Pittsburgh water-sewer authority fighting higher costs
Pittsburgh Water and Sewer Authority officials today said they are scrambling to reverse a $230,000 increase in weekly interest payments on a complicated bond deal that has been battered by the economic downturn.
Thursday was the deadline to secure a letter of credit from a bank to stop the interest rate the authority is paying on the largest bond series from increasing to 7 percent, up from 4 percent, said Michael Kenney, executive director.
PWSA's financial advisor, PNC Capital Markets LLC, missed the deadline because one of two key bond insurers objected to language in an agreement under negotiation, said Jason DiMartini, manager director of PNC's public finance division.
If PNC and other bond advisers can secure the letter of credit, the higher interest payments can be reversed, but it will take at least a week to accomplish, perhaps longer, DiMartini said.
Kenney said the authority has roughly $41 million in unrestricted cash reserves to deal with the unanticipated costs. That's about 45 percent of the authority $89 million spending plan. The industry standard is to have about 25 percent on hand, he said.
"The authority has done very good over the last five years to increase that unrestricted cash flows for rainy days. Well, it's raining," Kenney said.
Councilman Patrick Dowd, a PWSA board member, long has criticized the authority's variable-rate bond dealings.
"This is, I think, at best a terrible situation," Dowd said. "But the people working on it are doing what they can."
Kenney said there has been no discussion of increasing customer water and sewer rates; however, the authority is running a $4 million budget deficit as of September. Kenney said the board could tap the reserve fund to fill that budget gap, as well.