Tarentum Council is moving forward in refinancing two old bond issues and possibly adding several million to the borough’s debt.
With municipal bond rates around 2% , council this week authorized Borough Manager Michael Nestico to contact the borough’s bond underwriters about refinancing two old bond issues from 2011 and 2016.
As part of that inquiry council is exploring the possibility of adding $2 million or more to that bond issue to finance capital projects because of the low rates.
“Your rates are not going to be this low for a long time,” said Councilman Adam Blythe, chairman of the finance committee. “The big projects we have on the books right now, they’re not cheap.”
Nestico had suggested adding $2 million to the refinancing.
“It increases our annual (debt) payment by $70,000 per year which I think is sustainable,” Nestico told council.
He said the borough’s current annual debt service payment is $270,000. Adding the new debt would bring that up to $340,000.
Nestico said he thinks the borough can handle the increased debt by making some adjustments in the budget.
Councilman Jim Bonner said he sees the question as not being whether the borough should incur the additional debt but whether $2 million is enough. He said he would hate to see the borough take on the additional $2 million, then fall short of the money needed to complete the capital projects and then have to borrow more at a higher rate.
According to Nestico, some of the capital projects council wants to tackle include:
• Stormwater and sanitary sewer separation and repairs to the sewer lines along with mapping the system to comply with the state’s stormwater guidelines
• Water system distribution projects
• Bridge and road renovation and construction projects
• A major repair project to the borough-owned electrical grid system.
Nestico said the electrical project in particular is likely to be expensive.
“There’s everything from lines and poles that need replaced to constructing a mini micro-grid that would power the borough if the main grid goes down,” he said.
Council President Scott Dadowski said all the previous discussions council has had produced a consensus that the borough should at least refinance the current bond issues. Nobody own council took issue with that statement.
Nestico said he has enough information from council now to contact the bond underwriters and at least “get that ball rolling.” He said he would advise the bond company that there is a possibility that the borough may fold additional debt into the refinancing.
“If we want to consider additional funds then that is a conversation we should have over the next few months,” Nestico said.