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Sanitary authority debt remains an issue

Thursday, July 4, 2013, 12:01 a.m.
 

Elizabeth Township Sanitary Authority officials say $7 million will be lost to refinancing costs if the township takes over all of the authority's debt.

At an authority meeting on Wednesday, sanitation officials said the township's intended termination of the authority will add unnecessary costs to the operation of the system that will be passed on to customers through sewage bills.

Attorney Wayne D. Gerhold, who was hired to represent the authority in matters pertaining to debt as they relate to the township's efforts to dissolve the authority, told board members that it will cost the township $3.6 million to refinance authority debt because of added taxes and higher interest rates.

Gerhold, who had with him a plan he said township lawyers gave him addressing the debt, said the township also would “squander” some $1.8 million the authority had saved by recently refinancing its debt. Gerhold said the township hopes to use that money to refinance authority debt, rather than put it toward capital projects as the authority had planned to do.

Authority members said the cost of refinancing the debt also would consume $1.7 million the authority has in its debt reserve fund, concluding the total cost of refinancing would be around $7 million.

The township has to assume all authority debt and responsibilities by Oct. 24 in order to comply with a recent agreement signed by the township and the authority.

The agreement also requires the authority to “take all necessary actions to dissolve and wind up its affairs” and prohibits it from taking on debt in excess of $300,000 before then without consent from the township.

Township commissioners took action in April to dissolve the sanitary authority.

Authority solicitor Thomas Barry noted on Wednesday that the township has yet to state a reason for the termination, even in court documents.

“They're supposed to tell you what we did wrong,” he remarked at the meeting.

Barry said he had to sign the agreement with the township in order to comply with the Municipal Authority Act, but he still doesn't want to see the authority dissolved.

“This is something we don't want to have happen,” Barry said, but “we're going to do what the law requires us to do.”

The board discussed whether the township, which has an annual operating budget of about $4.5 million, can afford to refinance the authority debt, which is around $32 million.

By paying off and assuming that debt, the township would add about $150,000 annually onto its debt service costs.

Gerhold said the township does not have the option of extending the debts, which will last until 2041.

Eric Slagle is a staff writer for Trib Total Media. He can be reached at 412-664-9161, ext. 1966, or eslagle@tribweb.com.

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