SHARON Audit erodes support for proposed $6M loan
Adding to the city's long-term debt at this point might not be a good idea, some council members said.
By HAROLD GWIN
VINDICATOR SHARON BUREAU
SHARON, Pa. -- Support is waning for a city plan to borrow $6.1 million to fix the parking deck at the library, pave some streets and refinance an old loan.
City officials have been ready to move on the plan for a couple of months but the bond market hasn't been favorable. The money will be borrowed through the sale of bonds.
City council has twice scheduled a vote on a $6.1 million bond issue and twice the vote has been canceled because the bond market dropped.
Now, some members of council are saying they don't think it would be wise to add to the city's debt, based on a recent audit of the 2001 budget that showed Sharon started this year $239,000 in the red and not with a cash balance of $75,000 as had been shown in the 2002 budget.
"I'm having second thoughts about [the borrowing]," said council President Fred Hoffman. "There needs to be some strong financial decisions made."
Hoffman said he might favor a new bond issue to refinance the old one at a lower interest rate but is reluctant to borrow any additional funds.
Councilman Lou Rotunno agreed, saying he was disappointed to learn the city is already behind in its budget for 2002 and is reluctant to borrow more.
"Someone's going to have to do some hard talking to convince me at this point," he said, complaining that council isn't getting the answers it wants regarding city finances.
"I'm still in favor of it but we're reconsidering it now," said Councilman Ray Fabian, adding, "To add more debt might not be prudent right now."
Will vote for it
Still, Fabian said he will probably vote to borrow the money.
"I think we have to do it," he said, explaining there is no other way to make the improvements on the city's list.
Council members Chris Outrakis and George Gulla said they'll vote for the $6.1 million bond issue when it comes up, but Gulla said the administration has to use the money exactly as designated. It can't just be thrown into the general fund and used for other expenses, he said.
Mayor David O. Ryan said there's no other source of money to do the work on the parking deck at the Shenango Valley Community Library, the street improvement projects or some other smaller projects targeted with the funding.
"We just don't have any money in the general fund to do it," he said.
Ryan said the city is trying to launch a downtown revitalization project and having the city put up some money for street resurfacing projects is a good way to get it started.
The plan targets Silver and Pitt streets and Shenango Avenue downtown as well as some residential streets and curb repairs and some sidewalk improvements, he said.
Replacing the upper level of the two-story parking deck at the library is a safety priority, Ryan said, noting the upper level has deteriorated to the point where he had a 5,000-pound vehicle limit placed on it this spring.
The elevator inside the library also needs some updating to meet federal handicapped accessibility requirements and that would be part of the project as well, he said.
Finally, the city needs money to continue work on heating, ventilating and air conditioning improvements as part of a building update started in 1999, he said.
Ryan said the city wants to be guaranteed a savings of at least $100,000 before it moves to refinance the old bond issue.
Sharon borrowed $5.2 million in 1994 to finance the debt on the municipal parking garage and some street improvement projects and still owes $3.8 million of that debt.
Refinancing at a lower interest rate will save the city money in the long run, officials have said.
Most of the new bond issue will cover the refinancing.
Michael Gasparich, city finance director, said Sharon is already paying $428,000 a year on the 1994 bond issue and the new bond issue will be arranged so that the annual debt service is the same so no tax increase will be necessary to pay for it.
The difference, he said, is that the old bond issue expires in 2014 but the new bond issue would run until 2026, extending the debt an additional 12 years.
Mercer County put up a guarantee for the old bond issue and is prepared to do the same for the new one, Gasparich said, explaining that the county backing will mean a better borrowing interest rate for Sharon.
City council was set to approve the borrowing in June but backed off when the bond market dropped and the estimated savings dropped to just $40,000.
Council scheduled a special meeting July 25 to try again but a faltering bond market at that time showed savings of only $61,000 and the plan was put on hold again.