Penn Hills to float $5.5 million to refinance existing debt from 2014

Penn Hills Council voted unanimously to take out a bond that will refinance existing debt from 2014.

According to the ordinance, the bond allows the municipality to float as much as $5.5 million from underwriter Piper Sandler and Co.

The money will not create new debt. Rather, it will refinance debt from 2014 at a lower interest rate, around 1%. The old interest rate for that bond was 2.79%.

Refinancing that money, which sits around $5 million, at that low interest rate would rake in about $171,000 in net savings for Penn Hills, said Chris Shelby, managing director at Piper Sandler, during council’s Sept. 21 meeting.

Hiring Piper Sandler would mean the municipality paying around $116,000 in fees, but the municipality would still see the $171,000 in savings through 2027, when the 2014 debt is set to be paid off.

Mayor Pauline Calabrese pointed out during the meeting that certain fees are negotiable. She also had asked Manager Scott Andrejchak to determine what the original 2014 bond was for.

Shelby informed council that the 2014 bond also refinanced an existing bond, but could not offer specifics.

When asked about the 2014 bond by a reporter, Andrejchak said he would have to look into it. But generally speaking, he said, refinancing the debt will be a silver lining for the municipality.

“Any found money is rare to some extent and a good thing,” he said.

Andrejchak said the municipality is gearing up to finalize its spending plan for 2021. He declined to speak on specifics but said tax revenue losses from the coronavirus pandemic have not been as dramatic as he had expected.

“But I don’t want to count chickens before they hatch,” he said.

Budget discussions with council and the public begin in November.

Municipalities across the nation will face budget constraints as tax revenues are expected to drop as a result of the coronavirus pandemic’s stay-at-home orders and unemployment rates.

University of Pittsburgh Municipal Finance Research Collaborative studies released in June said as many as 249 municipalities across Pennsylvania, including a chunk in the southwestern region, will not be able to pay their bills in the next year or so.

It is unclear how much of a deficit there might be in Penn Hills’ spending plan and how that hole could be filled — whether it be through a property tax hike, cutting services or a combination of both.

The municipality’s millage rate on property taxes was last increased in 2018, the first time since 2011.