Pittsburgh City Council considers borrowing $152 million for capital projects
Pittsburgh Mayor Bill Peduto backpedaled on Tuesday on a proposal to borrow $120 million for capital projects, scaling the figure down to $50 million in line with the city's financial recovery plan.
Early in the day, City Council introduced legislation that would allow the city to borrow up to $152 million this year, well above the $100 million state financial overseers recommended in a five-year financial recovery plan.
Peduto spokesman Tim McNulty initially said the administration wanted to borrow $120 million. He said $70 million in old bonds would be refinanced at a lower interest rate for a savings of $2.4 million. The city would issue $50 million in new bonds, he said.
Peduto scrapped the plan in a letter to council, saying the administration would comply with what Act 47 coordinators recommended in May: two separate bond issues of $50 million each, in 2015 and 2017. He said the administration still intends to refinance the old bonds.
“I want to ensure adequate time to make sure all concerned parties and the public have adequate time to consider all of the complexities of the refunding,” Peduto wrote.
McNulty said Act 47 coordinators James Roberts and Dean Kaplan, appointed by the state to help Pittsburgh resolve its long-standing financial problems, were aware of the refinancing proposal and did not object.
Roberts and Kaplan did not return messages.
The refinancing is expected to save the city $2.4 million and decrease annual debt service payments from $87.3 million a year to $84.9 million, or 17 percent of $487.1 million in budgeted expenses, McNulty said. The city has been working for years to reduce debt to comply with an ordinance that requires its debt payments to account for no more than 12 percent of expenses.
Peduto said the $50 million would be used to buy large equipment and upgrade infrastructure, including roads, bridges and buildings. The mayor estimated that Pittsburgh faces a $60 million deficit, mostly because it has neglected to maintain infrastructure during a decade-long cash crunch.
“It's a drop in the bucket to what we really need to stop the 10-year decline of our infrastructure,” Peduto said.
Council members who spoke to the Tribune-Review on Tuesday said they would support the legislation. Controller Michael Lamb said he supports “responsible borrowing” for capital expenditures.
Council President Bruce Kraus of the South Side said it's a good time to borrow, because interest rates are low.
“There is a clear need to invest in our infrastructure,” he said.
Councilman Ricky Burgess of North Point Breeze said he has advocated for additional borrowing for capital improvements.
“We have to do it,” he said. “How are we going to repave streets, how are we going to repair bridges if we don't borrow?”
The fixed-rate bonds would mature in 2032. McNulty said officials won't know interest rates until the bonds are issued.
Pittsburgh will pay about $631,000 for insurance and fees to bond counsel Ronald Stout of the Downtown law firm Clark Hill Thorp Reed, and underwriters, which include PNC Corp., McNulty said.
Bob Bauder is a staff writer for Trib Total Media. Reach him at 412-765-2312 or email@example.com.