Trafford Council approves $2.75-million bond issue
Trafford Council is borrowing $2.75 million to restructure its debt and reimburse its general fund for overspending on the borough public safety building.
Council voted 5-1 at a special meeting on Sept. 27 to approve the issuance of a 30-year general-obligation bond. Rich Laird, John Daykon, Vicki Megon, Henry Schultz and Casey Shoub voted in favor, while Frank Bruno, who participated by phone, opposed the borrowing. Councilwoman Rita Windsor was absent.
Council members have said the bond is necessary because the borough might end up spending $600,000 more than the $2-million loan Trafford received for the building project. The borough general fund could run out of money this month, they said.
“Given the situation we're in, I didn't think we had the choice,” Laird said. “We need to come up with money to maintain the borough, and unless we hit the lottery, there was no way of getting it.”
The bond will be used to pay off several expenses related to the building and some other borough debts, as well as replenish the general fund until the end of the year.
The breakdown of the bond includes:
• $2 million to pay off the construction loan from S&T Bank.
• $382,500 to reimburse the borough's general budget fund for some building expenses beyond the $2 million loan;
• $200,000 for the construction of Cavitt Avenue parking lots for the community room and the paving of the parking lot for the public works building;
• $75,000 to John Pultan for property purchases for the Cavitt Avenue parking;
• $50,000 for the purchase of Cavitt Avenue parking lot near the Fifth Street intersection.
• $50,000 for the completion of the community room kitchen.
More than $84,000 targeted for the general fund will go toward reimbursing line items that were drained to help pay for the new building. Of that, $52,600 will be repaid to the sewage fund.
Even with the bond, council likely will consider seeking a short-term tax-anticipation loan later this year to help its cash flow early in 2013 until residents begin paying their taxes in the spring, said Daykon, the finance chairman.
“We should be on solid footing through the end of the year,” Daykon said in an email. “The important thing to keep in mind is that with the bond issue, we will no longer have monthly loan payments. We will pay the bond twice a year: one payment of just interest and one payment of interest and principal.”
When the bond closing happens in late October or early November, the borough will end up with an interest rate around 3 percent, Daykon said.
That will replace the 20-year, adjustable-rate building loan the borough received from S&T. Under that arrangement, the borough was paying 3.24-percent interest in the first five years, but the rate could have jumped as high as 6.56 percent for later five-year periods in the loan.
Bruno, whom Laird removed as finance chairman in March, said he is “totally against” the bond. He helped to shepherd the borough through a financial recovery plan eliminated nearly $1 million in debt.
“I'm not saying it won't work; it's not my choice,” Bruno said. “I think it's risky, and it's not necessary.”
Bruno has said the borough could borrow from several budgeted line items and outside funds — including sewage — to balance the general fund.
Council has countered that its auditors discourage those types of transfers, especially from the sewage fund. State law also prohibits that practice.
Section 2043 of the Borough Code states that all money received from sewer charges shall be deposited in a reserve fund and used only for the operation, maintenance and replacement of sewer facilities.
“As we tell people, the Borough Code is not a recommendation; it's the law,” said Ed Troxell, director of government affairs for the Pennsylvania State Association of Boroughs.
Chris Foreman is a staff writer for Trib Total Media. He can be reached at 412-856-7400 ext. 8671 or firstname.lastname@example.org.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.