Mercer Co. to guarantee bonds

Sharon’s current sewage
system isn’t in compliance with state regulations.

By MARY GRZEBIENIAK

VINDICATOR CORRESPONDENT

MERCER, Pa. — Mercer County commissioners unanimously agreed to guarantee up to $28 million in bonds for a new sewer treatment plant in Sharon, thereby saving customers of that system some $10.2 million.

The commissioners took the action Thursday at a special meeting. The county’s excellent bond rating allows a lower-interest loan than the city of Sharon could obtain on its own, officials said.

The total project cost is estimated at $41 million. Additional funds will come from a $15 million, one percent interest state loan from Pennsylvania Infrastructure Investment Authority or PENNVEST. That loan will be used only after the bond issue is spent.

PENNVEST is the state agency that supplies low-interest loans for sewer, storm water and drinking water projects throughout the state.

Sharon’s sewer system, which serves some outlying areas in addition to the city, is currently not in compliance with state regulations and is being fined daily by the state Department of Environmental Protection.

County Fiscal Director John Logan said about 17 percent of the county’s residents are customers of the sewer system. Officials said safeguards are in place to protect the county from having to repay the loan.

Lawrence Bashe, managing director of public finance for Raymond James & Associates Inc., New York City, said that if projected income from sewer user fees is not adequate to pay back the loan, the sewer authority would be responsible for increasing rates to cover any shortfall.

If the sewer authority could not make the payments, the city of Sharon has made a general obligation pledge which means it would use its taxing authority to borrow money and come up with additional funds.

In addition, one year’s worth of principal and interest payments is being held in reserve. Only if all these avenues are exhausted would the county become liable for loan repayment.

Logan said the user fees for those on the system is designed to bring in 120 percent of the annual amount to be paid on the loan in order to cover maintenance and other contingencies.

Sewer bills are based on the amount of water used per month. Sharon residential customers now pay $22 a month for up to 3,333 gallons of water used a month. The monthly rate will increase to $27.50 in January.

In 2009, the rate will go to $38.50 and in 2010 will rise to $42.50.

Logan said that even though the user fees will eventually nearly double, they are comparable to what others in the area pay for sewage treatment.

The 30-year loan will have an interest rate of about 4.5 percent, although bond counsel Atty. Chris Brewer of the Pittsburgh law firm Dinsmore & Shohl said the actual bond closing will not be for another week, and that the rate is dependent on the market.

The actual bond issue is expected to be $26.5 million. Work already has begun on the sewer plant, which will be located off Pa. Route 62 along the Shenango River.