Mercer County commission OKs refinancing $32.25 million debt

MERCER, Pa. -- County commissioners gave final approval for refinancing $32.25 million still left to pay off a construction bond issue.
The county will get at least $1.3 million in cash after the more than $100,000 in fees are paid.
The refinancing -- similar to home mortgage refinancing -- is called contractual refunding, and local governments have been allowed to do it only since 2003, John Logan, county fiscal director, told commissioners Thursday.
It reduces the original 5 percent loan interest rate to 4.25 percent in exchange for allowing a change from fixed to variable interest rates on the bonds in 2011.
A change in interest rates before final papers are signed could make the plan unfeasible, so Thursday's action does not necessarily mean the transaction will be completed officials said.
Hired adviser
Jay Wenger, managing director of Susquehanna Group Advisors, was recently hired by commissioners as their adviser on the transaction, as is required by law.
Wenger attended the meeting along with lawyers Ronald Stout and Lynn Freeman of bond counsel Thorp Reed & amp; Armstrong, and Michael Zubasic, managing director of PNC Capital Markets, Pittsburgh, which is a party in the transaction.
The swap provides that in 2011, PNC will have a single day to decide whether to exercise its option for variable rate bonds. In order to cover the risk involved because of the impossibility of predicting interest rates, Logan said the county will voluntarily set aside about $100,000 in an escrow account.
The prospective bond issue also is covered by bond insurance. Full payment of the bonds is scheduled for 2031.
The bond issue financed the courthouse renovation, county jail construction and updating of district justice offices. The refinancing will provide more than enough money needed for a $1.24 million shortfall on the jail construction.