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Elizabeth Twp. ponders plans for debt funding

| Tuesday, Aug. 27, 2013, 3:41 a.m.

As Elizabeth Township looks at ways to dissolve the sanitary authority and assume an approximate $34 million debt, the authority's supporters — including several township commissioners — have made it clear they won't go down without a fight.

Tempers flared again Monday evening during a special meeting to adopt a not-to-exceed borrowing ordinance for the acquisition of the authority, which must “dissolve and wind up its affairs” before Oct. 24, according to a consent order issued by Allegheny County Court of Common Pleas Judge M.A. Della Vecchia.

Joseph Muscatello, managing director with public finance firm Boenning & Scattergood, told commissioners that he researched three ways the township could take over the debt, each with a slight increase in residential sewage rates.

“If the township would take over the authority and use none of the authority's money, the debt service would go up approximately $420,000,” Muscatello said. “With 5,000 customers over 12 months, it would cost the average customer about an additional $7 per month.

“If you use the debt service reserve fund monies, which is about $1.7 million, you can get that $7-per-month additional charge down to about $5. If you use both the savings and debt services fund, the additional cost would be down to about $3 per month.”

Muscatello warned that interest rates have changed since he went over similar possibilities with the commissioners in May, and if the rates stay unstable it could blur the township's plans.

“Interest rates on the municipal side have gone up about 100 basis points since May,” he said. “So that's going to make a big impact on these numbers. You won't know how much it's actually going to cost until you actually do the bond issues.”

Jeff Mills from law firm Reed Smith said there is a solution that could benefit the township and residents.

“We believe there is an alternate path to potentially have the township go through the consent process with the bond insurer and — connected with the dissolution of the authority — the township would be able to assume the debt” without having to refinance, Mills said. “That then takes all the interest-rate risk out of this transaction. So all of the increases in rates would go away.”

Commissioners authorized the legal and financial consultants to move forward with reviewing Mills' plan and to provide their legal opinion about whether it would be possible.

“If we're able to do that, it's absolutely the best-case scenario and frankly a much better scenario than even I believed we would be able to achieve,” township Solicitor Pat McGrail said.

In case that plan doesn't pan out, the commissioners approved Ordinance 904, which will enable them to incur up to $41 million to complete the refinance of the authority debt.

“That's definitely Plan B,” McGrail said. “We want Plan A.”

The commissioners passed a motion not to take any action under that ordinance until they hear from their legal and financial team on the more desirable option.

But throughout most of the meeting, frustrated members of the sanitary authority board and other supporters accused the commissioners of not knowing what they're doing, and directly asked the board majority members — president Gene Francesconi, vice president Larry Vota and Commissioners Claire Bryce and Chris Evans — for reasons as to why the authority needs to be closed.

Authority board vice chair Jim Lesniewski Sr. pleaded for any sort of explanation.

“I spent 18 years on this job,” he said. “Can somebody tell me what I've done wrong that all this has to happen?”

The commissioners did not supply any specific answers, but Commissioner Joanne Beckowitz deflected the question to the majority members.

“You need to ask four members sitting on this board why this is happening,” she said. “You've done nothing wrong and I applaud you for your 18 years of service.”

Beckowitz turned to the other commissioners and said, “I'm telling you, this is the wrong thing and it's going to come back to haunt you guys.”

The sanitary authority has scheduled a public informational meeting at 6 p.m. on Wednesday at the Boston Spectrum.

Tim Karan is a staff writer for Trib Total Media. He can be reached at 412-664-9161 ext. 1970, or tkaran@tribweb.com.

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