Westmoreland County may lose $8M as it ends controversial bond deal
Westmoreland County commissioners said Thursday there are no plans to raise taxes to pay for a multimillion-dollar investment loss from a risky bond deal approved by a previous board five years ago.
Officials are expected to finalize a financing package next month that will terminate a controversial bond deal in which the county is expected to lose more than $8 million.
Commissioner Charles Anderson said cash from a new round of borrowing will cover the loss, refinance existing debt and infuse up to $10 million to pay for capital improvements.
“We don't anticipate any” tax increases, Anderson said.
Commissioners on Thursday hired Valco Capital LTD of Ligonier as its financial adviser to work on a package to refinance a $35 million bond deal completed in 2008.
The company will be paid up to $30,500 for its work. Dinsmore and Shohl LLP of Pittsburgh was hired at $24,000 to perform legal work on the deal.
In 2008, a previous board of commissioners entered into a “swaption” deal that essentially bet on interest rates. The higher the interest rate, the more money the county earned.
When the rates dropped drastically, the county lost money.
Sandy Flanders, the county director of financial administration, said the county now owes $8.5 million on the deal, which can be broken by June 1 to lessen future losses.
Flanders said the new deal would increase the county's debt to $114 million, a $10 million increase.
Yearly payments would jump to about $9.8 million, an increase of about $200,000, she said.
Commissioners said plans are being formulated to borrow up to $10 million to revamp office space, convert the closed-waste-to-energy plant in Hempfield to a new forensics center to house the coroner's office and renovate the courthouse. Commissioner Ted Kopas said he opposes a $500,000 proposal to build a new suite of offices for commissioners on the sixth floor of the courthouse office annex.
“I'll be scrutinizing very closely the projects. I am not as excited about taking out new debt,” Kopas said.
Commissioner Tyler Courtney defended the new borrowing, saying the money will be used to pay for projects that usually would have to be paid from the county's general fund.
Rich Cholodofsky is a staff writer for Trib Total Media.