Council members said they want to be sure the money will go to designated projects and not to cover other expenses.
By HAROLD GWIN
VINDICATOR SHARON BUREAU
SHARON, Pa. -- City council is expected to go along with borrowing $6 million to refinance old debt and pay for various public improvements, but council members want guarantees on how the money will be spent.
The city has been looking for about at year at borrowing the money through the sale of bonds, but the bond market interest rate hasn't been good enough to move on the plan.
City officials said they want to save at least $100,000 by refinancing an old bond issue before they would consider a new bond issue.
Michael Gasparich, city finance director, said the bond market interest rate has improved to the point where the city can save about $128,000 in interest costs by refinancing its old debt.
Two weeks ago, councilmen Fred Hoffman and Lou Rotunno said they were having second thoughts about borrowing any money beyond that needed to refinance the old debt, citing an audit report in late July that showed Sharon started the year $239,000 in the red.
Now might not be the best time to increase the city's debt, they said.
Locking in interest rates
However, they and council members Ray Fabian and George Gulla voted Thursday in favor of having an investment banking company lock in interest rates todayfor the sale of $6.1 million in bonds. Councilwoman Chris Outrakis was absent.
Council will meet in special session at 4 p.m. Wednesday to give formal approval to borrowing the money. It includes $4 million to refinance the old debt, $1 million for street improvements, $650,000 to replace the upper level of the Shenango Valley Community Library parking deck, $175,000 to repair the heating and air conditioning systems in the city building and $50,000 to improve the library's elevator.
The city will keep the same annual bond repayment schedule of $428,000, but whereas the old issue would have been paid off in 2014, the new one will run until 2026, Gasparich said.
However, refinancing the old debt now will allow the city to avoid a November debt payment of $225,000 on the old bond issue, Gasparich said, adding that money will be needed to cover an unanticipated $140,000 jump in employee health insurance costs and to help offset the $239,000 deficit the city had at the start of the year.
"This is a financial necessity," Fabian said of the plan to borrow the extra $2 million to make public improvements. The library parking deck, in particular, must be dealt with now, he said.
Specific about spending
Gulla agreed but said the money must be used exactly for the projects designated and not on anything else.
Rotunno and Hoffman agreed, with Hoffman going so far as to suggest that the ordinance approving the borrowing contain a clause spelling out what projects will get the funds.
The money can be put into a trust that would prevent it from being spent elsewhere, Gasparich said, adding that city council must approve all bills and spending anyway.
Mayor David O. Ryan offered his personal guarantee that money earmarked for certain projects will be spent only on those projects.