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Alcosan faces over $2.6M in bond costs, could save more than $30M

Aaron Aupperlee
| Tuesday, Aug. 4, 2015, 10:27 p.m.

It could cost the Allegheny County Sanitary Authority more than $2.6 million to issue bonds to refinance debt and pay for capital projects, authority officials said.

Alcosan sold $265.27 million in bonds July 27.

Allegheny County Treasurer John Weinstein, chair of Alcosan's board of directors, said the bond sale resulted in interest rates that could save Alcosan more than $30 million, more than initially thought.

Original estimates pegged savings from refinancing $195 million in debt at $27 million.

The remaining funds from the bond sale will go toward capital projects.

The authority won't know the full cost to issue the bonds until it closes the deal in September, said Jeanne Clark, Alcosan's spokeswoman.

The underwriters of Alcosan's bond, led by investment banking firm Boenning & Scattergood, could receive nearly $862,000 in fees. Alcosan estimates it will spend about $218,000 on bond insurance. Other costs, such as printing, accountants and fees paid to Downtown firms Campbell & Levine, Clark Hill, Cohen & Grigsby and Dinsmore & Shohl and payments to rating agencies, could total $595,500, according to estimates provided by Alcosan. A surety policy, which would insure payments should Alcosan default, makes up the biggest cost at about $927,500.

Clark did not know how much it might pay to BNY Mellon Capital Markets, the financial advisor on the deal. BNY Mellon was not available to comment.

Tim Davis, vice president and director of the fixed-income and municipal bond department for Downtown-headquartered Hefren-Tillotson Inc., which was not involved in the deal, said the fees appeared fair and competitive.

Members of Alcosan's Board of Directors, who are appointed by Allegheny County Executive Rich Fitzgerald and Mayor Bill Peduto, approved the bond issue in June. Weinstein said Alcosan's staff chose the firms to handle the bond sale and presented the team to the board's Finance Committee — Weinstein, Vice Chair Sylvia Wilson, a Pittsburgh Public Schools board member and Treasurer Jack Shea, head of the Allegheny County Labor Council. The Finance Committee then presented the deal, including potential costs, to the board, said members Corey O'Connor and Harry Readshaw, a city councilman and a state representative respectively.

Alcosan selected the underwriters through an open bidding process. Bond counsel was chosen based on similar factors, Clark said.

Firms or employees of firms involved in the deal donated a total of $16,000 to Weinstein's campaign in 2015 and 2014, records show. Readshaw received $800 in donations in 2014 from firms involved in the bond sale. O'Connor received $300 in 2014. All three said the donations did not influence the bond deal.

Aaron Aupperlee is a staff writer for Trib Total Media. He can be reached at 412-320-7986 or aaupperlee@tribweb.com.

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