Penn Hills School Board selects $100M bond refinancing option
Penn Hills School District officials decided long-term savings was better than upfront cash when it comes to refinancing about $100 million in bonds for their high school and elementary school.
Board members voted 7-1 Oct. 30 to authorize bond counsel to pursue a restructuring option that could save about $10 million through the life of the bond.
Cathy Mowry was absent and Kristopher Wiegand dissented.
Wiegand and state-appointed chief recovery officer Dan Matsook pushed for refinance option three, which would have created a little more than $6 million in upfront savings, but would cost taxpayers about $6 million more long-term.
The district is about $172 million in debt, largely due to construction loans. It’s all expected to be repaid by 2042.
Wiegand said the immediate benefits of option three may have offset the need for a tax anticipation note, and could have saved the district more by not having to pay that interest.
A TAN is a loan many school districts and municipalities obtain to address cash flow needs until tax money comes in.
“I think we went with a good decision, but I want to make sure everybody knows that we really tried to do what’s best for the district and look at all the options,” Wiegand said.
Matsook said he endorsed option three because it addressed immediate needs.
“My priority is now,” he said. “We’re going to be cash-strapped this year and our fund balance is in a deficit. We need to front-load savings. Neither one of those (options) were wrong. It’s about what our priorities are.”
Board President Erin Vecchio said her priorities were with the taxpayers.
“I’m not charging the taxpayers another dime for these people’s mistakes,” she said. “Harrisburg told us from the get-go to build these schools, and now Harrisburg’s going to try to get the taxpayers of Penn Hills for more money? It’s not happening. We can’t afford this anymore … The board in 2009 voted on a whole different plan (for the schools) than what was built, and Harrisburg signed off on it all.”
Option three would also require Allegheny County court approval.
“Both options will necessitate a fund balance policy that restricts the use of the early savings,” Matsook said.
“This prevents the board from squandering the windfall.”
Philadelphia-based Public Financial Management Co., a public financial advisory firm, explored four refinancing options for the district, and district officials narrowed it down to two to vote on.
Scott Shearer, managing director for PFM, said three goals they had when evaluating refinancing options were to take advantage of low-interest rates, eliminate a debt service spike and not stretch debt repayment past 2043.
“We’re comfortable with all four options,” Shearer said.
“That’s why we put them on the table. From past experience working with other districts, all four have been implemented for one reason or another. It’s not a one-size-fits-all.”
Option two hit all three aforementioned targets.
Shearer said the district would need to adopt a resolution regarding the refinancing at its Nov. 25 meeting.
It would also receive a credit rating and bond insurance quotes in mid- to late December and lock-in interest rates in either mid-December or early January.
District officials selected the law firm of Wayne Gerhold as bond counsel, Buchanan, Ingersall & Rooney as disclosure counsel and Boenning & Scattergood as bond underwriter at a special meeting Oct. 22.
The firms were also recommended by PFM.
Michael DiVittorio is a Tribune-Review staff writer. You can contact Michael at 412-871-2367, [email protected] or via Twitter .