Hazleton City Council hears refinancing pitch

Apr. 17—Council members in Hazleton got their first look this week at a plan for purchasing fire trucks and other equipment as part of a proposed financing of city debts.

The plan has been in the works for months and involves restructuring more than $6 million in existing bonds and notes. It also secures about $3 million in new money to pay for three fire trucks that the city ordered last year and equipment for the Department of Public Works, according to Mayor Jeff Cusat.

The goal, Cusat said, is to take advantage of favorable interest rates and invest in equipment while keeping debt service payments in the current range of about $1.2 million to $1.3 million per year.

"We were on pace to be possibly debt-free by 2025," Cusat said. "With the borrowing, we're going to extend (payments) without really increasing the debt service."

The plan involves consolidating a $1.536 million bond issue from 2005, a $3.237 million note from 2015, and a $1.3 million note from 2018 and issuing $3 million in new money for the fire trucks and equipment, Cusat said.

Interest on existing debts range from 2.853% to 4.735%, but would drop to about 1.941% under the plan, he said.

A $595,000 Act 47 loan from the state is also among city debts, but that money was secured at no interest and will not be part of the refinancing.

The city would use the savings and new money to pay for a ladder truck and two pumper trucks that were ordered last year for about $2.48 million — and leave the city with about $700,000 for updating public works equipment, Cusat said.

The transaction would have minimal impact on debt service payments, which would increase by about $6,800 this year, by $34,000 in '22; by $28,000 in '23 and by $17,000 and $14,000 in 2024 and 2025, respectively.

Debt service payments would drop by $1 million per year in 2026 through 2040.

City Administrator Dan Lynch said the new borrowing is significant for the city because it's the first time in years that the funds represent an investment.

"This additional $3 million in funding is actually a kind of important bellwether for the city in that it represents for the first time in a very long time the borrowing of money for the actual purpose of investment in the city, investing in the future and allowing the city to provide better service," Lynch said. "All of the debt on the city's debt service right now is literally from adverse financial impacts during different time periods."

If council moves forward with the transaction, it will have minimal impacts on future budgets because of the lower interest rate and payment structure, Lynch said.

"The city's debt service will stay mostly level until 2025 when it will drop off about $1 million," Lynch said.

Council will decide how to spend roughly $700,000 for equipment needs. Administrators gave council some options that include an estimated $433,000 vactor truck, a $261,000 street sweeper, a $53,000 sanitation vehicle or portable light towers that cost about $12,000 each.

Since funds are limited, the city will not be able to purchase all of that equipment, Cusat said.

Ryan Hottenstein, vice president of Financial S&lutions — a firm that serves as the city's financial advisor — gave council an overview of the proposed transaction and a tentative timeline for the process.

An ordinance that authorizes the city to incur debt could be presented to council April 27 and adopted in mid-May. The city could close by late June, he said.

Contact the writer: sgalski@standardspeaker.com; 570-501-3586