PENNSYLVANIA Officials support decision for sewage work funding

City officials have been criticized for not going after a state loan.
By LAURE CIOFFI
VINDICATOR NEW CASTLE BUREAU
NEW CASTLE, Pa. -- New Castle officials say they believe they got the best deal possible on a loan taken out recently to pay for sewage work in the city.
Tammi Gibson, city business administrator, said the $4 million, 20-year bond issue came in at an initial interest rate of 2 percent -- lower than the anticipated 3 percent. That rate goes up on a sliding scale over the life of the loan to 5.1 percent at the end, but Gibson said it's unlikely the city will keep the bond that long. She said the city typically refinances a bond in seven to 10 years.
Mayor Wayne Alexander said it was imperative to get the funding in place so work on the project could start soon. The city has been plagued with sewage problems during the recent heavy rains.
"I walked to close to 60 homes. People don't realize how these [residents] are barraged with raw sewage in their homes. There are widows and widowers I talked to who still have raw sewage in their basements," Alexander said late last week.
Criticism
But the city has faced criticism from state Rep. Frank LaGrotta of Ellwood City, D-10th for not going after a Pennsylvania Infrastructure Investment Authority loan.
LaGrotta said through PennVEST the city would receive a 1.37 percent loan. That interest rate would have gone no higher than 2.8 percent over the life of the loan, the lawmaker said.
Gibson and Alexander say the process of applying for a PennVEST loan is too long and the city must start work now.
Gibson said the city wouldn't know until March if it would receive the state money and then it likely wouldn't receive it until next summer.
"We went with the bond issue because the city wants to get the work done now, rather than wait a year," Gibson said.
Short-term loan
LaGrotta contends the city doesn't have any of its engineering work completed and waiting for the state funding wouldn't put the project off course. He said the state would likely let the city know if they were getting the money when the application is submitted in January.
He said the city could have taken out a short-term loan to pay for initial engineering work until PennVEST gave its approval.
City officials, however, say they have no guarantee they will get the state loan even after all the engineering work is done. They wanted to take advantage of current low interest rates for the bond issue.
Gibson noted that the interest earned on the bond money will likely make up for the lower percentage rate they would have gotten with the PennVEST loan. She said a money market should yield about 1 percent.
cioffi@vindy.com