Tale of Two Authorities

When discussing municipal authorities, two key types are often contrasted: operating municipal authorities and financial-only municipal authorities. Both are responsible for governing certain aspects of a local area but differ in terms of their functions, objectives and the scope of their oversight.

An operating municipal authority has broader responsibilities, which often include the direct management and operation of municipal services and infrastructure. This can involve everything from utilities (water, electricity, sewage) to transportation systems and housing. These authorities are typically created to manage complex functions that require specialized management and oversight.

The advantage of having an operating municipal authority is that it provides for a focused expertise. Since these authorities are responsible for specific services, they often have a level of expertise in managing complex infrastructure and public services. With a dedicated body overseeing operations, municipalities can more effectively manage day-to-day functions like sewer treatment or water supply. Their goal is to deliver high-quality services to the public due to their direct involvement in operations. This type of authority can act independently, which allows for quicker decision-making without the layers of bureaucracy typically found in general municipal governments.

Conversely, these authorities typically focus on specific sectors, which might result in siloed decision-making and a lack of coordination between different services or functions. This allows for a risk of overlapping with other authorities or municipal entities, leading to inefficiencies or duplications in services. Managing large-scale infrastructure can be expensive, and if not managed well, these authorities may require significant taxpayer funding or run into financial problems. Remember, an authority does not have the power to tax on its own.

A financial-only municipal authority primarily focuses on financial management, such as managing municipal debt, funding specific projects, or overseeing budgets for various public sectors without directly engaging in service operations. These authorities generally handle the financial aspects of large municipal projects (e.g., expanding the public system, issuing bonds, etc.) and work closely with other entities but don't directly manage day-to-day operations.

These authorities focus purely on financial management, which can result in greater expertise and a more strategic approach to municipal financing. By separating financial decision-making from operational concerns, this type of authority can lead to clearer financial planning and fewer conflicts of interest. Since it does not handle operations, this authority is often less bogged down by the political and operational red tape that might affect an operating authority. Financial-only authorities are better positioned to manage large capital projects, access bond markets, and implement innovative financial strategies without the pressure of managing day-to-day services.

There are some cons of a financial-only municipal authority. These authorities might not fully understand the practical challenges of the operational side of municipal services. While the authority handles finances, it must work closely with other municipal governing bodies that are responsible for maintaining operation of the services. Failure to ensure alignment between the financial authority and the municipal operations can sometimes result in miscommunication or delays in the implementation of projects. If the financial authority is not well-coordinated, there could be poor budgeting, underfunded services, or inefficient allocation of funds. While financially focused, these authorities can still face political pressures that could skew decision-making toward short-term political gains over long-term financial sustainability. The rates for services would be set by the municipal governing board (township supervisors, borough council, etc.) and not the authority.

The choice between an operating municipal authority and a financial-only authority depends on the specific needs and structure of the municipality. An operating authority may be more effective in directly managing services and infrastructure but can be prone to inefficiencies or financial struggles. On the other hand, a financial-only authority may be more adept at managing resources and capital but risks being disconnected from the actual operational needs of the community. Often, a balance of both can provide the best outcomes, with strong financial management supporting the operational capabilities of municipal services. In either case, it is important to reach out to those who are capable of providing you with guidance and practical advice.

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About the Author

David L. Anthony is a member of the Keystone Municipal Solutions team of experts. He is a veteran of municipal government, having served more than 33 years in various positions of public service. Contact him at david@keystonemunicipalsolutions.com. To learn more about David and the Keystone Municipal Solutions team, click here.