)... 4 Petition of Skytop Lodge Corporation, Docket No. P , slip op. at 12 (Pa. Pub. Util. Comm n July 24, 2014)... passim Petition of the Borough of Phoenixville for a Declaratory Order that the Provision of Water and Wastewater Service to Isolated Customers in Adjoining Townships Does Not Constitute the Provision of Public Utility Service Under 66 Pa. C.S. 102, Docket No. P , slip op. (May 19, 2015)... 12, 13, 14 Petition of the City of Titusville for a Declaratory Order that the Provision of Water Service to isolated Customers in the Townships of Oil Creek and Cherrytree Does Not Constitute provision of Public Utility Service Under 66 Pa. C.S. 102, Docket No. P (Tentative Order entered April 23, 2014)... 6, 15, 17 Re Duquesne Light Co., 61 Pa. P.U.C. 507 (1986)... 7, 16 ii

7 Review of Issues Relating to Commission Certification of Distributed Antennae System Providers in Pennsylvania, Docket No. M , Joint Motion of Commissioner John F. Coleman, Jr., and Vice-Chairman Andrew G. Place at 2 (adopted Jan. 29, 2016)... 8, 16 Shryock Brothers, Inc. v. Uwchlan Township, Docket No. C , 2007 WL (Pa. Pub. Util. Comm n Oct. 25, 2007)... 5 Shryock Brothers, Inc. v. Uwchlan Township, Docket No. C , Initial Decision, slip op. (Pa. Pub. Util. Comm n Apr. 27, 2007)... 5, 10, 11 Triple Crown Corp., 94 Pa. P.U.C. 300 (May 18, 2000) Statutes 1 Pa. C.S. 1921(b) Pa. C.S Pa. C.S et seq Pa. C.S. 5607(d)(9) Pa. C.S. 1102(a)(5)... 3, 13, Pa. C.S P.S , Pa. C.S (b)... 8, 16 Rules 52 Pa. Code 5.42(b) Pa. Code 5.421a iii

8 The Cornwall Borough, Lebanon County, Municipal Authority (the Authority ), by its attorneys, Hawke McKeon & Sniscak LLP, files these Exceptions to the Recommended Decision by Administrative Law Judge ( ALJ ) David A. Salapa issued in the above-captioned matter on January 14, I. INTRODUCTION The Recommended Decision, if adopted, would set a dangerous precedent because it would allow extraterritorial municipal utility service unquestionably subject to Pennsylvania Public Utility Commission ( Commission ) jurisdiction to be left unregulated, and the extraterritorial customers to be left unprotected, without regard to any public interest determination as to whether the municipality is financially and managerially able to provide such essential service. Such a result would constitute a derogation of the fundamental public interest purpose of Commission regulation under the Public Utility Code. The ALJ refused to allow any testimony on the Petitioner s admitted financial peril as well as its unsuitability to manage and operate. Instead, the Recommended Decision proceeds as if there were a simple recipe for municipalities to evade Commission regulation of their extraterritorial service, despite the fact that the ingredients of this case are fundamentally different from those of the decisions on which the ALJ relied. Notably, those decisions merely granted uncontested petitions for declaratory orders and thus have little or no precedential effect, and the Recommended Decision compounded its errors by failing to cite, consider or explain cases stating that a public interest determination is required. Simply put, the Recommended Decision cannot amend the statute and overrule the Legislature s clear and express language simply because it believes, erroneously, that there is a simple test for Commission jurisdiction based upon intonations and promises by a municipality that offers water distribution service to 1

9 any and all members of public who now or in the future may occupy the premises served by the municipality s extraterritorial connections. If the Borough wants relief under its unique circumstances, the answer is to go to the Legislature to change the law, not to this Commission. For these reasons, and for the additional reasons set forth in the following Exceptions, the Recommended Decision should be rejected for fundamentally failing to address and protect the public interest, and the Borough s petition for declaratory order should be denied. In the alternative, the Commission should remand this matter to the ALJ for hearings to consider the evidence of the Borough s admitted broke financial condition and continuing fiscal deterioration offered by the Authority 1 that the ALJ refused to consider or admit, and to recommend a finding whether, in light of such evidence, granting the Borough s petition for declaratory order would be in the public interest. II. EXCEPTIONS A. Exception No. 1: The ALJ erred by concluding that the water service proposed by the Borough to customers located outside its boundaries does not constitute public utility service subject to the Commission s jurisdiction. The ALJ concluded as a matter of law that [t]he water service proposed by the Borough to customers located outside its boundaries does not constitute public utility service. (Conclusion of Law No. 3, RD at 35.) This was error. The Public Utility Code defines public utility as [a]ny person or corporations now or hereafter owning or operating in this Commonwealth equipment or facilities for: distributing, or furnishing water to or for the public for compensation. 2 While a municipal corporation is not an individual and is excluded 1 The Borough s council president announced the Borough was broke at the council s April 2, 2015 public meeting. Since that time, the Borough s financial position has further deteriorated due to the entry of a $1.5 million judgment against it. See n.39, infra (discussing stricken Authority testimony) Pa. C.S. 102 (definition of public utility ). 2

10 from the definition of corporation, except as otherwise provided, 3 the Code expressly confers Commission jurisdiction over municipal corporations extraterritorial public utility service that is, public utility service furnished outside their municipal boundaries. 4 Thus, a municipality may not acquire facilities used to provide utility service to or for the public absent Commission approval, evidenced by a certificate of public convenience first had and obtained pursuant to application. 66 Pa. C.S. 1102(a)(5). Where, as here, the language of a statute is plain, an agency may not substitute a different interpretation of the Legislature s express terms. 5 The Commission has declined to regulate the municipal provision of extraterritorial service in only two situations: (1) where the extraterritorial service is provided to only particular individuals rather than to the public, as a class, or to any limited portion of it 6 (the Borough of Ambridge Cases ); and (2) and where the Commission has determined that, notwithstanding the fact that municipal corporations extra-territorial services are clearly subject to the Commission s jurisdiction[,]... it is appropriate to utilize a less burdensome regulatory oversight scheme to fulfill the requirements of the Public Utility Code regarding their extra-territorial service 7 (the Municipal Corporations Decisions ). While these lines of cases overlap in some instances, they require distinct analyses and produce different results Pa. C.S. 102 (definition of corporation ) Pa. C.S. 1102(a)(5), Service which is rendered outside a municipality s political boundaries; i.e., corporate limits, is termed extraterritorial service. City of Erie v. Pa. Pub. Util. Comm'n, 60 Pa. Commw. 102, 430 A.2d 1037 (1981). 5 1 Pa. C.S. 1921(b) ( When the words of a statute are clear and free from all ambiguity, the letter of it is not to be disregarded under the pretext of pursuing its spirit. ); see also id. 1921(a) ( Every statute shall be construed, if possible, to give effect to all of its provisions. ). 6 Borough of Ambridge v. Pa. Pub. Serv. Comm n, 165 A. 47, 49 (Pa. Super. 1933). 7 Petition of Skytop Lodge Corporation, Docket No. P , slip op. at 12 (Pa. Pub. Util. Comm n July 24, 2014) (citing 66 Pa. C.S. 1102(a)(5), 1301, 1304, and 1501). 3

11 Under the Borough of Ambridge Cases, the test is whether or not a service provider holds himself out, expressly or impliedly, as engaged in the business of supplying his product or service to the public, as a class, or to any limited portion of it, as contradistinguished from holding himself out as serving or ready to serve only particular individuals. 8 The test has been distilled to the following formulation: a service is not public utility service if it is provided to a defined, privileged, and limited group. 9 The Commission has repeatedly explained that the term defined, privileged and limited group... connotes a situation where the purveyor of water service has control over the persons selected to be provided water service. 10 Where the provider has such control, the service does not constitute public utility service under the Public Utility Code and thus falls completely outside the Commission s statutory jurisdiction. 11 The selection and control criterion is equally applicable to, and 8 Borough of Ambridge, 165 A. at 49; see, e.g., Waltman v. Pa. Pub. Util. Comm n, 596 A.2d 1221, 1223 (Pa. Cmwlth. 1991) ( The test for determining whether utility services are being offered for the public is whether or not such person holds himself out, expressly or impliedly, as engaged in the business of supplying his product or service to the public, as a class, or to any limited portion of it, as contradistinguished from holding himself out as serving or ready to serve only particular individuals. ) (quoting Drexelbrook v. Pa. Pub. Util. Comm n, 418 Pa. 430, 212 A.2d 237, 239 (1965)); id. at 1224 ( The private or public character of a business does not depend upon the number of persons who actually use the service; rather, the proper characterization rests upon whether or not the service is available to all members of the public who may require the service. ) (quoting C.E. Dunmire Gas Co., Inc. v. Pa. Pa. Pub. Util. Comm n, 413 A.2d 473 (Pa. Cmwlth. 1980)). See also Warwick Water Works, Inc. v. Pa. Pa. Pub. Util. Comm n, 699 A.2d 770 (Pa. Cmwlth. 1997) (finding that the existence of a relationship above and beyond that of a service provider and customer tends to show the private nature of the service).), 9 E.g., Drexelbrook Associates v. Pa. Pub. Util. Comm n, 418 Pa. 430, , 212 A.2d 237, (1965) (holding that the public or private character of the enterprise depends upon whether or not it is open to the use and service of all members of the public who may require it). 10 Megargel's Golf, Inc., 59 Pa. P.U.C. 517, 521 (1985), quoted with approval in Collazo v. Stillwater Sewer Corp., Docket No. C , slip op. at 5-6 (Pa. Pub. Util. Comm n Tentative Order entered Jan. 28, 2008) (emphasis added by Collazo opinion). 11 In the leading case of Drexelbrook Associates v. Pa. Pub. Util. Comm n, 418 Pa. 430, 212 A.2d 237, 239 (1965), electric, gas, and water service constituted service to a defined, privileged, and limited group, and the service to them was private in nature, where the service was provided by the landlord only to persons it selected (by entering into leases) as tenants in its garden-type apartment village. Conversely, in the case of Megargel's Golf, Inc., 59 Pa. P.U.C. 517 (1985), the Commission held that the provision of service to a limited number of homes in a subdivision was public utility service because the service 4

12 dispositive of, public utility status in the case of municipalities providing extraterritorial service. 12 provider had no control over the persons who would become its customers upon purchasing the homes. Id. at 521 ( We are of the opinion that the Court reasoned that since the proposed service was to be provided only to those persons selected as tenants, (i.e., defined, privileged, and limited group as found in Drexelbrook Associates, supra), the service was private in nature. In the case sub judice, neither Megargel nor the new owner (Hawthorne Inn, Inc.) has such control over persons who would become their customers since they do not own the homes or cottages or even the land on which these homes and cottages are situated. Moreover, Megargel agreed to provide water service to new homes built in the Montgomery subdivision (a total of perhaps 17 customers) on an as needed basis. Therefore, we conclude that the term, defined, privileged and limited group does not mean the residents of a particular development but connotes a situation where the purveyor of water service has control over the persons selected to be provided water service. ) (emphasis added). Similarly, in Warwick Water Works, Inc. v. Pa. Pub. Util. Comm n, 699 A.2d 770 (Pa. Cmwlth. 1997), the Commonwealth Court concluded that the absence of control or a relationship between the utility and a condominium association, whose members it served, was critical when determining public utility status. Id. at More recently, the Commission applied these precedents in Collazo v. Stillwater Sewer Corp., Docket No. C , slip op. (Pa. Pub. Util. Comm n. Tentative Order entered Jan. 28, 2008), where it held that a developer s provision of sewer service to the owners of individual units in the development, over which it had no control, constituted de facto public utility service. Id., slip op. at 6-7 ( [N]either Stillwater nor [its] Association has control over who buys or sells homes in the Stillwater Lake Estates development. There is no control over the persons who are provided wastewater service. Stillwater does not select its customers. Homeowners are free to buy and sell their homes without any involvement of Stillwater. In addition, wastewater service is not incidental to any other business or service Stillwater provides.... Just as in Megargel s Golf, Stillwater is a de facto, uncertificated public utility since it owns and operates a wastewater treatment facility providing service to the public an indefinite class of customers over which it has no control for compensation. ). 12 See, e.g., Shryock Brothers, Inc. v. Uwchlan Township, Docket No. C , 2007 WL (Pa. Pub. Util. Comm n Oct. 25, 2007). In Shryock Brothers, a municipality Uwchlan Township had agreed to provide sewer services to portions of a development located in a neighboring township. Specifically, the Township agreed to provide service to legacy properties in the development those owned by the developer, some of which were completed and occupied by tenants, and some of which were still being constructed as well as to whoever purchases the undeveloped lots from the developer. The Township did not own any property in the development and did not know the identity of these future purchasers WL at *7. After exhaustive review of the Borough of Ambridge/ Warwick line of decisions, the ALJ concluded that the crucial inquiry was whether the Township has maintained sufficient control over the entities selected to be provided water [sic] service, Shryock Brothers, Inc. v. Uwchlan Township, Docket No. C , Initial Decision, slip op. at 44 (Pa. Pub. Util. Comm n Apr. 27, 2007) (Melillo, ALJ) (emphasis in original), and found that, on the evidence presented, the Township had not sufficiently restricted its outside service to a defined, privileged and limited group to render its extraterritorial service private. Shryock Brothers, Docket No. C , Initial Decision, slip op at 47. On exceptions, the Commission affirmed the grant of summary judgment against the Township, stating that the ALJ had correctly concluded that the Township has been operating as a de facto public utility for decades by serving extraterritorial customers for compensation. Shryock Brothers, 2007 WL at *12. 5

13 The Municipal Corporations Decisions use a different analysis to answer a different question. Those cases (virtually all of which involved uncontested petitions for declaratory orders filed by municipalities with substantial experience providing utility service and none of which involved an essentially insolvent municipality proposing to commence service) considered whether, under the particular circumstances presented, it is appropriate to utilize a less burdensome regulatory oversight scheme to fulfill the requirements of the Public Utility Code regarding [such] extra-territorial service. 13 The Commission has emphasized that, notwithstanding its determinations that regulatory relief was warranted in the Municipal Corporations Decisions, [p]ursuant to the Public Utility Code, these municipal corporations extra-territorial services are subject to the Commission s jurisdiction. 14 Here, the ALJ confused these two lines of authority and analysis. He attempted to use the analysis the Commission used to grant an uncontested petition for regulatory relief in a Municipal Corporations Decisions case (City of Titusville 15 ) to determine whether the Borough s proposed extraterritorial service will constitute public utility service subject to the Commission s jurisdiction. He thus used the analysis of the Municipal Corporations Decisions, which governs the discretionary determination whether Commission oversight of a municipality s extraterritorial service is required to ensure adequate service and just and reasonable rates, to make the statutory determination of the Commission s jurisdiction over extraterritorial service, which is governed by the Borough of Ambridge Cases. In effect, the ALJ 13 Skytop, Docket No. P , slip op. at Skytop, Docket No. P , slip op. at 12 (citing 66 Pa. C.S. 1102(a)(5), 1301, 1304, and 1501) (emphasis in original). 15 Petition of the City of Titusville for a Declaratory Order that the Provision of Water Service to isolated Customers in the Townships of Oil Creek and Cherrytree Does Not Constitute provision of Public Utility Service Under 66 Pa. C.S. 102, Docket No. P (Tentative Order entered April 23, 2014) (Titusville). 6

14 attempted to produce jurisdictional apple juice by squeezing discretionary oranges. This was error. As the Commission made clear in its recent Skytop order, the grants of regulatory relief in the Municipal Corporations Decisions do not render the municipalities extraterritorial services non-jurisdictional: Pursuant to the Public Utility Code, these municipal corporations extra-territorial services are subject to the Commission s jurisdiction. See 66 Pa. C.S. 1102(a)(5), 1301, 1304, and In these particular cases, however, the Commission chose not to regulate their extra-territorial service because the municipal corporations satisfied the factors listed above. These municipal corporations extra-territorial services are clearly subject to the Commission s jurisdiction; however, the Commission has determined it is appropriate to utilize a less burdensome regulatory oversight scheme to fulfill the requirements of the Public Utility Code regarding their extra-territorial service. 16 While some of the language in the Titusville order suggests that the extraterritorial service at issue was not public utility service and thus non-jurisdictional, such dicta cannot, and does not, amend the Public Utility Code or abrogate the Borough of Ambridge Cases. Like all of the Municipal Corporations Decisions, Titusville granted a petition for a declaratory order. Declaratory orders, while binding on the parties to the underlying proceedings, 17 are not binding precedent, 18 nor do they establish a rule for determining all such petitions. 19 The dicta in 16 Skytop, Docket No. P , slip op. at 12 (citing 66 Pa. C.S. 1102(a)(5), 1301, 1304, and 1501) (emphasis of the word are in original; remaining emphasis added). While the Recommended Decision notes the discussion of the Municipal Corporations cases in the Skytop order, it inexplicably fails to address this critical passage, which was discussed at length in the Authority s main and reply briefs Pa. C.S. 316 ( Whenever the commission shall make any rule, regulation, finding, determination or order, the same shall be prima facie evidence of the facts found and shall remain conclusive upon all parties affected thereby, unless set aside, annulled or modified on judicial review. ). 18 See Re Duquesne Light Co., 61 Pa. P.U.C. 507 (1986) ( It should be noted that our action here is predicated on the unique factual circumstances before us. It should not be construed as a precedent indicating that routine approval will be granted with regard to future declaratory order petitions by other utilities.... ). 7

15 Titusville and similar Municipal Corporations Decisions is even less persuasive because the petitions in those cases were uncontested. As Commissioner Coleman and Vice Chairman Place recently explained in an analogous context, this means that the legal and factual issues presented by such petitions were not fully and openly vetted in an on-the-record proceeding before the Commission. 20 As the Commission s subsequent decision in Skytop makes clear, the extraterritorial services provided by the petitioners in the Municipal Corporations Decisions are subject to the Commission s jurisdiction. 21 Therefore, those decisions cannot support a conclusion that the Borough s proposed outside water service is not public utility service and therefore not subject to the Commission s jurisdiction. The ALJ s failure to address the crucial inquiry regarding the issue of jurisdiction -- whether the Borough has control over the identity of the customers that will be provided water service via the 48 existing and 24 future authorized outside connections requires rejection of his erroneous legal conclusion that [t]he water service proposed by the Borough to customers located outside its boundaries does not constitute public utility service and thus is not subject to the Commission s jurisdiction. As argued in the Authority s briefs and discussed below in the 19 Such binding norms i.e., rules of general application can be promulgated only pursuant to the mandatory, formal rulemaking procedures established by the Commonwealth Documents Law, 45 Pa. C.S et seq., the Commonwealth Attorneys Act, 71 Pa. C.S (b), and the Regulatory Review Act, 71 P.S The decisions on unopposed petitions for declaratory orders cited by the ALJ and the Borough clearly do not satisfy these requirements. See Naylor v. Commonwealth, Department of Public Welfare, 54 A.3d 429, (Pa. Cmwlth. 2012) (summarizing statutory requirements for the promulgation of regulations by Pennsylvania agencies). 20 Review of Issues Relating to Commission Certification of Distributed Antennae System Providers in Pennsylvania, Docket No. M , Joint Motion of Commissioner John F. Coleman, Jr., and Vice-Chairman Andrew G. Place at 2 (adopted Jan. 29, 2016) ( [I]t is our understanding that the DAS applications for authority that the Commission previously granted were all uncontested. This means that the legal and factual issues surrounding whether to certificate DAS providers have yet to be fully and openly vetted in an on-the-record proceeding before the Commission. ). 21 Skytop, Docket No. P , slip op. at 12 (citing 66 Pa. C.S. 1102(a)(5), 1301, 1304, and 1501) (emphasis in original). 8

16 context of the ALJ s erroneous findings of fact, 22 the Borough has admitted that its extraterritorial service will not be limited to only particular individuals but instead will be offered to any and all members of the public who purchase the premises served and to be served by the outside connections. 23 This proves that the Borough s outside water service will be provided to or for the public under the Borough of Ambridge Cases and thus constitutes public utility service subject to Commission regulation under the Public Utility Code. The public nature of the Borough s extraterritorial service and the Commission s jurisdiction are confirmed by the Commission s decision on analogous facts in the Shryock Brothers case. There, Uwchlan Township had agreed to provide sewer services to the portions of the Eagleview Corporate Center located in a neighboring township. Specifically, the Township agreed to provide service to legacy properties in the development those owned by the developer, some of which were completed and occupied by tenants, and some of which were still being constructed as well as to whoever purchases the undeveloped lots from the developer. The Township did not own any property in the development and did not know the identity of these future purchasers. 24 After concluding that under the Borough of Ambridge line of cases the crucial inquiry was whether the Township has maintained sufficient control over the 22 See section II.D. 23 This admission was made by Borough representative Steckbeck during cross examination (Transcript Tr. at 40-41) (emphasis added): Q. So, is it fair to say then, as you understand it, it is not the Borough s intent to limit the outside customers but rather limit the addition of new outside connections; is that correct? They'll keep the same number of connections and different people may own the property connected, but they won t increase the number of connections; is that right? A. That's my understanding. They will not allow an increase in the number of EDUs by a single connection either. 24 Shryock Bros., Docket No. C , Opinion and Order, 2007 WL at *7 (quoting Initial Decision). 9

17 entities selected to be provided water [sic] [i.e., sewer] service, 25 the ALJ found that, on the evidence presented, the Township had not sufficiently restricted its outside service to a defined, privileged and limited group to render its extraterritorial service private. 26 In affirming the Initial Decision, the Commission agreed that the Township has been operating as a de facto public utility for decades by serving extraterritorial customers for compensation. 27 Like the township in Shryock Brothers, the Borough does not own properties served by the Authority s existing and authorized extraterritorial connections; it does not have a contractual relationship with either the current or the future individual owners of the 48 properties served or the 24 properties to be served by those connections; and it does not know the identity of the customers who will eventually occupy the homes that have yet to be built on the latter properties, but has admitted that it will serve them. Thus the Borough is clearly holding itself out as engaged in supplying [water] service to the public or to a limited portion of it, as contradistinguished from holding itself out as only ready to serve particular individuals, 28 and, as was the case in Shryock Brothers, while the Borough s extraterritorial customers would likely be small in number, they comprise a limited portion of the public, and extraterritorial 25 Shryock Bros., Docket No. C , Initial Decision, slip op at Id. at 47 ( T]he Township herein does not own the Eagleview Corporate Center property or the commercial establishments therein, nor does it have a contractual relationship with either present or future individual property owners or customers in the Eagleview Center.... Thus, the Township does not have the control over these customers as was found to be necessary for private utility service.... The Township is clearly holding itself out as engaged in supplying sewer service to the public or to a limited portion of it, as contradistinguished from holding itself out as only ready to serve particular individuals. Borough of Ambridge, supra; see also, Borough of Ridgway v. Pa. P.U.C. (Ridgway), 480 A.2d 1253, 1258 (1984). Indeed, the Township does not know the identity of its future Eagleview Center customers, but had admitted that it will serve them. While the Eagleview Center customers would likely be small in number, they comprise a limited portion of the public, and extraterritorial service to them would be public utility service. ). 27 Shryock Bros., Opinion and Order, 2007 WL at * Shryock Bros., Docket No. C , Initial Decision, slip op at 44 (citing Borough of Ambridge; further citation omitted). 10

18 service to them would be public utility service. 29 Therefore, the Borough s Petition which seeks a jurisdictional determination in order to evade the necessity of Commission approval of the Borough s acquisition of the Authority s water system rather than relief from any existing regulatory burdens should be denied. B. Exception No. 2: The ALJ erred by failing to consider whether stripping outside customers of the Commission s protection is in the public interest. The question presented by the Borough s Petition is not whether the Borough s proposed extraterritorial water service constitutes public utility service subject to the Commission s jurisdiction as argued above and confirmed by the Commission s Skytop decision, it clearly is. 30 Rather, the question is whether, under the particular circumstances of this case, it is appropriate to utilize a less burdensome regulatory oversight scheme to fulfill the requirements of the Public Utility Code regarding [such] extra-territorial service. 31 The ALJ has recommended that the Commission grant the Borough s petition without any demonstration or finding that such an exemption is in the public interest. Instead, the ALJ reduced the analysis to a narrow, formulaic focus on the number of extraterritorial customers, their proximity to the Borough s borders, and the Borough s promises that it would not extend service or charge discriminatory rates. (RD at ) This was error. The fundamental justification for the Legislature s decision to exempt services provided by municipalities within their political boundaries from Commission oversight is that residents 29 Shryock Bros., Docket No. C , Initial Decision, slip op at Skytop, Docket No. P , slip op. at 12 ( These municipal corporations extra-territorial services are clearly subject to the Commission s jurisdiction; however, the Commission has determined it is appropriate to utilize a less burdensome regulatory oversight scheme to fulfill the requirements of the Public Utility Code regarding their extra-territorial service. ) (citing 66 Pa. C.S. 1102(a)(5), 1301, 1304, and 1501) (emphasis added). 31 Id. 11

19 can vote the municipal elected officials out of office if they are dissatisfied with their municipal service. Here, it is beyond dispute that the members of the public located outside the Borough served at present, and those the Borough admits it will add in the future, and those who may buy the premises located outside of the Borough, will lack the ability to use the ballot box to address inadequate, unreasonable or discriminatory rates and service. 32 As the Commission observed in Borough of Phoenixville, Commission oversight over the rates and service substitute for the power of the ballot box that extraterritorial customers lack with respect to inside-borough operations. 33 If the Borough s Petition is granted, they will be deprived of the Commission forum that the Legislature expressly provided as a substitute for their lack of voting power. The ALJ s failure even to consider whether such a result in this case is in the public interest was error in the most fundamental sense, because it abjured the Commission s core responsibility under the Public Utility Code that of protecting the public interest in utility matters. 34 The Public Utility Code charges the Commission with protecting the public interest in utility matters, 35 and a public interest determination thus lies at the core of every Commission decision. 36 The fundamental duty to protect the public interest would be eviscerated if the 32 Tr. at Petition of the Borough of Phoenixville for a Declaratory Order that the Provision of Water and Wastewater Service to Isolated Customers in Adjoining Townships Does Not Constitute the Provision of Public Utility Service Under 66 Pa. C.S. 102, Docket No. P , slip op. at 7 (May 19, 2015). 34 Application of the York Water Co. (York Water) for Approval of (1) the Transfer, by Sale, of Substantially All of the Water Works Prop., & Rights of the Paradise Homes Mobile Park (Paradise Homes) to York Water, & (2) the Right of York Water to Begin to Offer or Furnish Water Serv. to the Pub. in A Portion of Paradise Twp., York Cty., Pennsylvania, A , 2015 WL , at *1 (Jan. 29, 2015) 35 Id., at *1 (Jan. 29, 2015). 36 See, e.g, York Water, A , 2015 WL , at *1; Chester Water Auth. v. Pennsylvania Pub. Util. Comm'n, 822 A.2d 146, 151 (Pa. Cmwlth. 2003), rev'd on other grounds, 581 Pa. 640, 868 A.2d 384 (2005) ( The primary object of the [Public Utility] Code is to serve the public interest. ) (citing Phila. Suburban Water Co. v. Pennsylvania Pub. Util. Comm'n, 425 Pa. 501, 229 A.2d 748 (1967), 12

20 Commission s consideration of petitions for declaratory orders to evade Commission oversight is limited to the factors considered by the ALJ. The whole purpose of the Public Utility Code is to ensure the efficient, safe provision of reasonable utility service to the public at reasonable rates. Therefore, when a municipality seeks to acquire facilities to provide utility service beyond its borders, the Public Utility Code requires the municipality to demonstrate that the municipality s acquisition and operation of such facilities is in the public interest, pursuant to an application for a certificate of public convenience under 66 Pa. C.S. 1102(a)(5). The Phoenixville decision demonstrates that where, as in this case, the municipality seeks to circumvent this requirement by requesting that the Commission exercise its discretion to exempt its extraterritorial service from regulation, such exemption must be in the public interest. 37 The Recommended Decision would have this Commission ignore as irrelevant to its fundamental duty to safeguard the public interest whether a Borough with huge financial problems and a record of erratic decision making 38 should be excused from statutory oversight in serving existing and future members of the public that have no right to vote in Borough elections and thus lack any protection against Borough mismanagement. Therefore, the Recommended Pennsylvania R. Co. v. Pennsylvania Pub. Util. Comm'n, 199 Pa. Super. 158, 184 A.2d 111 (1962), and Pittston Gas Co. v. Pennsylvania Pub. Util. Comm'n, 190 Pa. Super. 365, 154 A.2d 510 (1959)); In Re Final Rulemaking for Revision of Chapters 1, 3 & 5 of Title 52 of Pennsylvania Code Pertaining to Practice, Procedure Before the Comm'n, L , 2006 WL , at *41 (Jan. 4, 2006) ( The presiding officer's obligation to determine whether a settlement is in the public interest is a necessary corollary to the Commission's fundamental statutory obligations under the Public Utility Code, particularly sections 501, 1301 and Pa. C.S. 501, 1301 and ); In Re Pennsylvania-Am. Water Co, 95 Pa. P.U.C. 86 (Feb. 13, 2001) ( The Legislature has directed the Commission to determine whether the fundamental requirement of the public interest is present in any application for a certificate of public convenience. ) (citing City of York v. Pa. PUC, 449 Pa. 136, 295 A.2d 825 (1972)); Triple Crown Corp., 94 Pa. P.U.C. 300 (May 18, 2000) ( The Commission's duty is to determine the public interest, it has no jurisdiction to adjudicate purely private fights. ) (citing Reading & Southwestern St. Ry. v. PA Public Utility Comm'n, 168 Pa. Super. 61, 77 A.2d 102 (1950)); accord City of Pittsburgh v. W. Penn Power Co., 147 F.3d 256, 259 (3d Cir. 1998) ( The PUC is mandated to act in the public interest in overseeing public utilities. ). 37 Borough of Phoenixville, Docket No. P , slip op. at See n.39, infra. 13

21 Decision should be rejected and the Borough s petition denied (or, in the alternative, remanded to the ALJ for further hearings on whether exempting the Borough s extraterritorial service from Commission oversight is in the public interest). C. Exception No. 3: The ALJ erred by striking the Authority s testimony and exhibits regarding the Borough s extreme financial stress and lack of fitness. The ALJ struck the Authority s written testimony and exhibits concerning the Borough s extreme financial distress on the ground that evidence of the Borough s fitness was not relevant to the Commission s decision whether to strip outside customers of the protections of Commission oversight. 39 This was error. As the Commission held in Borough of Phoenixville, to relinquish jurisdiction in the absence of circumstances demonstrating that the interests of outside customers will be protected is clearly not in the public interest. 40 The Commission 39 The stricken testimony was the statement of the Paul C. Vranesic, the current chairman of the Authority s Board and a former member of the Borough Council. Mr. Vranesic s testimony (Authority Stmt. No. 1), marked to show the stricken portions, was filed electronically in accordance with 52 Pa. Code 5.421a. A copy of the testimony as marked and filed is attached hereto as Appendix I. Mr. Vranesic s testimony, had it been admitted, would have established the following facts: by admission of the Borough Council president, the Borough is broke ; the Borough has recently defaulted on a tax anticipation loan; the Borough recently had a judgment of $1,500,000 (equal to approximately 80% of its annual general fund revenues) entered against it; the Borough will be unable to borrow money or borrow at favorable rates, terms and conditions due to its financial peril and thus adversely affect rates and service; and the Borough s acquisition of the water system will likely result in water operations and outside customers subsidizing other Borough operations and residents. 40 Borough of Phoenixville, Docket No. P , slip op. at 7. Id. (emphasis added). [I]t should be noted that the standard of safe and reliable service at just and reasonable rates is a statutory standard under the Public Utility Code that has been extended by the Code to the extraterritorial customers of a municipal corporation. Commission oversight over the rates and service substitute for the power of the ballot box that extraterritorial customers lack with respect to insideborough operations. Regulatory review of the rates and service to the extraterritorial customers assures that the rates being charged for utility service are based upon those revenues derived from and expenses incurred in providing utility service to the extraterritorial customers. For the Commission to relinquish jurisdiction under the circumstances presented in the Borough s Petition is clearly not in the public interest. 14

22 would fail to discharge its fundamental public interest determination obligation if it did not consider a municipality s ability or fitness to acquire and operate facilities used to provide public water service to outside customers before stripping those customers of the protections of the Public Utility Code, particularly where, as here, the petition is vehemently opposed on the grounds of the municipality s lack of financial fitness. To grant the Borough s petition without even considering the Authority s testimony regarding the Borough s lack of financial fitness would constitute a dereliction of the Commission s statutory duty to protect the outside customers, who will have no recourse either to the court of common pleas (as they do today) 41 or the Commission once the Borough s petition is granted and the water system is transferred. As argued above, the question presented by the Borough s petition is whether, under the particular circumstances of this case, it is appropriate to utilize a less burdensome regulatory oversight scheme to fulfill the requirements of the Public Utility Code regarding [the Borough s proposed] extra-territorial service. 42 The Commission must consider all evidence relevant to whether such oversight is appropriate in view of the circumstances of the case. However, relying on the Commission s declaratory order in Titusville, 43 the ALJ adopted a rigid and incorrect rule that only evidence pertaining to these elements may be admitted and considered by the Commission in determining whether and under what conditions water service customers 41 Pursuant to the Municipality Authorities Act, the court of common pleas has jurisdiction to hear all matters relating to the reasonableness and uniformity of Authority s rates and the reasonableness and safety of the Authority s service. See 53 Pa. C.S. 5607(d)(9). 42 Skytop, Docket No. P , slip op. at 12 ( These municipal corporations extra-territorial services are clearly subject to the Commission s jurisdiction; however, the Commission has determined it is appropriate to utilize a less burdensome regulatory oversight scheme to fulfill the requirements of the Public Utility Code regarding their extra-territorial service. ) (citing 66 Pa. C.S. 1102(a)(5), 1301, 1304, and 1501) (emphasis added). 43 Petition of the City of Titusville for a Declaratory Order that the Provision of Water Service to Isolated Customers in the Townships of Oil Creek and Cherrytree Does Not Constitute Provision of Utility Service under 66 Pa. C.S. 102, Docket No. P , Tentative Order, slip op. (Apr. 23, 2014). 15

23 located beyond the Borough s boundaries (and its electoral franchise) may be deprived of the protections of Commission oversight. The Commission s decision in Titusville cannot, and does not, support such a rule. First, unlike the Borough s Petition, the petition in Titusville was not contested. This means that the legal and factual issues presented by such petitions were not fully and openly vetted in an onthe-record proceeding before the Commission. 44 Second, even if it had been contested, the Titusville declaratory order would not be binding precedent, 45 nor could it legally be treated as a rulemaking proceeding adopting a regulation governing all such petitions. 46 Third, even if Titusville is binding in this case which it is not it does not support the exclusion of the evidence offered by the Authority to prove the Borough s admitted extreme financial distress. As in the other Municipal Corporations Decisions, the fundamental question in Titusville was whether continued Commission regulation was necessary to ensure that the outside customers rates remained just and reasonable. The Commission found that Titusville s undertaking to charge the same rates to outside and inside customers was sufficient to protect the 44 Review of Issues Relating to Commission Certification of Distributed Antennae System Providers in Pennsylvania, Docket No. M , Joint Motion of Commissioner John F. Coleman, Jr., and Vice-Chairman Andrew G. Place at 2 (adopted Jan. 29, 2016) ( [I]t is our understanding that the DAS applications for authority that the Commission previously granted were all uncontested. This means that the legal and factual issues surrounding whether to certificate DAS providers have yet to be fully and openly vetted in an on-the-record proceeding before the Commission. ). 45 Re Duquesne Light Co., 61 Pa. P.U.C. 507 (1986) ( It should be noted that our action here is predicated on the unique factual circumstances before us. It should not be construed as a precedent indicating that routine approval will be granted with regard to future declaratory order petitions by other utilities.... ). 46 Such binding norms i.e., rules of general application can be promulgated only pursuant to the mandatory, formal rulemaking procedures established by the Commonwealth Documents Law, 45 Pa. C.S et seq., the Commonwealth Attorneys Act, 71 Pa. C.S (b), and the Regulatory Review Act, 71 P.S The decisions on unopposed petitions for declaratory orders cited by the ALJ and the Borough clearly do not satisfy these requirements. See Naylor v. Commonwealth, Department of Public Welfare, 54 A.3d 429, (Pa. Cmwlth. 2012) (summarizing statutory requirements for the promulgation of regulations by Pennsylvania agencies). 16

24 outside customers under the circumstances presented in that case. The circumstances of this case are starkly different from those of Titusville: The City of Titusville had provided public water service for decades. 47 Here, the Borough does not currently own or operate the water system or provide public water service. Unlike the Borough here, the City of Titusville was not trying to evade the application requirements of 66 Pa. C.S. 1102(a)(5). The City of Titusville petition was unopposed and the issue of the fitness of a municipality that had been providing extraterritorial service for years without complaint was not raised. Here, the Borough s petition is opposed on the basis of the Borough s lack of financial, technical and legal fitness and ability to provide adequate service at reasonable rates or to maintain safeguards protecting outside customers interests. The Commission s recent Borough of Phoenixville 48 decision confirms that where a petition for an order declaring a municipality s extraterritorial service exempt from Commission regulation is opposed, the factors considered in the Titusville decision relied upon by the ALJ in this proceeding are not exclusive, and the Commission will consider additional factors to determine whether Commission oversight is required to protect the interests of outside customers, such as whether a Borough may be tempted to comingle water system funds with Borough funds or engage in cost sharing and whether ratepayer protection is warranted in general. 49 The testimony and exhibits of Mr. Vranesic that were stricken by the ALJ in this case are directly relevant to such considerations the Borough s parlous financial state provides substantial temptation to commingle water system funds with Borough funds, engage in cost 47 While the Titusville Municipal Authority had owned the water system for most of this time, it was as a financing authority as opposed to a bona fide operating municipal authority. Titusville, 2014 WL at *2 n Petition of the Borough of Phoenixville for a Declaratory Order that the Provision of Water and Wastewater Service to Isolated Customers in Adjoining Townships Does Not Constitute the Provision of Public Utility Service Under 66 Pa. C.S. 102, Docket No. P , slip op. (May 19, 2015). 49 Id., slip op. at

25 sharing, and generally squeeze whatever financial benefit it can out of the ratepayers all of which were factors considered by the Commission in Borough of Phoenixville. The Commission cannot decide whether the Borough s unenforceable promises provide adequate protection to the extraterritorial customers without considering the Borough s financial condition and track record. Similarly, the Commission cannot determine whether issuing the declaratory order sought by the Borough, and thus removing the extraterritorial customers rates and service from Commission oversight and regulatory review, is in the public interest without considering the Borough s financial, technical and managerial fitness. To exclude such evidence in effect to declare that the Commission should ignore the Borough s financial, operational and legal fitness to serve these otherwise jurisdictional customers as well as its ability or inability to maintain safeguards to protect those customers interests would render any public interest determination by the Commission meaningless. The ALJ s failure to admit and consider such evidence in this case requires rejection of the Recommended Decision and denial (or, alternatively, remand) of the Borough s petition. D. Exception No. 4: The ALJ erred by finding that the Borough will not offer water service to additional customers located outside the Borough s boundaries. The ALJ erred by finding that the Borough will not offer water service to any additional customers located outside the Borough s boundaries despite the undisputed evidence of record the contrary (Finding of Fact No. 60), 50 and by finding that the Borough has adopted a resolution to that effect, despite the express words of the resolution in question (Finding of Fact No. 61) The Borough will not offer water service to any additional customers located outside the Borough s boundaries. Borough St. 1, p. 3-4, Borough Ex. C-2. RD at The Borough adopted Resolution (Resolution) which states that the Borough will not offer water service to customers outside its boundaries other than the customers previously authorized by the Authority. Borough St. 1, p. 3-4, Borough Ex. C-2. RD at

26 These findings are completely contradicted by the undisputed evidence of record. First, Borough Resolution does not state that service will be limited to the existing outside customers; it states only that the Borough will not permit additional customer connections. Second, while the Borough has asserted it will not permit any new connections outside its boundaries, it has admitted that it will serve any member of the public who occupies the properties to be served by those connections. Moreover, the Recommended Decision ignores the import of the fact that one-third of the Authority s authorized outside connections are for future customers and future premises. When those residences are built and sold, the new owners will request water service, and the Borough has admitted that it will serve these new, additional customers. The Authority doubts the Recommended Decision would be the same if there were 5,000 new outside customers to be added. However, [t]he private or public character of a business does not depend upon the number of persons who actually use the service; rather, the proper characterization rests upon whether or not the service is available to all members of the public who may require the service. 52 The fact the Recommended Decision and Borough cannot surmount is that the statute does not provide an exemption either for the service currently provided to the members of the public served by the 48 existing outside customers or for the service to be provided in the future to the unidentified customers purchase the homes to be built on the lots served by the 24 authorized future outside connections. If the Borough wants to amend the statute so that it contains such exemptions, then it must address its request to the Legislature, not this Commission. The undisputed evidence of record shows that the Borough will offer service to any member of the public who purchases or leases the properties served by the 48 existing and Waltman v. Pa. Pub. Util. Comm n, 596 A.2d 1221, 1224 (Pa. Cmwlth. 1991) (quoting C.E. Dunmire Gas Co., Inc. v. Pa. PUC, 413 A.2d 473 (Pa. Cmwlth. 1980)). 19

27 future authorized outside connections. Resolution does not state that the Borough will only serve the Authority s current outside customers; to the contrary, it states only that the Borough will not permit any outside connections beyond the 72 outside connections already authorized by the Authority: The Borough will not, unless otherwise directed by a Pennsylvania regulatory agency, permit any new customer connections beyond its municipal boundaries, without prior approval of the PUC; 53 The Borough s witness confirmed on cross examination that the Borough will offer service to any member of the public who purchases or rents the properties served by the Authority s 48 existing and 24 authorized future extraterritorial connections: Q.... Starting in the middle of line 5 [of p.4 of Borough St. 1] you state that the Borough will only offer legacy service to the 72 outside customers authorized for connection to -- authorized for connection before transfer of the water system assets to the Borough.... * * * Q. Now, do you mean by that statement that the Borough will only offer service to customers who own the property the connected property at the time of the transfer, only those individual customers? A. What I mean is that there are properties, developers who have requested service from the Authority who are either now being served or anticipate being served upon completion of the development. Borough Council has expressed to me and publicly their intention to honor all those commitments by the Authority. Q. When one of those developers or other current owners of the properties, the outside properties that are connected sells that property in future years, will the Borough continue to provide water service to the new owner of the property? 53 Borough Ex. C-3 (emphasis added). The RD erroneously cites Resolution as Borough Ex. C-2 in support of Findings of Fact Borough Statement No. 1, which is cited in support of the findings, characterizes Resolution in conflicting terms. 20

28 A. To my knowledge, yes. It will not force any person to disconnect and find a new source of water. It will continue to remain a customer of what is today the Cornwall Borough Municipal Authority's water system. Q. So, is it fair to say then, as you understand it, it is not the Borough s intent to limit the outside customers but rather limit the addition of new outside connections; is that correct? They'll keep the same number of connections and different people may own the property connected, but they won t increase the number of connections; is that right? A. That's my understanding. They will not allow an increase in the number of EDUs by a single connection either. 54 Finding of Fact No. 60 of the Recommended Decision, that [t]he Borough will not offer water service to any additional customers located outside the Borough s boundaries (emphasis added) is thus unsupported and in fact contradicted by both Resolution and the testimony of the Borough s own representative, each of which establishes that the Borough will serve any member of the public who purchases or occupies the properties served by the 48 existing and 24 future authorized outside connections. Similarly, Finding of Fact No. 61, that Resolution states that the Borough will not offer water service to customers outside its boundaries other than the customers previously authorized by the Authority, mischaracterizes both the plain language of the Resolution and the Borough s own interpretation of it. The Recommended Decision turns on the ALJ s determinations that the Borough will not offer service to the general public located outside its boundaries and will not offer water service to customers outside its boundaries other than the customers previously authorized by the Authority. (RD at 32.) The only findings that purport to support those determinations are the erroneous finding that no additional customers will be served and an erroneous reading of the 54 Tr. at (emphasis added). 21

29 Borough s resolution. Therefore, the Recommended Decision should be rejected for lack of record support and the Borough s petition should be denied. E. Exception No. 5: The ALJ erred by recommending that the Petition be granted without providing directly affected persons due process of law. The ALJ bases the Recommended Decision in part on the fact that the Borough s petition has not been protested by any directly affected customers located outside the Borough s boundaries. However, only 47 such outside customers were served with copies of the Borough s petition. A 48th customer, who was connected shortly before the hearing in this matter, 55 was by definition not served, and it appears that the Borough failed to serve the owner of the lots to be served by the remaining 24 authorized outside connections the developer of Alden Place. Furthermore, the Commission s rules require petitions for declaratory orders to be served on all persons directly affected 56 not just customers. The record shows that the Quentin Water Company has relied and continues to rely on the Cornwall water system to provide alternative and backup service to customers located in West Cornwall Township. Since the Borough has declared its intention not to extend service to any new outside connections, granting its petition will directly affect the interests of the neighboring water company and municipality that have relied on such outside connections. Granting the petition would deprive directly affected persons, including but not limited to the recently-connected residential customer, the Alden Place developer, West Cornwall Township and the Quentin Water Company, of their right to be heard on the petition and thus deprive them of due process of law. Since the Borough failed to serve the petition on all persons directly affected as required by the Commission s rules, the petition should be denied for this 55 See Tr. at Pa. Code 5.42(b) (emphasis added). 22

30

31

32 Authority Statement No. 1 BEFORE THE PENNSYLVANIA PUBLIC UTILITY COMMISSION Petition of the Borough of Cornwall for a declaratory order that its provision of water service to isolated customers adjoining its boundaries does not constitute the provision ofpublic utility service under 66 PA C.S. 102 Docket No. P DIRECT TESTIMONY AND EXHIBITS OF PAUL C. VRANESIC ON BEHALF OF THE CORNWALL BOROUGH, LEBANON COUNTY, MUNICIPAL AUTHORITY

33 Authority Statement No. 1 1 Q 2 3 A PLEASE STATE YOUR NAME, BUSINESS ADDRESS AND ON WHOSE BEHALF YOU ARE TESTIFYING. My name is Paul C. Vranesic. My business address is 44 Rexmont Road, Lebanon, 4 Pennsylvania I am testifying on behalf of the Cornwall Borough, Lebanon 5 County, Municipal Authority (the "Authority"). 6 Q PLEASE DESCRIBE YOUR RELATIONSHIP WITH THE AUTHORITY, 7 STATE YOUR CURRENT OCCUPATION, AND BRIEFLY DESCRIBE YOUR 8 BUSINESS AND EDUCATIONAL BACKGROUND. 9 A I am currently the Chairperson of the Board of the Authority. I was first appointed to the 10 Board in January of 2012, and I have been an active member from that time through the 11 present. I have served as Chairperson of the Board since being elected to that position in 12 January of Prior to joining the Authority, I was a member of the Cornwall 13 Borough Council for six years, serving two of those years as Vice President and two as 14 President. I am currently employed as Manager of Market Development for HCR 15 ManorCare. I am a graduate of Juniata College. 16 Q 17 A 18 WHAT ARE THE ISSUES YOU WILL DISCUSS IN THIS TESTIMONY? Specifically, I will discuss the following: The Authority's position in this proceeding with regard to the declaratory order 19 requested by the Borough; 20 Facts and circumstances that are relevant to whether the Public Utility Commission 21 (the "Commission") should exempt from the requirement that it apply for and obtain 22 Commission approval, evidenced by a certificate of public convenience first had and 1

34 Authority Statement No. 1 1 obtained, before proceeding to acquire the facilities used by the Authority to provide 2 public water service to customers located outside the Borough's municipal 3 boundaries; 4 Certain points asserted by Mr. Jeff Steckbeck in the direct testimony he has submitted 5 on behalf of the Authority in this proceeding. 6 Q 7 A 8 WHAT IS YOUR UNDERSTANDING OF THE BOROUGH'S PETITION? It is my understanding that the Borough has asked the Commission to declare that the service currently provided to the Authority's outside water service customers will not be 9 "public utility service" and thus not subject to the Commission's jurisdiction. 10 Q A WHAT IS YOUR UNDERSTANDING OF THE COMMISSION'S JURISDICTION IN THIS MATTER? I am not an attorney, but it is my understanding that the Commission regulates public utility service provided by municipalities to customers located outside of their municipal boundaries. I am advised that this regulation takes several forms under the Public Utility 15 Code. Specifically, it is my understanding that a municipality is required to obtain 16 Commission approval before acquiring facilities used to provide public utility service to 17 outside customers and commencing service. I also understand that a municipality 18 providing service to outside customers generally must comply with certain tariffing and 19 reporting requirements and if it does not its rates charged may be illegal and subject to 20 refund. 21 Q WHAT DOES THE COMMISSION CONSIDER IN DETERMINING WHETHER 22 TO GRANT A CERTIFICATE OF PUBLIC CONVENIENCE ALLOWING THE 2

35 Authority Statement No. 1 ACQUISITION OF FACILITIES USED TO PROVIDE PUBLIC UTILITY 2 3 A SERVICE? Again, I am not a lawyer, and I am not offering a legal opinion. However, for purposes 4 of framing my testimony, it is my understanding that the Commission will grant a 5 certificate of public convenience only after finding or determining "that the granting of 6 such certificate is necessary or proper for the service, accommodation, convenience, or 7 safety of the public." In cases such as this one, involving the transfer of existing utility 8 operations, the Public Utility Code requires the Commission to determine whether the 9 party to whom the assets and service obligations are being transferred is "legally, 10 technically and financially fit." 11 Q 12 MR. STECKBECK'S DIRECT TESTIMONY (AT PAGE 2) SEEMS TO SUGGEST THAT THE BOROUGH'S PETITION IS DIRECTED SOLELY TO 13 COMMISSION REGULATION OF THE BOROUGH'S PROVISION OF 14 SERVICE TO OUTSIDE CUSTOMERS. IS THAT CONSISTENT WITH YOUR 15 UNDERSTANDING OF THE BOROUGH'S PETITION? 16 A No. In its Petition and in its advocacy before the Commission in this matter- 17 specifically, its Preliminary Objections to the Authority's New Matter in response to the 18 Petition-it is clear that the Borough seeks ~o avoid Commission examination of the 19 Borough's acquisition of the water system and whether the Borough is financially, 20 managerially and legally fit to assume such service responsibility, not merely regulation 21 of its provision of service to the outside customers after the acquisition. 22 Q DOES THE COMMISSION TREAT A MUNICIPALITY'S ACQUISITION OF 23 FACILITIES USED TO PROVIDE PUBLIC UTILITY SERVICE TO OUTSIDE 3

36 Authority Statement No. 1 CUSTOMERS SEPARATELY FROM A MUNICIPALITY'S PROVISION OF 2 PUBLIC UTILITY SERVICE TO OUTSIDE CUSTOMERS? 3 A Again, I am not an attorney, but it is my understanding that in the City of Lebanon case 4 the Commission ruled that the question whether a municipality should be permitted to 5 acquire facilities used to provide public utility service to outside customers is separate 6 from the question whether the municipality should be permitted to offer and provide 7 service to outside customers: 8 Approval under 66 Pa. C.S. 1102(a)(5) is required prior to when 9 a municipality, enabled by 53 Pa. C.S. 5622(a), or by any other 10 enabling statute, acquires plant, equipment or facilities from a 11 municipal authority it created and will use such plant, equipment 12 or facilities to provide public utility service beyond its corporate 13 limits in addition to approval to begin to render or furnish public 14 utility service beyond its corporate limits. 15 Re City of Lebanon, 101 Pa. P.U.C. 541 (2006) (emphasis added). 16 Q WHAT IS THE AUTHORITY'S POSITION WITH RESPECT TO THE 17 BOROUGH'S PETITION FOR DECLARATORY ORDER? 18 A It is my understanding based on the advice of counsel that, under the facts of this case, 19 this would contravene the Pennsylvania Public Utility Code. Since the Authority is 20 charged with the stewardship of the water system and may transfer it only after 21 fulfillment of all applicable legal requirements, we oppose the Borough's request because 22 it would facilitate the Borough's acquisition of the water system without first acquiring a 23 certificate of public convenience as required by the Public Utility Code. 24 Q DOES THE AUTHORITY HAVE CONCERNS BEYOND THE BOROUGH'S 25 COMPLIANCE WITH THE PUBLIC UTILITY CODE? 4

37 Authority Statement No. 1 1 A 2 Yes. The Authority is charged with stewardship of the water and sewer projects it owns and with ensuring that its customers continue to receive adequate service at reasonable 3 rates. In light of the Borough's admittedly difficult and worsening financial situation, 4 and its erratic approach to the acquisition, which I describe below, the Authority believes 5 that to allow the Borough to acquire the water system without any Commission review 6 and determination of whether the Borough's acquisition of the facilities at issue and 7 commencement of service outside its boundaries is necessary or proper for the service, 8 accommodation, convenience or safety of customers would pose substantial risks to the 9 financial and operational health of the water system, and thus the adequacy of service and 10 reasonableness of rates of all customers, including those located outside of the Borough. 11 Q WHAT CRITERIA DOES THE BOROUGH BELIEVE ARE DETERMINATIVE 12 OF WHETHER THE COMMISSION SHOULD REGULATE SERVICE 13 PROVIDED BY A MUNICIPALITY TO OUTSIDE CUSTOMERS? 14 A Mr. Steckbeck testifies that based on his understanding of Commission "policies" the 15 "consideration of the following factual circumstances will determine whether service to 16 outside customers rises to the level of public utility service: 1. Number of outside 17 customers[;] 2. Proximity of outside customers to the municipal boundary[;] 3. Whether 18 the municipality holds itself out as a public utility[;] 4. Whether the municipality will 19 continue to connect new customers[; and] 5. Whether the municipality will equalize 20 inside and outside rates[.]" (Steckbeck Direct at 3.) 21 Q BASED ON YOUR UNDERSTANDING OF THE COMMISSION DECISIONS 22 CITED BY THE BOROUGH, ARE THOSE THE ONLY RELEVANT CRITERIA 23 TO BE CONSIDERED HERE? 5

38 Authority Statement No. 1 A No. Again, like Mr. Steckbeck, I am not a lawyer. However, it is my understanding that in all or virtually all of the cases the Borough has cited for this proposition, some or all of the following additional circumstances were present: 1. The municipality was currently providing public water service and had done so for decades; 2. The municipality was already providing a service that was regulated by the Commission; 3. The extensions of service to outside customers had been made where there was no alternative source of service available to the outside customers; 4. The extensions of service to outside customers had occurred in the distant past; 5. No opposition to the petition was filed; 6. The petition was not filed for the express purpose of avoiding the requirement of obtaining Commission approval in the form of a certificate of public convenience before acquiring the facilities used to serve the outside customers; and 7. There was no reason to doubt the municipality's fitness to acquire the facilities or provide the service. 20 Q 21 A 22 DOES THE BOROUGH CURRENTLY PROVIDE PUBLIC WATER SERVICE? No. To my knowledge, the Borough has not provided public water service for at least 20 years. 23 Q A 26 DOES THE BOROUGH CURRENTLY PROVIDE A SERVICE REGULATED BY THE COMMISSION? No. The Borough does not currently provide and, to my knowledge, never has provided a service regulated by the Commission. 6

39 Authority Statement No. 1 1 Q HAS THE AUTHORITY EXTENDED SERVICE TO OUTSIDE CUSTOMERS 2 ONLY WHERE THERE WAS NO ALTERNATIVE SOURCE OF SERVICE 3 AVAILABLE TO THE OUTSIDE CUSTOMERS? 4 A 5 No. The Authority has extended service to outside customers in response to requests whenever it made sense to do so, not because there was no alternative source of service 6 available to the outside customers. For example, the Authority has extended service to 7 locations in West Cornwall where service was available from the Quentin Water 8 Company. Similarly, the Authority has extended service to locations in South Lebanon 9 Township to property owners that already had well service. 10 The Authority has always been open to the prospect of extending public water 11 service; however, for the duration of this proceeding it has agreed not to undertake any 12 requests for new water service outside the Borough. As Ms. Henry explains in her 13 testimony, prior to that agreement, the Authority informed the Quentin Water Company 14 that it would provide back-up service upon that company's request with respect to certain 15 new connections in West Cornwall. In addition, as related by Ms. Henry, in December the Authority offered to extend service to property located in West Cornwall 17 township in response to Mr. Steckbeck's request. 18 Q HAVE THE AUTHORITY'S EXTENSIONS OF SERVICE TO OUTSIDE 19 CUSTOMERS OCCURRED IN THE DISTANT PAST? 20 A No. Most of the Authority's extensions of service to outside customers have occurred 21 within the past 25 years. As set forth in Ms. Henry's testimony, the Authority agreed to 22 extend service to six customers located on Rexmont Road in South Lebanon Township in 23 response to Mr. Steckbeck's request in A seventh customer on Rexmont Road was 7

40 Authority Statement No. 1 1 subsequently added. The construction of the main extension serving the eleven lots 2 located in North Lebanon Township and the 24 located in West Cornwall Township was 3 completed in The Authority agreed to extend service to 28 additional outside 4 customers in West Cornwall Township (3 of which have been built to date) in In 5 addition, as explained in the testimony submitted by Ms. Henry, the Authority's 6 Executive Director, the Authority has recently (a) indicated its willingness to extend 7 service to outside locations in response to a request by Mr. Steckbeck, and (b) offered to 8 function as a back-up to the Quentin Water Company for certain customers located in 9 West Cornwall. 10 Q IS THE BOROUGH'S PETITION UNOPPOSED? 11 A No. The Borough's Petition has been opposed by both the Authority and by the Office of 12 Consumer Advocate. 13 Q WAS THE PETITION FILED FOR THE EXPRESS PURPOSE OF A VOIDING 14 THE REQUIREMENT OF OBTAINING COMMISSION APPROVAL IN THE 15 FORM OF A CERTIFICATE OF PUBLIC CONVENIENCE BEFORE 16 ACQUIRING THE FACILITIES USED TO SERVE OUTSIDE CUSTOMERS? 17 A Yes. Again, it is clear from the Borough's Petition and other pleadings that the Petition 18 was filed for the express purpose of avoiding the requirement of obtaining Commission 19 approval in the form of a certificate of public convenience before acquiring the facilities 20 used to serve the Authority's outside customers. That review would require the Borough 21 establish its financial, managerial and legal fitness. In particular, under either way of 22 proceeding-by the Borough's Petition for a Declaratory Order or by an application for a 23 certificate of public convenience-it would be contrary to sound governmental and 8

41 Authority Statement No. 1 1 regulatory judgment not to consider and weigh heavily the financial condition of the 2 entity that will be responsible for providing this important utility service. Customers 3 deserve that protection and process, whether they are 72 or 72,000-it should not matter. 4 Q IS THERE REASON TO DOUBT THE BOROUGH'S FITNESS TO ACQUIRE 5 THE FACILITIES OR PROVIDE THE SERVICE? 6 A Yes. There is reason to doubt the Borough's legal, technical and financial fitness to 7 acquire and operate the Authority's water system. Therefore, it would appear to be 8 contrary to the public interest and the intent of the Public Utility Code (as I understand it) 9 to grant the Borough's Petition and thus exempt the Borough's acquisition of the 10 Authority's water system from the Commission review and approval required by the 11 statute. 12 Q A WHAT CONCERNS DO YOU HAVE ABOUT THE BOROUGH'S FINANCIAL, LEGAL AND TECHNICAL FITNESS TO ACQUIRE AND OPERATE THE AUTHORITY'S WATER SYSTEM? I have the following concerns about the Borough's financial, legal and technical fitness: I. The President of Borough Council publicly admitted at the start of the Borough's special meeting held at 8:00 a.m. on April 2, 2015, that the Borough is "broke"; my own knowledge of the Borough's financial condition, its financial statements and recent events more than support that characterization. 2. The Borough Council has incorrectly promised water rate reductions on the basis of false assumptions and in the absence of a legitimate, competent rate study. 3. The Borough Council has attempted to prevent the Authority from fulfilling its function as an independent Commonwealth agency, attempting to intimidate Authority officials with misstatements of the law and baseless threats of personal 9

42 Authority Statement No liability for taking any action contrary to the Borough's peremptory commands. 4. The threatening and erratic actions of members of the Borough Council have driven away quality Authority personnel. 5. The Borough Council has demonstrated a disregard for conflicts of interest, or the appearance thereof, by trying to have the Authority pay for construction at the residence of an immediate member of a sitting councilman's family, by permitting said councilman to vote in favor of that effort, and then by appointing said councilman to the Authority Board. 6. Further communications by the Borough have demonstrated a fundamental lack of understanding regarding the long-term capital requirements of a water utility. 14 Q A WHAT DO YOU KNOW ABOUT THE BOROUGH'S FINANCIAL CONDITION? Based on my six years of experience as a member of the Borough Council, I have been involved in many decisions and discussions regarding the Borough's finances. Specifically, in 2008, a discovery was made regarding Lebanon County's collection and distribution of Earned Income Tax revenues for all 26 municipalities and 6 school districts. A decision was then made by the County's new taxing authority, based on certain findings, that the Borough would receive less EIT monies than was projected during the development of its 2009 budget. At the time I had asked Council's then president, Carl Hilton, to reopen the budget and make the necessary expenditure 24 adjustments based on the expectation of fewer revenues. That motion was rejected Instead, Council approved acquiring a tax anticipation loan to cover the gap in revenues. Because the loan was not paid back within the same year, as required by law, the Borough defaulted on the loan and had to go to the Court of Common Pleas for a judgment of relief. The Court gave the Borough 10 years to pay back the defaulted loan 10

43 Authority Statement No. 1 with interest. It is my understanding that debt still exists today. While I do not know the 2 exact remaining amount, I note that according to its latest financial statement and budget, the Borough continues to make payments on this debt at the rate of $30,000 per 4 year. The Borough's General Fund Statement of Revenues and Expenditures - 5 Compared to Budget through August 31, 2015, and its 2015 Budget, which were 6 produced in discovery, are attached hereto as CBMA Exhibit 1.01 and CBMA Exhibit , respectively. The annual payments on this loan are noted on page I 0 of the 8 financial statement and page I 0 of the budget. 9 When I became president of the Borough Council in we worked tirelessly 10 and made difficult choices to bring expenditures in-line with revenues. The result of 11 those actions produced an over $200k year-end cash balance in 20 I1, which was my last 12 year on council. From 2012 to today, the Borough has increased its debts through a I3 $200,000 note to repair a failing bridge, has continually spent more tax dollars than it 14 generates, and, as discussed below, is facing an additional burden in the form of a more 15 than $1.5 million earned income tax recovery judgment. 16 Q DO THE BOROUGH'S FINANCIAL STATEMENTS SUPPORT THE COUNCIL I7 18 A 19 PRESIDENT'S STATEMENT THAT THE BOROUGH IS "BROKE"? Yes. According to page 5 of the Borough's most recent financial report (CBMA Exhibit 1.01), the Borough expects revenues of $1,765, to be collected this year. 20 However, according to page 10, it expects expenditures of $1,885, to be incurred, 21 resulting in a shortfall of $120, for the year. In other words, based on the 22 information provided the Borough's expected expenditures for 2015 exceed its expected 23 revenues. In addition, the Borough's 2015 budget (CBMA Exhibit 1.02), at page 10 of 11

44 Authority Statement No , shows that the year-end balance for 2015 was projected to be $85,713 when the 2 budget was adopted and now is anticipated to be negative $7, The budget shows 3 that that there is not sufficient cash on hand or anticipated to cover the Borough's 4 expenses, which are depicted in the August 31, 2015 financial report, through the end of 5 this year. 6 Q ARE THERE ANY RECENT EVENTS THAT WOULD EXACERBATE THE 7 BOROUGH'S FINANCIAL PROBLEMS? 8 A 9 10 Yes. The Borough is a defendant in an action for recovery of earned income tax ("EIT") revenues that were alleged to be erroneously paid to the Borough and other municipalities in prior years. On July 15, 2015, the Lebanon County Court of Common Pleas entered a 11 verdict of more than $1.5 million the Borough for repayment of earned income tax 12 receipt overpayments and pre-judgement interest. This new financial obligation 13 represents approximately 85% ofthe Borough's expected annual revenues for The 14 Authority asked how the Borough intends to pay this obligation in discovery, but the 15 Borough refused to answer. 16 Q WHAT CONCERNS DOES THE BOROUGH'S FINANCIAL CONDITION 17 RAISE ABOUT ITS FITNESS TO ACQUIRE AND OPERATE THE 18 AUTHORITY'S WATER SYSTEM? 19 A The Borough's financial condition raises three concerns. First, the fact that Borough 20 appears unable to live within its means does not demonstrate the kind of prudent financial 21 management required to maintain, operate and improve a public water system. Second, 22 the deficit spending and resulting need to find additional revenues will put tremendous 23 pressure on the Borough to allocate as many overhead and shared costs to water system 12

45 Authority Statement No. 1 operations and maintenance, thus in effect causing water customers to pay costs that 2 otherwise would be paid by Borough taxpayers. Third, the Borough's poor financial 3 condition will make it more difficult-that is, more expensive-to borrow money to 4 finance necessary capital projects. 5 Q PLEASE EXPLAIN THE SIGNIFICANCE OF THE SECOND CONCERN 6 RAISED BY THE BOROUGH'S POOR FINANCIAL CONDITION - THE 7 PRESSURE TO SHIFT COSTS FROM TAXPAYERS TO RATEPAYERS. 8 A The significance is that requiring water system ratepayers to pay municipal costs results 9 in unfair rates. This is most obvious with respect to the extraterritorial customers. These 10 customers, by definition, do not receive the municipal services enjoyed by Borough 11 residents, nor is the Borough Council answerable to them. If, for example, the Borough 12 shifts Borough shared and overhead costs to the water system, the extraterritorial 13 customers would literally be subsidizing Borough services that they neither receive nor 14 control. In effect, the cost shifting would subject the outside ratepayers to taxation 15 without representation. The unfairness would not be limited to outside water system 16 customers. The 25% of Borough residents who are not customers of the water system 17 will enjoy reduced Borough costs at the expense of the 75% who are. The cost shifting 18 would thus subject customers who are also Borough residents to what amounts to double 19 taxation. 20 Q PLEASE EXPLAIN THE SIGNIFICANCE OF THE THIRD CONCERN RAISED 21 BY THE BOROUGH'S POOR FINANCIAL CONDITION - THE INCREASED 22 DIFFICULTY AND/OR EXPENSE OF BORROWING FUNDS FOR CAPITAL 23 PROJECTS. 13

46 Authority Statement No. 1 1 A Water utilities periodically must fund large capital projects. The Authority has identified 2 a number of such projects that will have to be completed over the coming years, 3 including tank relocation and refurbishing, meter replacement, main upgrades and 4 replacements, pump station overhaul, and hydrant replacement. A list of such Future 5 Projects, which was presented to the Authority Board on August 17, 2015, is attached as 6 CBMA Exhibit A large portion of these projects will be funded by debt in the 7 form of bonds or loans. If the Borough takes over the water system, obtaining the 8 necessary funds will be both more difficult and more expensive. It will be more difficult 9 because the Borough has limited borrowing capacity, and it will have to use a large 10 portion of it to borrow the funds necessary to pay the $1.5 million EIT verdict entered on 11 July 15 of this year. It likely will be more expensive because the Borough's debt levels 12 and deficit spending will likely result in the Borough having to pay higher interest rates 13 than would be available to the Authority. Lenders look to see strong reserves, a forward- 14 looking financial plan and a willingness to raise tax revenues when determining the cost 15 of debt. The Borough has exhibited none of the traits that would secure a high quality 16 debt rating and I would expect to see the Borough have difficulty borrowing funds for 17 any purpose at reasonable rates. 18 Q WHY DO YOU SAY THAT THE BOROUGH COUNCIL HAS PROMISED 19 WATER RATE REDUCTIONS ON THE BASIS OF FALSE ASSUMPTIONS AND 20 IN THE ABSENCE OF A LEGITIMATE, COMPETENT RATE STUDY? 21 A A special meeting of the Board of the Authority was held on March 30, Several 22 members of the Borough Council, including President John Karinch, Vice-President 23 Anthony Fitzgibbons, and the Borough Council's special counsel attended the meeting 14

47 Authority Statement No. 1 1 and participated in discussions with the Board during the public comment period. Also 2 present was Mr. Jonathan R. Beers, P.E. Mr. Beers serves as Consulting Engineer to the 3 Authority. He also is the Executive Director of the City of Lebanon Authority. 4 During the March 30, 2015 meeting, Mr. Karinch and the other Councilmembers 5 were asked about the operation of the Authority's water and sewer systems after they are 6 transferred to the Borough. They stated that the Borough was considering giving the 7 Authority's water distribution system to the City of Lebanon Authority without charge in 8 the hope that it would operate and maintain the system. They also asserted that the 9 transfer of the Authority's water distribution assets to the City of Lebanon Authority 10 would produce rate reductions of at least 11 %. The Council Vice-Chairman stated his 11 belief that there was a study by the City of Lebanon Authority that the transfer may 12 provide a 20% reduction. When questioned, said Vice Chairman stated he was relying 13 upon a study by the Authority's Consulting Engineer. This percentage reduction and the 14 existence of any study was refuted by its purported author, Mr. Beers, who said that he 15 did not do a true study but rather gave an off-the-top of the head response of I 0% to 20% 16 upon an inquiry from someone from or on behalf of Council and that he, Mr. Beers, had 17 qualified his response by saying he would have to do an actual study. The Borough Vice 18 President did not mention these qualifications in his statements to the Board and 19 members of the public present, and would have left those present with the false 20 impression that a formal study existed had Mr. Beers not been present to dispel that 21 impression. 22 The initial comments of the President and Vice President of the Borough Council 23 with respect to projected rate reductions also created the misimpression to the public that 15

48 Authority Statement No. 1 the City of Lebanon Authority had agreed, at least in principle, to acquire and operate the 2 Authority's water distribution system. However, Mr. Beers stated that the City of 3 Lebanon Authority's board of directors "has not even met to consider this." Mr. Karinch 4 subsequently admitted that the Borough had "no formal agreement yet" with the City of 5 Lebanon Authority regarding the Authority's water distribution system. The Vice- 6 Chairman of the Borough did nothing to explain his preference to terminate the Authority 7 other than to say that it makes sense to get rid of the middleman and to criticize the 8 Authority for hiring legal representation, though he himself is a practicing lawyer who 9 presumably represents those, like the Authority, in matters where important legal rights 10 and obligations are at issue. 11 With respect to the effect on rates by a hypothetical takeover of the Authority's 12 water distribution system by the City of Lebanon Authority, Mr. Beers stated that his 13 estimate of an 11% reduction was preliminary and assumed the then-current level of the 14 Authority's rates, but qualified this by stating that the rate would actually be higher for 15 Cornwall customers as it is farther from the Lebanon Authority's core facilities. 16 After the period for public comment, the Authority Board voted to implement its 17 prior intention to pay down certain debts and thus eliminate certain debt charges from its 18 rates. This action resulted in a 13% reduction of the Authority's water rates. Notably, 19 the only vote against the reduction was cast by Mr. Al Brandt, a member of the Borough 20 Council who is not an Authority water customer, and thus does not pay the rates he voted 21 against reducing. 22 Three days later, at a special meeting held at 8:00 a.m. on April 2, 2015, the 23 Borough voted to take over the Authority. During the public comment period, a number 16

49 Authority Statement No. 1 1 of members of the public asked why the Borough was considering this action. Various 2 councilmembers responded that they believed that transferring the Authority's water 3 system to the City of Lebanon Authority would result in rate reductions for the 4 Authority's current ratepayers. The Borough's consulting engineer, Jeff Steckbeck, 5 stated that he had performed a "rate study" demonstrating that a transfer of the 6 Authority's water system to the City of Lebanon would result in rate reductions. 7 In response to questions from the public, Mr. Steckbeck admitted that the "rate 8 study" he performed did not take into account the 13% reduction in the Authority's rates 9 produced by the Authority's decision to eliminate certain debt charges at its March 30, public meeting and that further reductions may not be possible. 11 This "rate study" was not made available to the public before or during the April 12 2, 2015 meeting. When counsel for the Authority asked Mr. Steckbeck for a copy of the 13 "rate study" during the meeting, Mr. Steckbeck told him to file a Right-to-Know request. 14 When counsel did so, the Borough responded that it needed 30 additional days in order to 15 conduct "legal review." When this "legal review" was completed, the Borough refused 16 to provide a copy of Mr. Steckbeck's "rate study" on the ground that it was still a "draft" 17 and "not final." (A copy ofthe Borough's response is attached as CBMA Exhibit 1.04.) 18 The Borough has refused to provide Mr. Steckbeck's "rate study" in response to 19 discovery in both this proceeding and in response to discovery in the Authority's 20 complaint proceeding (propounded before that proceeding was stayed). 21 Q 22 WHY DO THE STATEMENTS OF BOROUGH COUNCILMEMBERS ABOUT SELLING THE WATER SYSTEM AND RATE REDUCTIONS RAISE 17

50 Authority Statement No. 1 1 CONCERNS ABOUT THE BOROUGH'S FITNESS TO ACQUIRE AND 2 OPERATE THE AUTHORITY'S WATER SYSTEM? 3 A Operating and maintaining a public water system requires prudent decisions to be made 4 on the basis of accurate information gathered after careful and thorough investigation of 5 all available facts. The apparent willingness of certain members of Borough Council to 6 make sweeping, unsupported assertions in order to gamer support shows a lack of due 7 diligence and a pattern of jumping to conclusions without facts to reach a predetermined 8 goal. The suggestion by members of Borough Council that they would "give" the water 9 system to the City of Lebanon Authority also displays a complete lack of understanding 10 of the value of the assets comprising the water system and the simple fact that ratepayers, 11 through their rates have supported the acquisition and maintenance of these valuable 12 assets. 13 Q HOW HAS THE BOROUGH COUNCIL ATTEMPTED TO PREVENT THE 14 AUTHORITY FROM FULFILLING ITS FUNCTION AS AN INDEPENDENT 15 COMMONWEALTH AGENCY AND ATTEMPTED TO INTIMIDATE 16 AUTHORITY OFFICIALS? 17 A On March 26, 2015, special counsel for the Borough sent a letter to me and the other 18 members of the Authority's Board, enclosing a copy of the takeover ordinance to be 19 considered at the April 2, 2015 special meeting of the Borough Council. (A copy of the 20 March 26, 2015 letter, without enclosures, is attached as CBMA Exhibit 1.05.) 21 In an attempt to bully the Authority into submission, in this March 26, 2015 letter, 22 the Borough's special counsel stated that following the passage of the proposed ordinance 23 at the April 2, 2015 meeting of the Borough Council, the Authority's "sole purpose will 18

51 Authority Statement No be to take all necessary action to effectuate its termination." Then, citing what I have been advised is a plainly inapplicable provision of the Borough Code relating to the liability of Pennsylvania borough officials for improper expenditure of borough funds, the Borough Council's special counsel threatened the Authority Board members and officials with personal liability for "any expenditure of Authority funds in support of an action that is contrary to the Borough's directives in the Ordinance": Upon the enactment of the Ordinance, the Authority's sole purpose will be to take all necessary action to effectuate its termination. Therefore, any expenditure of Authority funds in support of an action that is contrary to the Borough's directives in the Ordinance is contrary to the limited purpose of the Authority following enactment of the Ordinance. The Borough will seek to recover all funds expended by the Authority in furtherance of such invalid purposes from the Authority's recipients. Furthermore, please be aware that the Borough shall pursue to the fullest extent of the law surcharge actions against all Authority Board members and officials who approve such improper expenditures following the enactment of the Ordinance, and hold them personally liable for repayment of such amounts paid out of Authority funds. See, 8 Pa. C.S (Emphasis in original.) While I am not a lawyer, as President of the Authority's Board it is my understanding that, contrary to the Borough special counsel's unsolicited advice or threat, the sole purpose of the Authority is to perform the duties assigned to it by the Municipal Authorities Act, the first and foremost of which is to protect the integrity of its projects and the interests of its customers. To fulfill that responsibility, the Authority has the power and the responsibility to ensure that all legal requirements are satisfied, particularly those requirements designed to protect ratepayers, before transferring huge financial sums and the keys to a water and sewer system to an admittedly "broke" municipality with none of the legal, technical or financial expertise required to operate a 19

52 Authority Statement No IO II IS I6 I7 I water utility. To suggest that the Authority could tum a blind eye to this responsibility is foolish; to insist that it must do so is ludicrous. On April 2, 20I5, after the adjournment of the Borough meeting, the Borough's special counsel sent another peremptory, bullying letter to the members of the Authority Board, which states, in part: On behalf of the Borough, the Authority is hereby directed to immediately comply with the directives of the Borough as set forth in the Resolution and in the Ordinance,... and immediately begin the process of effectuating its termination. * * * The purpose of the Authority is now expressly limited to conducting activities in furtherance of the Borough's directive to terminate - and we strongly caution you against approving any course of action that is inconsistent with that stated purpose. Ordinance No. I28, enacted by the Borough on January 9, I956 and which authorized the creation of the Authority (and a copy of which is enclosed), expressly reserved to the Borough the right to restrict the activities of the Authority through the enactment of future ordinances. The Borough has done precisely that by the enactment of the Ordinance. Thus, any action you take that is contrary to the directives of the Borough in the Ordinance IS contrary to the Authorities Act, see 53 Pa. C.S. 5612(a.l)(I). (A copy of the April2, 20I5 letter is attached as CBMA Exhibit 1.06.) Contrary to the representations of the Borough's special counsel in his letter to the Authority, the ordinance authorizing the creation of the Authority did not "reserve[] to the Borough the right to restrict the activities of the Authority through the enactment of 27 future ordinances." The ordinance contains no such reservation. To the contrary, the I ordinance directed that the Authority "shall be organized for all of the purposes set forth in the Municipality Authorities Act of I945, and shall have all of the powers granted in said Act." The only "restriction" contained in the ordinance provides that the Authority shall not undertake any projects (a term of art under the Authorities Act) other than 20

53 Authority Statement No. 1 waterworks, water supply works, and water distribution systems. (A copy of Ordinance No. 128 is attached as CBMA Exhibit 1.07.) The April 2, 2015 letter from the Borough's attorney also demanded that the Authority Board seat Councilman Steven Levengood, whom the Borough Council had appointed to replace Katherine Schaeffer, a distinguished member of the community with 25 years of service on the Board. On April I 0, 2015, the Borough filed a quo warranto complaint (among other things) and motion for injunctive relief in the Lebanon County Court of Common Pleas against Mrs. Schaeffer and the Authority Board, asserting that Mrs. Schaeffer was continuing "to purport to serve as a member of the Authority and take actions on behalf of the Authority," that the other Board members were "allowing her to do so," that Mr. Levengood was thus "being denied his seat on the Authority," and that the Board is being denied its "right to choose its appointee for the Board seat." None of that was true. Mrs. Schaeffer had no contact with either Mr. Levengood or the Borough Council since April2, 2015, nor had she "purported to serve as a member of the Board" or taken any actions on behalf of the Authority since that time. Neither Mrs. Schaeffer nor any member of the Board "denied" Mr. Levengood his seat, nor did they deprive the Borough of its appointment right. To the contrary, on April 6, 2015, the first business day after the April 2, 2015 Borough Council meeting, the Executive Director of the Authority sent the following message to Mr. Levengood: 21

54 Authority Statement No. 1 Steve: 2 I understand that the Cornwall Council appointed you as a 3 member of the Authority Board. Welcome! We deliver packets to 4 the board members the Friday before the meeting, usually after 5 noon. If you would like any information about the Authority, 6 please stop by and if you would like a tour of the Authority system 7 we can arrange for a tour. 8 Hope you had a wonderful Easter holiday. 9 Barb 1 0 Mr. Levengood replied the same day accepting the invitation to a tour of the system with 11 thanks. (A copy of this exchange is attached as CBMA Exhibit 1.08.) In light of 12 this exchange, it was evident the Borough had not even bothered confirming its false 13 allegations against Mrs. Schaeffer with Mr. Levengood, who is a member of Borough 14 Council in addition to being newly appointed to the Authority Board. The Borough 15 abandoned its quo warranto claims and provided Mrs. Schaeffer with a written apology. 16 Q HOW DO THESE ACTIONS RAISE CONCERNS ABOUT THE BOROUGH'S 17 FITNESS TO ACQUIRE AND OPERATE THE AUTHORITY'S WATER 18 SYSTEM? 19 A These intemperate and ham-handed attempts to dissuade Authority board members and 20 officials from performing their responsibilities to evidence a disregard for the law and a 21 lack of even rudimentary due diligence before issuing and acting upon threats of legal 22 action-attributes which are obviously incompatible with running a public water system. 23 Q WHY DO YOU SAY THAT THE THREATENING AND ERRATIC ACTIONS OF 24 MEMBERS OF THE BOROUGH COUNCIL HAVE DRIVEN AWAY 25 AUTHORITY PERSONNEL? 22

55 Authority Statement No. 1 A The Authority's employees found out about the Borough's plan to dissolve the Authority through press reports on March 10, No information was provided regarding the employees' jobs after the dissolution. The news came as a shock to the employees, and they expressed substantial anxiety to management about their job security and their ability to provide for their families. The March 26 and April 2, letters from the Borough's special counsel threatening Authority officials with personal liability for fulfilling their duties cast a further pall. As set forth in Ms. Henry's testimony, on or about April 16, 2015, Councilman Anthony Fitzgibbons called the Executive Director of the Authority to request a meeting with Authority employees for the purpose of discussing staffing in the event the Authority is terminated and the water and sewer systems transferred to the Borough. Mr. Fitzgibbons said the Borough would offer the employees their current wages, benefits and titles for one year. He also stated that if the Authority employees were unwilling to meet with the Borough, he would run advertisements for their jobs. The Authority and its employees agreed to Mr. Fitzgibbons' request, and a meeting between the employees and the Borough was scheduled for April 28, 2015 at 6:15p.m. On the morning of April 28, 2015, Mr. Fitzgibbons called the Authority's Executive Director and informed her that the meeting scheduled for that evening had been cancelled by the Borough. No explanation for the cancellation was given. On June 29, 2015, the Authority's two full-time licensed operators gave notice of their intent to resign their positions effective July 10,2015. During exit interviews, these individuals stated that the reason for their departure was the Borough's actions, 23

56 Authority Statement No culminating with Mr. Fitzgibbons' unexplained, last-minute cancellation of the meeting he had scheduled to discuss the continued employment of Authority personnel. Upon receiving this notice, the Authority took a number of actions to ensure continuity and quality of water and sewer service in compliance with applicable requirements, including the following: a. The Authority immediately activated a retired Authority employee with whom the Authority has maintained a consulting arrangement to oversee the day-to-day operations of the water and sewer systems. That reactivated employee and the Executive Director had a series of meetings with the departing operators to make the transition smooth. b. Following the employees' departure, the Authority utilized a licensed operator from its testing service (Pure Test Labs) to collect samples and conduct required testing. c. To ensure the availability of resources in case of emergency, the Authority informed the two entities with which it has mutual aid agreements of the situation (the Borough and the City of Lebanon Authority). d. The Authority immediately commenced a search for qualified personnel to fill the vacancies, on a temporary or permanent basis. e. The Authority informed the Local Department of Environmental Protection ("DEP") Sanitarian for the Authority of the situation. The Sanitarian informed the Authority that it had a ten-day grace period in which to replace the licensed operators after their departure (that is, through July 20, 20 15). f. The Authority interviewed applicants for the licensed operator positions. While the uncertainty created by the Borough's actions discouraged qualified individuals from considering permanent, full-time employment, several firms were willing to provide the licensed-operator functions on a contractual basis. g. On July 14, 2015, the Executive Director of the Authority arranged to have a licensed firm operate and maintain the water and sewer systems, subject to approval by the Authority Board, which was given at a special meeting on July 16,

57 Authority Statement No. 1 1 Having effectively chased off the Authority's licensed operators, the Borough 2 sought to put its own in place. On July 2, 2015, without consulting the Authority, the 3 Borough Council passed a resolution purporting to appoint a member Mr. Steckbeck's 4 engineering firm as the Authority's consulting engineer and an individual associated with 5 that firm as the Authority's licensed operator and directing the Authority to utilize their 6 services. Upon receiving notice ofthe special meeting ofthe Authority Board to approve 7 the hiring of a licensed firm other than the Borough's choice to operate and maintain the 8 water and sewer systems, the Borough Council through its attorney threatened legal 9 action. (A copy of the Borough's attorney's July 16, to the Authority's 10 attorney, and the latter's reply, is attached as CBMA Exhibit 1.09; no such legal action 11 was taken, cooler heads having ultimately prevailed at the Borough.) 12 Q A HOW DO THESE ACTIONS BY THE BOROUGH RAISE CONCERNS ABOUT ITS FITNESS TO ACQUIRE AND OPERATE THE AUTHORITY'S WATER SYSTEM? The Borough's insensitive, hostile and peremptory dealings with the Authority Board and 16 employees resulted in the departure of two valued and experienced employees. The 17 Borough used this unfortunate event to try to appoint its own candidates to fill the 18 vacancies. It did so without consulting the Authority, and when the Authority hired its 19 own candidate the Borough once again resorted to baseless threats of legal action. The 20 Borough's actions demonstrate poor judgment and disregard for the disruption of 21 individuals' lives and Authority operations caused such gamesmanship. 22 Q HOW HAS THE BOROUGH COUNCIL DEMONSTRATED A DISREGARD 23 FOR CONFLICTS OF INTEREST, OR THE APPEARANCE THEREOF? 25

58 Authority Statement No. 1 A The Borough Council has demonstrated a disregard for conflicts of interest, or the IO II I I9 20 2I appearance thereof, by trying to have the Authority pay for construction at the residence of an immediate member of a sitting councilman's family, by permitting said councilman to vote in favor of that effort, and then by appointing said councilman to the Authority Board. On or about March I 0, 20 I5, Stephen N. Danz, Manager of the Borough, sent a letter to Barb Henry, Executive Director of the Authority (copy attached as CBMA Exhibit 1.10), stating in pertinent part as follows: Borough Council at its Mach [sic] 9, 20I5 meeting passed a motion to contact the Authority about replacing the riser at the Levengood residence, 174 Tice Lane. Council felt this was the responsibility of the Authority. The Borough Highway Department will do the paving when weather permits. The cost to the Authority's ratepayers of providing the riser, preparing the site, and installing the riser at "the Levengood residence, 174 Tice Lane," but not including any paving, as requested by the Borough Council, would be approximately $ The "Levengood residence" referenced at the Borough's March 9, 20I5 meeting and its March 10, 2015 letter to the Authority is the property of a member of the immediate family of Borough Councilman Mr. Steven Levengood. The minutes of the March 9, 20I5 meeting of the Borough Council (attached as CBMA Exhibit 1.11) indicate that Councilman Levengood was present throughout the meeting. The minutes do not indicate that Councilman Levengood recused himself from the discussion of "the construction done at the Levengood residence," or that he disclosed that the requested action - provision and installation of the riser by the Authority at its cost - would provide a pecuniary benefit to a member of his immediate family. Similarly, the minutes do not indicate that Councilman Levengood recused himself from the consideration of or vote 26

59 Authority Statement No. 1 1 upon the motion "to send a letter to the Authority asking they [sic] replace the riser" or 2 that he filed a memorandum describing his relationship with the owner of the property in 3 question with the Council's minutes. 4 Q HOW DO THESE ACTIONS RAISE CONCERNS ABOUT THE BOROUGH'S 5 FITNESS TO ACQUIRE AND OPERATE THE AUTHORITY'S WATER 6 SYSTEM? 7 A In addition to ralslng possible issues under state ethics law, providing politically 8 connected customers with additional or better service than that provided to other 9 customers who pay the same rates amounts to unreasonable discrimination in rates and 10 service, and thus violates a fundamental requirement of utility service. 11 Q 12 A DOES THIS CONCLUDE YOUR DIRECT TESTIMONY? Yes. 27

60 Authority Statement No. 1 BEFORE THE PENNSYLVANIA PUBLIC UTILITY COMMISSION Petition of the Borough of Cornwall for a declaratory order that its provision of water service to isolated customers adjoining its boundaries does not constitute the provision of public utility service under 66 PA C.S. 102 Docket No. P EXHIBITS TO DIRECT TESTIMONY OF PAUL C. VRANESIC ON BEHALF OF THE CORNWALL BOROUGH, LEBANON COUNTY, MUNICIPAL AUTHORITY

61 1.01 Borough General Fund Statement

62 SET BOROUGH OF CORNWALL RESPONSES TO CORNWALL BOROUGH MUNICIPAL AUTHORITY S INTERROGATORIES - I DOCKET NO. P Please produce the Boroughs most recent financial statement. Response: Sec Attachment Response Provided by: Jeffrey Steckbeck, President of Steckbeck Engineering & Surveying, Inc. Date: September 11, 2015

63 Borough of Cornwall General Fund Attachment 1-33 Page 1 of 10 Page General Fund Statement of Revenues and Expenditures - Compared to Budget August 31, 2015 Revenues Current Actual %ot Remaining Budget Month Y-T-D Real Estate Property Taxes Real Estate Taxes-Current Year S 543, $ 1, , , Real Estate Taxes-Prior Year 10, (561.28) Real Estate Taxes-Delinquent 1,20 2, (1,550.89) Total Real Property Taxes 554, , , ,03933 Local Tax Enabling Act (Act 511) Taxes Real Estate Transfer Taxes 65,00 4, , , Earned tnc.taxes- Current Year 560,00 77,336.5$ 377, , Earned Inc. Taxes - Prior Year AmusementiGolfCourscTax Local ServicesTax ,00 6, , , Total Local Enabling Act 660,00 88, , , Business Licenses and Permits Health (4) Transient Retailers 5 5 (5) CableTV Franchise 92,00 22, , , Total Business Licenses and Permits 92,24 22, , , Non-Business Licenses and Permits DRIVEWAY PERMITS 20 1, $7.50 (975.00) Total Non-Business Licenses and Per 20 1, (975.00) Fines Vehicle Code Violation w/state 6, , , Violations ofordinance, Etc. 10, , , Total Fines 16, , $ 6, Interest Earnings Interest Earnings Total Interest Earnings Rents and Royalties Rent of Buildings 342,100 RentofEquipment Total Rents and Royalties Federal Capital and Operating Grants Cops Fast Total Federal Capital & Operating Gre State Shared Revenue and Entitlements Property Taxes-Public Utility 1,50 1, Contributions/Donation Private For Management Purposes Only

64 Borough of Cornwall General Fund Attachment (-33 Page 2 of JO Pai,e 2 General Fund Statement of Revenues and Expenditures - Compared to Budget August 31, 2015 Ioii Current Actual %of Remaining M Y-T-D Alcoholic Beverages Taxes $5 $5 100, Foreign Fire Ins. Premium Tax 33, , OTHER STATE PAYMENTS State Payments in Lieu of Tax Total State Shared Revenue 36, $ , For Management Purposes Only

65 Recreation Borough of Cornwall General Fund Attachment 1-33 Page 3 of 10 Page 3 General Fund Statement of Revenues and Expenditures. Compared to Budget August 31, 2015 Total Current Actual %of Remaining Mrmth Y-]D Budeet [.ocal Government Units Capita] and Operating Grants Hwys & Streets(Co Liquid Fuel) 4, , Reimbursements from Authority Lebanon County Drug Task Force 4,75 2, , Total Locat Gvmt Units Grants 8, , , General Government Zoining,Subdivision &Land Dcv 25, , , Zoining Hearing Fees Sale of Subdivision & Land Dev 1 (1) ReimbursementAuthority 6, (6,404.00) Total General Government 25, , , Public Safety Public Safety West Cornwall Township 179,80 127, , MT. GRETNA POLICE SERVICE 38, , , /1 or Special Event Police 380 3, Tf POLICE EQUIP FUND Checkpoint Reimbursement ACCIDENT REPORTS 1,10 9 1, (160.20) REIMBURSEMENT-BRETT-DEA 12,00 1, , , Total Public Safety 235, , , , Highway and Streets Sts, Sidewalk & Curb Permits (235.00) Municipal Authority Jobs (468.48) PA Dept oflrans. Snow Removal Total Highway and Streets (703.48) Culture - Recreation CQM Contribution Park & Recreation Concessions Total Culture - Miscellaneous 380 Miscellaneous Revenues 3.000, , Insurance Dividends 32, , , Total Miscellaneous 35, , , Contribution and Donations from Private Sources Contr. & Donations from 101, , , Total Contrib. & Don Private Sources 101, ]0, , Interfund Operating Transfers Sale of Assets Compensation for Loss on Asset Transfer from Water Fund For Management Purposes Only

66 Borough of Cornwall General Fund Attachment 1-33 Page 4 of 10 Page 4 General Fund Statement of Revenues and Expenditures - Compared to Budget August 3 1, 2015 Total Current Actual %of Remaining Budget Month Y-T-D Budget Budget Transfer from Sewer Fund Transfer from Capital Reserve 1, (1,665.20) Transfer from Recreattion fund Transfer from Hwy - State Aid Transfer from Revenue Sharing TRANSFER FROM CAPITAL PROJ Trans. from Jonestown bank TRANSFER FROM ROCK FUND Police Share Utilities Transfer- Insurance Dividend 5,00 (5.00) Total Interfund Oper. Transfers 6, (6,665.20) For Management Purposes Only

67 Borough of Cornwall General Fund Attachment 1-33 Page 5 of 10 Page 5 General Fund Statement of Revenues and Expenditures - Compared to Budget August31, 2015 Total Current Actual %of Remaining Mth Proceeds of Short-Term Debt Proceeds of Long let-rn Debt RefundsofPriorYearExpenses Total Proceeds of Short-Term Deby Total Revenues S l,765,8t2.0o S 116, S 1,244, , For Management Purposes Only

68 Borough of Cornwall General Fund Attachment 1-33 Page 6 of 10 Page 6 General Fund Statement of Revenues and Expenditures - Compared to Budget August 31, 2015 Expenditures Total Current Actual f Remaining Budget Month Y-T-D Budggt Budget General Government SalaiyofSecretaty $ 73, $ 4, , , Janelle/Secretary 26, , , , Supplies 6, , , Communication 3, , , Adv. Printing& Binding 2,00 $ , Insurance & Bonding 53, , , ,07 10, Public Utility Services 8, , , Repairs & Maint. Services 4, , , Rentals Bank Service Charge Computer Equipment 3,30 5, (1,918.20) Total General Government 180, , , , Executive SalaiyofMayor Total Executive Financial Administration Prof. Services - Auditor 7,80 7,80 10 Total Financial Administration 7,80 7,80 10 Tax Collection Salary of Tax Collector Supplies - Tax Collector 1,30 2, (837.42) tns. Bonding-Tax Collector keystone FEES 7,50 5, , Total Tax Collection 8,80 7, , Law Salary of Solicitor Other Professional Services 10,000, , , legal Defense Fund 75,00 43, , (31,981.56) McNees Wallace & Nurick 45, , (67,437.10) Total Law 85,00 89, , (93,776.16) Engineering SaluryofEngineer 40, , , Engineering- MS4 Storm Sewer 15, , , Engineering- Snitz CreekReal 10,00 6, , Total Engineering 65,00 1, , , Public Safety SalaryofChicf 94, , , , Salary of Sergeant 97, , , , Wages of Patrolman 370, , , , Crossing Guard For Management Purposes Only

69 Borough of Cornwall General Fund Attachment 1-33 Page 7 of 10 Page 7 General Fund Statement of Revenues and Expenditures - Compared to Budget August 3 I Total Current Actual %of Remaining Budget Month Y-T-D jgggj CarWasher 4, , Police Secretary 29, , , , Personal Services Supplies - Office Forms - Office Small Office Equipment Vehicle Fuel 18,50 1, , ,39 8, Uniform Supplies & Replacement $ Other Operating Supplies Annunition & Range Supplies Minor Equipment Purchases Major Equipment Purchases 2, $ 25,54 1, Training/Education Communications Telephone 4, , , Radio Equipment Maintenance Radio/Dispatching/Comm. Fees 2, , , (0.40) Insurance & Bonding Vehicle Maintenance Vehicle Maintenance-Equipment Vehicle Maintenance 4, $ 2.$ , Vehicle/Tires/Alignment 1, $ Other Vehicle Expense 1, Dues, Subscription, Membership Laundry & Other Sanitation Ser , , Meetings& Conferences Humane Society Police Program Exp Community Relations Total Public Safety 638, , , , Fire EMA Director Contribution, Grants&Subsidies 18, , , Foreign Fire tnsurance 33, , Workmens Comp- Cancer 12, , , Insurance - Fire Vehicles 1, , Ambulance/Rescue Planning and Zoning Total Fire 65, , , , Total Ambulance/Rescue Total Planning and Zoning Health/Sewers SalaryofSecyIBoardofHealth Total Health/Sewers For Management Purposes Only

70 Borough of Cornwall Gcncral Fund Attachment 1-33 Page Page 5 General Fund Statement of Revenues and Expenditures - Compared to Budget August 31, 2015 Total Current Actual %of Remaining Month Y-T-D Budget Hiphwa Maintenance - General Services Salary of Supervisor 59, , , ] Salaries & Wages I ,00 10, , , Supplies 14, , , Fuel. I.ight & Water 24, , , Communications Expense 2, , Repair& Maint. Services 15,00 1, , , Total Hwy Maint - Gen Serv 265, , , $8, highway Maintenance- Cleaning of Streets and Gutters Salaries & Wages Rentals Total Hv.y Maint-Cleaning Sts Highway Maintenance - Snow and Ice Removal Snow& Ice Removal Total Hwy Maint-Snow & Ice Rmvl 0,00 Highway Maintenance - Traffic Signals and Street Signs Salaries & Wages 0,00 0, Supplies 8, , Total Hsy Maint-Traffic Signals & St 8, , l-lighway Maintenance - Street Lighting Public Utility Service 36,00 2, , ,605,24 Total Hwy Maint-St. Lighting 36,00 2, , , Kighwgy Maintenance - Storm Sewers and Drains Salaries & Wages Storm Sewers & Drains 7, , Total Hwy Maint-Storm Sewer & Drai 7, , Highway Maintenance - Repair of Tools and Machinery Salaries & Wages Repairs & Maint. Supplies Repairs & Maint. Services 0,00 Total Hwy Maint-Rpr Tools & Mach 0,00 Highway Maintenance - Maintenance/Repairs to Hwvs. and Bridges Salaries & Wages Supplies 20,00 2, , , Rexmont Road Bridge Snitz Creek - Realignment 30,00 30,00 Total H.y Maint-Hsys & Bridges 50,00 2, , ,728.1$ for Management Purposes Only

71 Borough of Cornwall General Fund Attachment 1-33 Page Page 9 General Fund Statement of Revenues and Expenditures - Compared to Budget August31, 2015 Total Current Actuat %of Remaining Y.T-D F-Lighway Construction and Rebuitding Sataries & Wages Suppties Total Const. & Rebuilding Participant Recreation Satades& Wages 7,00 0,00 7, Supplies 6, , $ Contracted Services Total Participant Rec. 13, , , libraries Contrib. Grants, & Subsidies Total Libraries Conservation of Natural Resources Contracted Services Total Conservation-Natural Resources Miscellaneous Expenditures and Expenses Tax Anticipation-Principal FULTON -PRINCIPAL Tax Anticipation-Interest Ft/LION - INTEREST Issuance Costs 480 Miscelleneous Expenditures 1,00 3, , ( ) Total Misc. Expend. & Exp. 1,00 3, , (3,367.57) Pension Pensions Contributions 101, , Total Pension 101, , Unemnloment Compensation Unemployment Compensation 12,00 8, , Total Unemp. Comp. 12,00 8, ,211.9$ Employee Benefits Social Security Contributions 68, , , , Medicare/Employer Share Total Employee Benefits 68, , , , Employee Withholdings Hospital & Medical Ins. Prem. 167, , , , Transitional Reinsurancc fee 20,00 1, ,073.2$ , Total Employee W/H 187, , , , For Management Purposes Only

72 Borough of Cornwall General Fund Attachment Page of 10 Page: 10 General Fund Statement of Revenues and Expenditures - Compared to Budget August31, 2015 Total Cun-ent Actual %of Remaining Budget Month Y-T-D Budget Budget Vacation, Sick Leave, Holidays, Etc Vacation, Sick I,eave, Holidays Total Vac, Sick, Holiday Leave 000 lnterftind Operating Transfers Transfer to Water Fund Transfer to Sewer Fund Transfer to Capital Reserve Fd Transfer to Highway Aid Fund 0, Transfer to Building Fund Transfer to Capital Project Fd Loan Payoff 10 Years 30,00 14, , Transfer to H & K Escrow Transfer to Legal Defense Transfer to Insurance Dividend 32, , Transfer to Rt 72/419 Fund Transfer to Equip Fund 20,00 20,00 Total tnterfund Operating Transfers 82, , , Total Expenditures 1,885, , ,215, , Net Fund Balance $ (120,177.00) $ (90,407.72) $ 29, (24.64) (149,785.55) For Management Purposes Only

73 1.02 Borough Budget

74 BOROUGH OF CORNWALL RESPONSES TO CORNWALL BOROUGH MUNICIPAL AUTHORITY S INTERROGATORIES - SET I DOCKET NO. P Please produce the Borough s 2015 budget. Response: See Attachment Response Provided by: Jeffrey Steckbeck, President of Steckbeck Engineering & Surveying, Inc. Date: September 11, 2015

75 2015 Current Year to Estimate Acct No. Classification Actual 2013 Actual 2014 Budget Date 8/ Request Reviewed CASH BALANCE 183, , ,89 158, , Current Total - Real Estate 503, , , , , Current Prior Total - Enabling Tax 653, , ,00 430, , Total - Amusement Tax , , , WORKING BUDGET GENERAL FUND REVENUES Attachment 1-35 Page 1 of Real Estate Tax Real Estate - 488, , , Real Estate - Prior 1 3, , ,00 10, Real Estate- Delinquent 2, , ,20 2, , Local Enabling Tax Real Estate Transfer 86, , ,00 43, , Earned Income - 566, , ,00 387, , Earned Income AmusementlAdmissjons Tax AmusemenUGolf Course Local Services Tax Local Services Tax 34, , ,00 25, ,00 - Total - Local Services Tax 34, , , , Licenses & Permits Health Transient Retailers Cable 1V Franchise 92, , ,00 66, ,00 - Total - Licenses & Permits -- 85, , Non-Business LicenselPermit Dilveway Permits , , _-- Total - Non Business LiclPermit M0 20 1, ,

76 Interest State Total - Local Gov t Units 50, , , ,051.61, 8, Attachment WORKING BUDGET GENERAL FUND REVENUES Page 2 of Current Year to Estimate cct No. Classification Actual 2013 Actual 2014 Budget Date ReQuest Reviewed 331 Fines Page Vehicle Code-Violations 7, , ,00 3, , Violations of Ordinances 12, , ,00 6, ,00 - Total - Fines 19, , ,00 9, , Interest Earnings Interest Total Rents and Royalties Rent of Buildings Rent of Equipment Total Rents and Royalites State_Shared Revenues Property Taxes (PUG) 1, , , Contributions/Donation_Private - 1, Alcoholic Beverages Taxes Foreign Fire Insurance 34, , , Other State Payments 17, , State Payments in Lieu of Tax - Total - Shared Revenues 54, , , , Local Government Units County Liquid Fuel Grant 47, , ,112,00 4, W.Cornwall Twp Contr Mt. Gtetna Born. Contr Reimbursements from Authority Lebanon_County Drug Task Force 3, , ,75 2, ,75 -

77 , Total WORKING BUDGET GENERAL FUND REVENUES Attachment 1-35 Page 3 of 19 : Current Year to Estimate cct No. Class ificatjon Actualv 2013 Actual 2014 Budget Date Request Reviewed 361 General Government Subdivision Fees , ,00 8, , Sale of Subdivision & Land Devel Reimbursement Municipal Auth 7, , , , Total - General Government 31, , ,00 15, , Public Safety Public Safety West Cornwall Police Services 164,30 171, ,80 127, , MtGretna Police Services 35,70 45, , , , Off or Special Event Police 10, ,80-3, IF Police Equipment Fund (5,662.07) 2, Checkpoint Reimbursement Accident Reports 1, , ,10 1, , Reimbursement- Brett- DEA 17, , ,00 6, , Public Safety - - Total - Public Safety 223, , , , , Highways and Streets Sts, Sidewalks & Curbs Municipal Authority Jobs Total - Highways & Streets Culture - Recreation CQM Contribution - Culture - Recreation Miscellaneous Revenues Miscellaneous Revenues 5, , ,00 2, , Insurance Dividend 40, ,414.68_ 32, , , Total - Misc. Revenues 45, , , , , Contributions & Donations Contributions & Donations 113, , , , ,

78 Total -Contributions 113, , , , , Total - Proceeds of Short Term Attachment 1-35 Page 4 of 19 Total - Revenues 1,887, ,778, ,765, ,244, ,765, Total-Revenues& - Cash on Hand 2,070,650.59[ 1,909, ,971, ,402, ,923, Page 4 WORKING BUDGET GENERAL FUND REVENUES 2015 Current Year to Estimate cctno. Classification Actual 2013 Actual 2014 Budget Date Request Reviewed 392 lnterfundltransfers Compensation fo Loss on Asset Transfer from Capital Reserve Fund Transfer from Recreation Fund - 1, , Transfer from Highway Aid Transfer from Capital Projects 49, Transfer from Jonestown Bank Transfer from R.O.C. Fund Police Share - Utilities Ins. Divedend Fnd. 15,00 - Total - Transfers 64, ,00-6, , Proceeds of Short-Term Debt ProceedsofLong Term Debt Refunds of Prior Year Expenses

79 Attachment 1-35 PageS of Reviewed 401 Executive Salary of Mayor Total - Executive Financial Administration Audit 8, , ,80 7,80 7,80 0,00 0.Oo Total - Financial Admin. 8, , ,80 7,80 7, Working Budget General Fund Expenditures cct No. 1 - Classification Actual 2013 Actual Current R idnt Year to Date Estimate Request 400 General Government Salary of Secretary Salary Supplies Communication Expense Advertising & Printing Insurance Public Utility Maintenance & Repaits Computer Equipment 69, , , , , , , , , , , , , , , ,00 3,00 3, , , ,00 1, , ,980O 43, , , ,00 4,00 6, , ,30 5, , , ,00 2,60 2,Ô0 55,001 8, Total-General_Government 194, , , , , Tax Collection Sary- Tax Collector Supplies 1, ,30 2, , h,surance & Bonding Keystone Fees 6, , ,50 5, ,50000 Total-Tax Collection 8, , ,80 7, , Law Salary - Solicitor Other Professional Services 8, , ,00 4, , Legal Defense Fund 46, , ,00 106, , McNees Wallace 67, , Total-Law 54, , ,00 178, , Engineer Salary-Engineer 38, , ,00 34, , Engineering - MS4 Storm Sewer 15,00 7, ,00 - Engineering - Snitz Creek Realign 10,00 6, ,00 Total-Engineer 38, ,171.16l 65,00 48, ,001

80 638, Attachment 1-35 Wo knbudet..2o1 6.Generalf..u id Exnendit rs Page 6 of 19 cct No Salary-Chief Salary Patrolman Crossing_Guard Car Washer Secretary , Small Office Equipment Vehicle Fuel Uniform Supplies i [ t350 Public Safety Supplies - Sergeant Office Forms - Office?40 Other Operating Supplies 41 Ammunition Supplies 60 Minor Equipment Purchase 61 Major Equipment Purchase [ [ Training/Education Communications Telephone Radio Equipment Maintenance Radio Dispatch Comm. Fee Insurance/Bonding Vehicle Maintenance Repairs/Maint._Equipment Vehicle Maintenance Vehicles/Tires/Alignment Other Vehicle Expense Dues, Subscriptions,Member. 410 Classification Actual 2013 Actual , , , , , , , , , , , , , , , , , Meetings & Conferences Humane Society Pohce Program Exp Community Relations , c 4, , , Current Budget 94, , , ,00 29, aoo.oo ,50 90 Year to Date 9( , , , , , , , , , , ,30 1,00 1, , , , ,00 Estimate , , , ,00 29, , , , , ,30 1, ,50-2,50 Request óöb Page 2 Reviewed Total - Public Safety 581, , , ,

81 . Foreman Fire Attachment Snow & Ice Removal Salaries&Wages Salt_- Anti-Skid. Page 3 Wo cifl [ Budget General Fu d Expendit res - Page 7 of 19 cct No Current Year to Estimate Fire Classification Actual 2013 Actual 2014 Budget Date 9/ (31/2015 Request Reviewed EMA-Personnel Contributions 27, , , , Foreign Fire Insurance 34, , ,815.00! 33, WorkmensComp-Cancer 12, i insurance Total - Fire Vehicles 1, , , , , , Health Salaries : 60 Total Health ! ! Public Works - Highway jsala y ]Salaries&Wages 131, , , , , , , ,99 42, , ]Supplies 13, , ,00: 6, , jfeI, Light& Water 21, , ,00 16, , Communications 1, , ,00 1,359.07: 2, Maintenance& Repairs 11, ,612.43, 15,00 7, ,00 Total - Public Works 237, , , , , Highway Maintenance Salaries&Wages Total - Highway Maintenance -., Total - Snow & Ice Removal! 433 Street Signs & Markings Salaries& Wages : Supplies 1, , ,00

82 Attachment 1-35 Page 8 of 19 WQtkki Ted ei6enerai Fund E41tes , , , , Page 4 Classification 2015 Current Year to Estimate cctNo. Actual 2013 Actual 2014 Budget Date /2015 Request Reviewed 434flFüghti Street Lighting ,00 - Total - 35, ,00 22, ,00 Lighting ih Storm Sewers 48 Salaries & Wages Supplies - Total - Storm Sewers , ,00 2, , , Repairs of Tools Salaries & Wages Repairs & Maint Supplies Repair & Maintenance Service Total - Repairs of Tools 438 Highways & Bridges Saries& Wages 8, , orSupplieslConstruction 15, , ,00 8, , Rexmont Road Bridge 181, , Snitz Creek- Realignment 30,00 18, Salaries & Wages Total - Hwys & Bridges 204, , ,00 8, , Recreation Salaries & Wages 5, , , Supplies 8, , ,00 5, Total - Recreation 13, , ,00 5, , Libraries Contributions Total - Libraries Conservation of Natural Res Contracted Services Total Gypsy Moth

83 -- 146, , , Attachment 1-35 Wo kipudget General Fuid ExpenditL$re. Page 9 of 19.cct No PageS Current Year to Estimate Classification Actual 2013 Actual 2014 Budget Date Request Reviewed 471 Misc Expenditures & Expenses Tax Anticipation Fulton Tax Anticipation Fulton - Principal Interest Principal J o.oof o.oo Interest Issuance Costs Miscellaneous ,00 4, , Total - Miscellaneous 2, , ,00 4, , Pension Contributions Pension Contributions 146, , , , Total - Pension Contrib , , , UIC Fund Contributions Unemp. Comp. Fund 10, , ,00 8, ,00 Total - UIC Fund 10, , ,00 8, ,00 OMO 487 FICA Contributions FICA 63, , , , , Medicare Total - FlCNMedicare 63, , , , Hospital & Med Insurance 488j00 Hospital & Med Insurance 184, , , , , j01 Employee Deductible 20,00 12, ,00 Total - Insurance 184, , , , L Vacation, Sick Leave Vacation, Sick Leave ooo Total - Vacation, Sick Leave

84 ,943, ,751, ,885, ,215, ,931, Attachment 1-35 Page 10 of 19 jn ibudget2oisg.encrai Fuid Exoenditóres I -. cct No, Page Current Year to Estimate Classification Actual 2013 Actual 2014 Budget Date 9130/15 12/31/2015 Request Reviewed 492 Interfund Operating Tran Tran. To Capital Reserve Tran. To Motor License Tran. To Building Fund Loan Payoff- 10 Years Transfer to H & K Escrow Transfer to Legal Defense Transfer to Ins Dividend Fund Transfer to Rt 72/419 Fund Transfer to Equipment Fnd. Total - Interfund Tran. 6, , Iran. To_Capital Project 4, , , , , , ,00 32, , ,00 17, ,00 20,00 74, , , , Balance-End of Period I 126, , , ,045.53, -7,

85 Balance - End of Period l7,64l.5j 12, Attachment 1-35 Page 11 ofl9 WQtinBndget2DI&CapftaLP.rijectsFun 2015 Current Year To Estimate Acct No. Classification Actual 2073 Actual 2014 Budget Date 9130/15 1 2I31!2015 Request Reviewed CASH BALANCE 57, , , Receipts Interest k TF General Fund 4, TF Municipal Authority 2, , Miscellaneous 000 Total-Receipts 2, , Total -Cash on Hand 59, , , Expenditures ] J Transfer to General Fund 49,00 I Backhoe Radio Communications Miscellaneous Total - Expenditures 49,00

86 1 Attachment 1-35 Page 12 of 19 Wor cirig_buduet 2016 Motor License Fungi - 20l5Current YearTo Estimate AcctNo. Classification Actual 2013 Actual 2014 Budget Date /2015 Request Reviewed CASH BALANCE 97, , , Revenues 00 Interest 05 Liquid Fuels Miscellaneous TF General Fund Total - Revenues , , , , , , ] Total - Revenues & Cash 221, , , Expenditures Minor Equipment Purchases Equipment Purchase 432 öö Snow & Ice Removal Street Lighting Maintenance and Repairs Highway & Bridge Expense Highway Construction 480 óöiscelieneous Transfer to General Fund Total -_Expenditures 11, , , , , , ,00 30, , , , , ,00 53, ,00 137, Balance 89, , ,082.00

87 Attachment 1-35 Page 13 of 19 Balance 0.79: 6, , j 2015 WQr iph Budget Capital Reservk Fund _f Year to Estimate Acct No. Classification Actual 2013 Actual 2014 Budget Date Request Reviewed CASH BALANCE , Revenues Interest 0.79: Deposit IF General Fund 100 1,00 Total-Revenues , , F- Revenues & Cash on Hand ,62766T 7, Expenditures Tran. To General Fund Office Computer 1,40 Total - Expenditures 1,40 -

88 0.OOj 2016 Attachment 1-35 Page 14 of 19 WrmäBud2OiLRecreatkFu nd Acrt. No. Classification Actual 2013 Actual Current Rudaet Year to Date Estimate 12131)2015 Reanest 2016 Reviewed Cash Balance Revenues lnterest Subdivision Recreation Fee Miscellaneous Total - Revenues Total - Cash on Hand Expenditures Back Stop/Lighting Hockey RaHs to Trails Electric - - iplaground Equip Basketball/Poles Transfer to General Fund Service Fee Ballfield Maintenance Total - Expenditures 00 W - ; I Balance - End of Period L - O.00

89 Attachment 1-35 Page 15 of 19

90 TF 2016 Attachment -35 Page 16 of 19 A BI C D E F G H I Year to Estimate cct No. Classification Actual 2013 Actual 2014, Budget Date Request Reviewed 3 CASH BALANCE 6, I 5 irevenues finterest 1.83, General Fund 6, ,000.OOj 2O,000O -. 0O Total - Revenues 6, , , Total - Cash on Hand 14 6, , , Expenditures 17 Line Painting Truck Payment Total - Expenditures 21 6, Balance-Endof Period 6, , , OOi

91 A B C D E F G H I I J H Attachment 1-35 Page 17 of 19 Working Budget Insurance Dividend Fund Current Yearto Estimate cct No Classification Actual 2013 Actual 2014 Budget Date Request Reviewed 4 CASH BALANCE 24, , Revenues Interest TF General Fund 39, , , Total - Revenues 39, , , o.oo Total - Cash on Hand 39, , , OÔ o.ool o.oo Expenditures 18 General Fund 15, Total - Expenditures 15, Balance - End of Period 24, , , oO

92 11/12/1965 7/12/ Playground - Position Playground H $33.55 $50, $ $1711 Attachment 1-35 Page 18 of 19 Cornwall Borough 2007 Wages for Non-Uniformed Employees and Chief Employee D.OM. Current Type Hourly Hourly Rate Salary Salary Harris, Bruce -- 12/1/1974 Chief S $69, $71, $72, Danz, Steven 6/11/1979 Manager S $26.78 $55, $57, $57, Salem, Janelle 9/16/1997 Admin. Assistant H $12.57 Burns, Stephanie 1/1/2007 Police Secretary H $12.03 $12.95 $13.07 $1239 $12.51 Smith, Thomas - Highway Supt. S $ $51, $5Z28454 Carpenter, Glenn 614/1969i Laborer H $18.64 $19.20 $19.39 Paul, Ron 4/23/1 979 Laborer H $17.10 $17.61 $17.78 Smith, Brian 11/20/2000 Laborer H $17.10 $17.61 $17.78 Oram, Kyle P/T Highway H $8.11 $8.35 $8.43 Smith, Tom P/T Highway H $8.11 $8.35 $8.43 Danz, Mark P/T Highway H $8.11 $8.35 $6.43 Dissinger, Paul - - Playground $1,00 Bamberger, Katie H $7.50 Flick, Hillary Playground H $7.50 Umbergerger, Laura Playground $7.50 Yearwood, Elizabeth -- H $7.50 Hartman, Emily Car Washer H $ $8.43 Finicle, Rick -. PIT Police H $16.61 $17.27 Peebles, Bob PIT Police H $16.61 $17.11 $17.27 PoliceI200B Rate-Per Contract Bender, Greg 12/1 9/1 995 Patrolman S $23.92 Conklin, Jim 3/1 0/1 997 Patrolman S $23.92 Hopkins, Brett 4/14/1986 Seargent S $28.39 Miller, Candace - Patrolman S $22.79 Perry, Danielle 2/13/2006 Patrolman S $22.79 Swgert, Ryan 5/8/2000 Patrolman S $23.92 Troxefl, David 2/9/2004 Patrolman S $22.79

93 Attachment 1-35 Page 19 of 19 Employee D.O.H. Current Type Position Hourly Hourly Rate Salary Salary Police Rate - Per Contract Bender, Greg 12/ Patrolman S $25.63 $25.63 $26.63 $27.83 Conklin, Jim 3/10/1997 Patrolman S $25.63 $25.63 $26.63 $27.83 Hopkins, Brett 4/14/1986 Seargent S $30.13 $30.13 $31.34 $32.75 Miller, Candace 7/12/2004 Patrolman S $25.63 $25.63 $26.63 $27.83 Sweigert, Ryan 5/8/2000 Patrolman S $25.63 $25.63 $26.63 $27.83 Troxell, David 2/9/2004 Patrolman S $25.63 $25.63 $26.63 $27.83

94 August 17, CBMA Future Projects

95 root CORNWALL BOROUGH MUNICIPAL AUTHORITY August 17, 2015 FUTURE PROJECTS WATER Estimated Cost Cold Springs Tank relocate or refurbish line $500,000 Refurbish line 5,750 feet Repair line Rts. 72/322 (600 feet) PAX tank Mixers $26,000 Replace meters and add MXUs (remote read units) $495,000 Upgrade main at Cornwall Center (5,825 feet) $700,000 From Blue Bird to Sacred Heart Church to Elementary School and end at BGPS Abandon line behind Dr. Yocums thru Coleman Estate Overhaul pump stations $175,000 Generator rebuilds Pump upgrades to variable frequency motor drives Replace electronics Chlorinator replacements Vulnerability study 186 residents short of required $15,000 Replace Smith hydrants with Darlings - Smith s 45 UGP =18 $1,500/each $95,000 Water main replacements of lines installed prior to 1965 (11 miles) $6,400,000 Right-of-way clearing $20,000 Valve location and documentation program 284 remain $50,000 Allocation Permit (reapply) $10,000 $8,486,000 SEWER Reseal watertight manholes $15, unsealed currently 48 more needed unsealed from jetting/tv work Televise/jet remaining sewer system (29 miles) $450,000 Right-of-way clearing issues as identified by televising $100,000 Repairs pin-pointed from televising $300,000 Sewer extension on Ironmaster Road (4,700 feet) $425,000 Grease issues/illegal industrial pretreatment $20,000 $1,310,000 TOTAL $9,796,000

96

97 1.04 Borough response to right-to-know request

98 BOROUGH OF CORNWALL 36 Burd Coleman Road P.O. Box 667 Cornwall, Pennsylvania Phone (717) Fax (717) Website: May 8,2015 VIA ONLY: Christopher M. Arfaa Hawke McKeon & Sniscak, LLP P.O. Box 1778 Harrisburg, PA RE: April 3, 2015 Right to Know Request Dear Mr. Arfaa: The undersigned, the Open Records Officer of the Borough of Cornwall, is in receipt of your April 3,2015 Right to Know request seeking the following: The rate study relating to the Cornwall Borough, Lebanon County, Municipal Authority ( Authority ) performed for the Borough of Cornwall ( Borough ) by Jeff Steckbeck and cited by Mr. Steckbeck at the public meeting held by the Borough Council on April 2, All records of communications, including but not limited to messages, between Borough councilmembers, officials or employees and Jeff Steckbeck, and all documents provided to or received from Mr. Steckbeck, relating to the Authority or its water system or sewer system. All records of communications, including but not limited to messages, between Borough councilmembers, officials or employees and Jonathan Beers, and all documents provided to or received from Mr. Beers, relating to the Authority or its water system or sewer system. All records of communications, including but not limited to messages, between Borough councilmembers, officials or employees and any board member, official or employee of the City of Lebanon Municipal Authority, relating to the Authority (i.e., the Cornwall Borough, Lebanon County, Municipal Authority) or its water system or sewer system. The complete minutes of the meeting of the Borough Council held on March 9, 2015, together will [sic] all memoranda or other documents filed with the minutes, and all documents considered by the Council at said meeting.

99 Document(s) memorializing the terms of the engagement of the law firm of McNees, Wallace & Nurick LLC by the Borough in connection with the Borough dissolving the Authority. All insurance policies providing coverage for the Borough or its council members, officials or employees for civil rights violations. Your request has been granted in part and denied in part as follows. Your request for the rate study has been granted in part and denied in part, and the sewer rate study is attached. However, as your request pertains to any water rate study, same is denied pursuant to Sections 708(b)(9) and/or 708(b)(11) of the Right to Know Law. Pursuant to Section 708(b)(9), drafts of bills, resolutions, regulations and the like are exempt from access; any documentation related to or considered to be a water rate study is not final and as such is denied. Further, the rate study is a confidential document. In accordance with Section 708(b)(1 1), records containing or revealing confidential proprietary information are also exempt from access and any request for same is denied. Pursuant to Section 703 of the Right to Know Law, your requests for all communications between Borough councilmembers, officials or employees and Jeff Steckbeck, and all documents provided to or received from Mr. Steckbeck, relating to the Authority or its water system or sewer system; all communications between Borough councilmembers, officials or employees and Jonathan Beers, and all documents provided to or received from Mr. Beers, relating to the Authority or its water system or sewer system; and all communications between Borough councilmembers, officials or employees and any board member, official or employee of the City of Lebanon Municipal Authority, relating to the Authority (i.e., the Cornwall Borough, Lebanon County, Municipal Authority) or its water system or sewer system are denied, as these requests do not identify or describe the records sought with sufficient specificity to enable the Borough to ascertain which records are being requested. 65 P.S Your request for the complete minutes of the March 9, 2015 Borough Council meeting, all memoranda or other documents filed with the minutes and all documents considered by Council is granted and the responsive documents are attached, Additionally, your request for document(s) memorializing the terms of engagement of McNees Wallace & Nurick, LLC is granted and responsive documents are attached. Finally, your request regarding insurance policies has been granted and the responsive documents are attached. You have a right to appeal this denial of information in writing to Executive Director, Office of Open Records, Commonwealth Keystone Building, 400 North Street, 4 Floor, Harrisburg, PA jfyou choose to file an appeal you must do so within 15 business days of the mailing due date of this response. See Section Please note that a copy of your original Right-to-Know request and this denial letter must be included when you file an appeal should you elect to do so. The law also requires that you state the reasons why the record is a public record and address each of the reasons the Borough has denied your request. Visit the Office of Open Records website at for further information on filing an appeal. If you have further questions, please contact Steve Danz,

100 Open Records Officer. Please be advised that this correspondence will serve to close this record with our office as permitted by law. Sincerely, j/ - 1/ I Steve Danz Open Records Officer Borough of Cornwall 36 Burd Coleman Road P.O. Box 667 Cornwall, PA Phone:

101 1.05 Borough counsel letter March 26, 2015

102 McNees Wallace & Nurick LLC 100 Pine Street PU Box 1166 Harrisburg, PA Tel: Fax: Timothy 3. Korstmann Direct Dial: Direct Fax: March 26, 2015 Mr. Paul Vranesic, Chairman Cornwall Borough, Lebanon County, Municipal Authority 44 Rexmont Road Lebanon, PA VIA AND FIRST CLASS MAIL RE: Termination of Cornwall Borough, Lebanon County, Municipal Authority Dear Chairman Vranesic: As you are aware, we have been engaged by the Borough of Cornwall (the Borough ) to advise the Borough in connection with the proposed termination of the Cornwall Borough, Lebanon County, Municipal Authority (the Authority ). By this letter, we are notifying you that the Borough, on March 25th, advertised in the Lebanon Daily News notice of a special meeting to be held on Thursday, April 2nd, at which Borough Council will consider for enactment the enclosed Ordinance, numbered , to effectuate the termination of the Authority in accordance with the Municipal Authorities Act, 53 Pa.C.S etseq. (the Authorities Act ). Pursuant to the proposed Ordinance, the Borough shall direct the Authority to take all actions necessary to effectuate its termination, and furthermore, the Authority shall be prohibited from taking any action, or expending any money in connection with any action, that is inconsistent with its termination. We understand that the Authority has published a notice in the Lebanon Daily News of its intent to hold a special meeting. A copy of the notice as advertised is attached, and reads as follows: The Cornwall Borough Municipal Authority will hold a special meeting on Monday, March 26, 2015 at 7:00 PM in the Authority Office located at 44 Rexmont Road. The purpose of this meeting is to review any business that may come before the Board. We assume you are aware that today, March 26th, is a Thursday not a Monday as set forth in the notice (next Monday is March 30th). Adding to the confusion is the fact that the Authority typically HARRISBURG, PA LANCASTER, PA SCRANTON, PA STATE COLLEGE, PA COLUMBUS, OH WASHINGTON, DC

103 Mr. Paul Vranesic, Chairman Cornwall Borough, Lebanon County, Municipal Authority March 26, 2015 Page 2 holds its meetings on Mondays. Thus, it is unclear from the notice which of these days (or, another day) the Authority s special meeting will actually take place. In light of these facts, it is apparent that the notice of special meeting published by the Authority fails to comply with the public notice requirements of the Pennsylvania Sunshine Act, 65 Pa.C.S. 701 etseq. (the Sunshine Act ). A public notice under the Sunshine Act must specify the date, time and place of the meeting. 65 Pa.C.S Here, the date of the special meeting has been specified as the notice suggests that the meeting will be held on Thursday, March 26th or Monday, March 30th. If the Authority elects to proceed with holding this special meeting without first publishing a new notice in compliance with the Sunshine Act, the Borough will pursue an action under the Sunshine Act to have declared any business transacted by the Authority at such meeting void. 65 Pa.C.S In addition, we strongly caution the Authority against advancing any action that is inconsistent with the Borough s directives set forth in the proposed Ordinance. As set forth in the Authorities Act, money of the authority may not be used for any grant, loan or other expenditure for any purpose other than a service or project directly related to the mission or purpose of the authority. 53 Pa,C.S (a. I )( 1) (emphasis added). Upon the enactment of the Ordinance, the Authority s sole purpose will be to take all necessary action to effectuate its termination. Therefore, any expenditure of Authority funds in support of an action that is contrary to the Borough s directives in the Ordinance is contrary to the limited purpose of the Authority following enactment of the Ordinance. The Borough will seek to recover all funds expended by the Authority in furtherance of such invalid purposes from the Authority s recipients. Furthermore, please be aware that the Borough shall pursue to the fullest extent of the law surcharge actions against all Authority Board members and officials who approve such improper expenditures following the enactment of the Ordinance, and hold them personally liable for repayment of such amounts paid out of Authority funds. 8 Pa.C.S finally, we bring to your attention the following. Upon investigation, we have determined that the appointment of one of the members of the Authority Board was in violation of the Authorities Act, and is consequently of no effect. Under section 5610 of the Authorities Act, the term of an individual appointed to the board of a municipality authority commences on the first Monday in January, and is for five years. 5610(a). Section 5610 further provides that the Borough Council shall appoint an individual to the Board 5610(a). when a vacancy has occurred by reason of the expiration of the term of any member. icl j. iy

104 Mr. Paul Vranesic, Chairman Cornwall Borough, Lebanon County, Municipal Authority March 26, 2015 Page 3 Pennsylvania case law makes clear that an appointment made before a vacancy occurs is invalid and to no effect. Waltman v. Graczyk, 460 A.2d 109$ (1983). We have determined that an attempt to reappoint Ms. Kathleen Schaeffer to the board of the Authority for a five-year term running through 2015 occurred at the Borough Council s meeting on December 13, However, this seat on the Authority Board did not expire until January 3, 2011, being the first Monday in January. Because this attempted reappointment occurred prior to the expiration of the previous term, the attempted reappointment was invalid, as no vacancy existed at the time of the attempted appointment. Thus, Ms. Schaeffer has been serving as a member of the Board purely in a holdover capacity since the expiration of her prior term on January 3, 2011, and the Borough may appoint a replacement to serve out the remainder of her term. The Borough Council intends to proceed with the appointment of a replacement to serve out the remainder of this term at its special meeting scheduled for next Thursday, April 2nd. Sincerely, McNEES WALLACE & NURICK LLC By-_ Timothy J. Horstmann Enclosures c: Anthony fitzgibbons John Karinch Thomas J. Sniscak Donald Beamesderfer Kathleen Schaeffer Alfred Brandt Jr. Bob Thomas

105 1.06 Borough counsel letter April 2, 2015

106 McNees Wallace & Nurick LLC 100 Pine Street P0 Box 1166 Harrisburg PA ToT: 717,232,8000 Fax: Timothy]. Horstmann Direct Dial: Direct Fax: April 2, 2015 Mr. Paul Vranesic, Chairman Cornwall Borough, Lebanon County, Municipal Authority 44 Rexmont Road Lebanon, PA VIA AND FIRST CLASS MAIL RE: Enactment of Ordinance No Authorizing Termination of Cornwall Borough, Lebanon County, Municipal Authority Adoption of Resolution Appointing Steven Levengood to Board of Authority Dear Chairman Vranesic: This morning, at a duly-advertised special meeting held in accordance with the Borough Code and the Sunshine Law, the Borough Council of the Borough of Cornwall (the Borough ) voted unanimously to enact Ordinance No , which, inter alia, authorized the termination of the Cornwall Borough, Lebanon County, Municipal Authority (the Authority ) in accordance with the Municipal Authorities Act, 53 Pa.C.S et seq. (the Authorities Act ), and directs the Authority to take all actions necessary to effectuate its termination. A copy of the executed Ordinance is enclosed. Also at this meeting the Borough Council voted unanimously to appoint Mr. Steven Levengood to the Board of the Authority. Mr. Levengood has been appointed to serve out the remainder of the term of Ms. Kathleen Schaeffer, who has been serving on the Board of the Authority in a holdover capacity since January 3, A copy of the resolution authorizing Mr. Levengood s appointment (the Resolution ) is enclosed, In the event that the Board refuses to seat Mr. Levengood, such action is unlawful, and any actions taken by the improperly constituted Board of the Authority will be challenged. Such a decision clearly would not be in the best interest of the taxpayers or the ratepayers. On behalf of the Borough, the Authority is hereby directed to immediately comply with the directives of the Borough as set forth in the Resolution and in the Ordinance, and accept the appointment of Mr. Levengood in place of Ms. Schaeffer, and immediately begin the process of effectuating its termination. HARRISBURG, PA LANCASTER PA SCRANTON, PA STATE COLLEGE, PA COLUMBUS, OH WASHINGTON, DC

107 Mr. Paul Vranesic, Chairman Cornwall Borough, Lebanon County, Municipal Authority Apr11 2, 2015 Page 2 Additionally, the Authority is hereby ordered to immediately cease any activities and the expenditure of any funds in connection with such activities that are contrary to the Borough s directives as set forth in the Ordinance. This expressly includes, but is not limited to, any outlay of funds in connection with any action which was allegedly approved by the Board of the Authority at its meetings held on March 23, 2015 and March 30, The purpose of the Authority is now expressly limited to conducting activities in furtherance of the Borough s directive to terminate and we strongly caution you against approving any course of action that is inconsistent with that stated purpose. Ordinance No. 128, enacted by the Borough on January 9, 1956 and which authorized the creation of the Authority (and a copy of which is enclosed), expressly reserved to the Borough the right to restrict the activities of the Authority through the enactment of future ordinances. The Borough has done precisely that by the enactment of the Ordinance. Thus, any action you take that is contrary to the directives of the Borough in the Ordinance is contrary to the Authorities Act, 53 Pa.C.S. 5612(a.1)(l). We request that you contact us immediately to confirm that the Authority intends to comply with the Borough s directives in the Resolution and the Ordinance. If we do not hear from you by Tuesday, April 7th, the Borough will take all appropriate action to enforce its directives, including litigation. Sincerely, NURICK LLC By J. Horstmann Enclosures c; Anthony Fitzgibbons John Karinch Thomas J. Sniscak Donald Beamesderfer Kathleen Schaeffer Alfred Brandt Jr. Bob Thomas

108 1.07 Borough Ordinance No. 128

109 . r ORDIN.NCE NO. 128.IT CDI - C. 8IC IFYIi C THD ITEIITION uti) DESIf C2 TES tunicipal AtJTHOITI1S OW Th 5OtjQ-i OF CO?IF LJL, LEB JOj l CDL TY, P SYLhTNIt, TO OQtt IZE AlT juthoriti UNDER THE PROVISIONS OF THE MUNICIPALIU ANTHORITIES ACT OF 1945 (THE ACT OF MAY 2, 1945, P , AS AMIITDED lied 8IjTPL1iENTED), TO E KNOWN AS CORNThILL BOROUGH, LEBANOIT COUNTY, MUNICIPAL AUTHORITY ; SETTING FORTH THE FORM OF THE.RTICLE8 OF INCORPORATION; APPOINTING THE FIRST MEMBERS OF THE BOARD OF SAID AUTHORITY; AUTHORIZING OTHER NECESSARY ACTIONS; PROVIDIFID THAT SAID AUTHORITY SHALL SE ORGANIZED FOR ALL OF THE PURPOSES SET FORTH, AND SHALL HAVE ALL OF THE POWERS GRANTED IN SAID ACT; DESIGNATING THE FIRST PROJECT OF THE AUTHORITY; REPEALING ALL INCONSISTENT ORDINAI DHS IiW RESOLUTIONS AND PARTS THEREOF; AND PROVIDING THAT THIS ORDINANCE SHALL TAKE EFFECT ThJTh)ITELY UPOiJ ITS FIi AL EUiCTUE1T BE IT ENACTED.aND ORDAINED by theborcugh Council of the Borcugh of Cornwall, Lebanon County, Pennsylvania, and it is hereby enacted andordained by authority of the same as follows SECTION 1. The Borough Council of the Borough of Cornwall hereby signifies its intention and desire to organize an Authority under the provisions of the Municloality Authorities Act of (the ct of May 2, 1945, P , as amended and supplemented). SECTION 2. The Burgess, the Presidenb of the Borough Council and the Secretary of the 3orouh Council are hereby authorizeu and directed to execute, on behalf of the Boxuugh of Co;nrwfl, trt;c1s of coooiatio e 202 sai.. uth3rity in substawuially following forlil: TO THE SECROJTARY OF THE COMJ0N,TEALTH OF PE1NSYLVANIA: ARIICLES OF INCORPORATION ] 4 ii In compliance with the requirements of the Act of May 2, 1945, P , known as the unicioality Authorities Act of , as amended. and Sup Dleinenteo, the municipal authorities of the Borough of Cornwall, Lebanon County, Pennsylvania, desiring to incoro j orate an Authority thereunder, DO HEREBY CERPIFY: : l ti ill (a) utnoty. The name of the Authority is Cow all Borough, Lebanon County, Municloal (b) Said Authority is formed under the provisions of the Act of May 2, 1945, P , known as the Juniciua1ity Authorities Act of 1945, as amended and supplemented. (c) T0 otl er trorty ha been under tlee sao tiuiucioallty utnorties CE of 19?5, o uncler the ct aprovu to 28th 5ay of June, 1935, L Cd3, o s ex1gflce in o. for ti a 3oro. o of Cor ir-all, Peeriy1ac±a, the incor)oratr) xnunlcida ity h I, r (ct) 2e naue of r2e incoroorating municioality is ne Borough of Coxra1l, o_ DUflb - e] os\7ve)11a, ano ui-c uiiues a-m. aciaresed a: a follows: it -..,.aunicaoal autholitibs V HI

110 becretat of Borough Council Liember of Borough President of Borough Council (&ikl) Council Council (f) Baid Authority is organized for all of the ouioses set forth in the Burgess Caused to be affixed hereto the seal thereof, this day of January, Cornwall), Pa. IN WITHBSS VHBRB0F, the undersigned have executed these Articles of Incorooration powers granted in said Act. y 1, rms of office shall commence on the date of appointrnenb and shall be computed from Box 110, Cor ra iail, Pa. 5 years Box l3,cornwa1l, Pa. 4 Years RFD 5, Lebanon, (Borou;h of 3 years Cozmrall), Pa. Bo: 65, econt, (Borough of 2 years Borough of Conii, Pa. 1 year Term B oro ugh Treasurer of the 13ecratar-y of Borough Council henber of orou;h heuber of 3orough pality Authorities Act of 1945, as anendad and supplemented, anu shall have a]1 of Iembrsr of Borough hember of Borough Council Council Council Council 2 behalf of the Borough of Cornwall, the incorporating municipality above named, and.!vheeler eu Boyer yer tiger rity are as follows:.inames, adcresses and terms of office of the first members of the Board Address Cornwall, Pa. Cornwall, Pa. Cornwall, Pa. Cornwail), Pa. Cornwall), Pa. BFD 5, Lebanon, (Borough of RPD #5, Lebanon (Borough of BQD: 192, Cornwall, Pa. Iertiber of Borough I. Vic e Presiuent arid (Borough of Cornwall), Pa. ox 117, Rexont of Borough Council Cornwall, Pa. president and Aember Box 25, Cornwall, Pa. Box 1, Co:nwal1, Pa. Burgess U-.L.LC

111 wa1l, the municipal corpotion named in a which executed the fore 4 saw the coraaon or corporate seal of the 3orou;h of Cornwall affixed Orccriance of the Borough cuncil of the Borough of Cornwall. - 1, day of January, ere personally present at the execution of the foregoing Articles of :Incooratiory, who, being severally duly sworn accorulng to let?. deooe cii, are in their proper ancl respective hanwritings..,_ribed before as Fresinent of Borough Council, and of Lester B. Soancake, as Secretary January, 1956, and that the names of Albert F. C. Standish, as Burgess, di as and îor the act and deed of, the said Borough, by the authority t the foregoing Articles of Incorporation were duly signed, sealed and be seal affixed thereto is the common or corporate sea]. of said Borough h Council ann Lester. Spancae, Secretary of Borough Council, of ersonally appeared ulbert F. C. Standish, Burgess, Nathan Brown, day of Jam.ry, 1956, before me, a Notary Public in and for the 35. edtion of the Borough Council, pursuant to an Orainance nuly enacted on YLVANIA uncertake any other project or projects unless specifically authorized so to do by quire, hold, construct, improve, maintain, operate, own, lease, either in the capacity of other territory as it may be authorized by law to serve and sale uthority hai1 not ene Cq.uioaent for use in connection therewith, for the Borough of Cornwall and for such lessor hr lessee, waterworks, water supply works, water distribution systecs, and property SECTION 6. The first project to be undertaken by the Authority shall be to ac ajd Act. - U the ilunicjpeijtv Authorities Act of 1945, and siail have all of the oowers granted in SECTION 5. Sale Authority shall be organized for all of the purposes set forth.qnlnall Borough, Lebanon County, Municipal Authority. cretary of the Commonwealth; and to do, execute and perform any and all official acts, licatjon of notice of this Oroinance ana a certified cooy of this Ordinance vdth the entea, to file sanq XtiClbs of Thco;oorat_on, together u; tie rciuiree oroofe of ty, as reauired by the inunicirality Authorities Act of 1945, as amended and supple SBCTION 4. The proper officers of the Borough are hereby directed to cause a Duflty, and one thee in a netvsoaper oublished and of :eneral circulation in Lebanon teres shall commence on the c.ate of approval thereof and shall be computed from d to pay all fees and coats necessary or appropriate to effect the incorporation of nted members of said Board for the terms of office set after their resoective names, e of this Ordinance to be oubiished one time in the legal periodical of Lebanon pal Authority named in the proposed Aiticles of Incorporation are hereby siecifically.,dtion 3. Th first members of the Board of Cornwall Borough, Lebanon County, sion 1bcoires: otary Public

112 Burgess.nproved this 9th day of January, etary of Borou1unc ii President of Borough Council Duly presented and enacted at a aecting of the Borough Council of the Borouc;li of :. j Qorn78ll, Lebanon County, PennsyJvania, held the 9th day of January, ; 3dC rion 8. This Ordinance shail take effect imnediate1y upon final enactient. jutjon5 inconsistent nerewith are nereby exor ssly renealeo. CTION 7. il Ordinancas an parts of Ordinances, resolutions and parts of 1- -.

113 1.0$ Levengood Welcome April 6, 2015

114 From: TeamLevengood [mailto:teamlevencioodcomcast.net] Sent: Monday, April 06, :16 PM To: Barb Henry Subject: Re: Cornwall Authority Yes I would thank you very much I will call you later in the week my wife s father past away and we had his funeral today so I m deal with this Sent from my iphone On Apr 6, 2015, at 12:00 PM, Barb Henry <BHenrycbma-pa.org> wrote: Steve: I understand that the Cornwall Council appointed you as a member of the Authority Board. Welcome! We deliver packets to the board members the Friday before the meeting, usually after noon. If you would like any information about the Authority, please stop by and if you would like a tour of the Authority system we can arrange for a tour. Hope you had a wonderful Easter holiday. Barb Barbara L Henry Executive Director Cornwall Municipal Atithority 44 Rexmont Road Lebanon, PA (717)

115 1.09 Borough counsel July 16, re hiring operators and response

116 Licensed From: To: Cc: Subject: Date: Christooher M. Arfaa Horstmann. Timothy Thomas]. Sniscak; Steinpur Youno, Carol; Douohertv, Jim; Bakare, Adeolu RE: Cornwall Borough Authority - Operator Resignations Thursday, July 16, :53:00 PM Mr. Horstmann: The Authority has the right under the Order to obtain replacement services without Borough interference. First, maintaining the personnel necessary to operate the water and sewer systems is part of the ordinary course of business of the Authority. Second, the Authority is entitled to maintain the current number of Authority employees under the Order. Third, the arrangement being considered will cost less than the amount budgeted for the salaries and wages of the two departing employees. We are aware of the Council resolution that purports to direct the Authority s actions in this matter. Please be advised that the Authority views the resolution, and any attempts by the Borough to force the Authority s compliance with its directives, as further attempts by the Borough Council to assert de facto control of the Authority s water system and other assets, in violation of the Public Utility Code. We believe the Court will agree with our interpretation of its Order and that it will not permit the Borough to interfere with the Authority s conduct of its business. Any emergency request filed by the Borough would result only in a further waste of public funds. Finally, should the Borough nevertheless attempt to seek such relief, we request that you do so in a manner that provides the Authority with sufficient notice and opportunity to be heard. From: Horstmann, Timothy [mailto:thorstma@mwn.comj Sent: Thursday, July 16, :41 PM To: Christopher M. Arfaa Cc: Thomas]. Sniscak; Steinour Young, Carol; Dougherty, Jim; Bakare, Adeolu Subject: Cornwall Borough Authority - Licensed Operator Resignations Mr. Arfaa: We understand that the Authority Board intends to consider at its meeting this evening a contract for operations and maintenance services as a result of the recent resignation of both of its licensed operators. As you know, the Authority and the Borough mutually agreed to the attached Court Order on April 15th of this year, which provides, inter a/ia, as follows: 2. The Authority will not incur any costs outside the ordinary course of business, such costs having been established by the Authority s duly adopted budget for Costs incurred in the ordinary course of business include:

117 employees; a. Normal and current salaries and benefits for the current number of Authority b. All expenses identified in the duly adopted budget for fiscal year ; c. Emergency costs or costs to meet regulatory requirements by an agency or body having jurisdiction over the sewer or water operations, not to exceed, in the aggregate, $25,000, without consent of the Borough which shall not be unreasonably withheld... Per the above provision, the Authority may not enter into this contract absent the consent of the Borough, which has not been requested or given. Before taking any formal action in connection with this proposed contract, Authority representatives must contact the Borough to request its consent, in accordance with the Court s Order. Failure to seek the Borough s consent will result in the Borough taking all action necessary to enforce its rights under the Order, including the filing of an emergency request with the Court. We note that the Borough has already taken action to address this emergency situation, by formally approving the appointment of Steckbeck Engineering & Surveying, Inc. as consulting engineer and Stephen J. Cordaro as interim licensed operator, pending the termination of the Authority, and directing the Authority to contract with the same during the interim. The Borough believes that these appointments are the preferred approach. Mr. Steckbeck of Steckbeck Engineering has previously served on the Authority Board and knows the system very well. The Borough expects that the services required can be provided by Steckbeck for substantially less money that the proposed contract; but to our knowledge, neither the Borough nor Steckbeck was contacted to provide a quote for services. The Borough requests that the Authority proceed as directed in the Resolution. Sincerely, Timothy J. Horstmann Attorney At Law Ill McNees Wallace & Nurick LLC 100 Pine Street I Harrisburg, PA Tel: I Fax: I Website I Linkedln www,m unicipalrecoverylaw.com The foregoing message may be protected by the attorney-client privilege If you believe it has been sent to you in error, do not read it. Please reply to the sender that you have received the message in error, then delete it Thank you. In the event this communication is provided in connection with a transaction involving, in any way (i) the issuance or proposed issuance of municipal securities or (ü) any municipal financial product, we hereby expressly advise, disclaim and disclose to the recipient(s) that we are not in any way acting in the capacity of a municipal advisor to any municipal entity, obligated person or any other participant in such transaction. Our services with respect to the transaction are limited to providing legal services of a traditional nature. The terms used in the foregoing disclosure and disclaimer have those meanings set forth in the Securities Exchange Act of 1934, as amended by the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as any regulations, interpretations or guidance of the united States Securities and Exchange Commission, the Municipal Securities Rulemaking Board or any other regulatory body promulgated, published or adopted thereunder or pursuant thereto.

118 March 10, Borough letter re Levengood riser

119 BOROUGH OF CORNWALL 36 Burd Coleman Road P.O. Box 667 Cornwall, Pennsylvania Phone (717) Fax (717) Website: March 10, 2015 Barb Henry Cornwall Borough Municipal Authority 44 Rexmont Road Lebanon, PA Dear Barb: Borough Council at its Mach 9, 2015 meeting passed a motion to contact the Authority about replacing the riser at the Levengood residence, 174 TIce Cane. Council felt this was the responsibility of the Authority. The Borough Highway Department will do the paving when weather permits. Sincerely, Should you have any questions, please feel free to call. teven N. Danz Manager

120 1.11 Borough Council Minutes March 9, 2015

121 RESIGNATION MINUTES OF THE CORNWALL BOROUGH COUNCIL MEETING HELD ON MONDAY, MARCH 9, 2015 AT 7:00 P.M. IN THE CORNWALL BOROUGH OFFICE The meeting was called to order at 7:00 p.m. by John Karinch. PLEDGE OF ALLEGIANCE PRESENT Joe Keaney, John Karinch, Beth Yocum, Gerald Boughter, Al Brandt, Tony Fitzgibbons, Steven Levengood and Mark Thomas. PUBLIC Meeting attendance sheet is attached hereto. APPROVAL OF MINUTES Gerald Boughter made the motion, seconded by Al Brandt to approve the minutes from the February 9, 2015 meeting. Motion passed. PUBLIC COMMENT No Comment REPORTS A motion was made by Gerald Boughter, seconded by Beth Yocum to approve all reports. Motion passed. OLD BUSINESS CELL PHONE TOWER John Karinch informed that Cell Tower Representative, Larry Romanoski, who will be in attendance at next month s Planning Commission and Borough Council Meetings to answer questions. ROBERT BOO SIMMERMON PLANNING & ZONING COMMISSION John Katinch made the motion, seconded by Gerald Boughter to accept the resignation of Robert Boo Simmermon from the Cornwall Borough Planning & Zoning Commission. Motion passed. 174 TICE LANE LEVENGOOD RISER There was a discussion concerning some construction work done at the Levengood Residence, 174 Tice Lane in which a manhole cover in front of mailbox was coveted with stones and paved over it. Municipal Authority dug up manhole and never filled in 5-6 inch hole. Highway Department filled in hole but it was decided a riser was needed. Municipal Authority voted to not put a riser in. Al Brandt made a motion, seconded by John Karinch to send a letter to the Authority asking they replace the riser. Borough Highway Department will pave at the site when weather permits. Motion passed. RESOLUTION BANK SIGNATURES Gerald Boughter made the motion, seconded by Al Brandt to adopt Resolution Motion passed.

122 MARCELLUS SHALE GRANT SNITZ CREEK $750 The Borough has received a $7,50 Grant from the Lebanon County Commissioners. The grant will be used for the Re-alignment of the Snitz Creek. P &ZVACANCY Borough Council asked Daily News reporter if he could mention in his article that there is a vacancy on the Planning & Zoning Commission. MCNEES WALLACE & NURICK LLC AUTHORITY TERMINATION Gerald Boughter made the motion, seconded by Steven Levengood to hire the Law Firm of McNees Wallace & Nurick LLC to look into the Borough dissolving the Municipal Authority. Motion passed. The motion also included, if needed, having Jeff Steckbeck get information together for the Firm. ADJOURNMENT Gerald Boughter made the motion, seconded by Beth Yocum to adjourn the meeting at 7:15 p.m. Motion passed. Steven N. Danz Secretary