The Herald, Sharon, Pa.

Local News

February 22, 2014

Bond adviser suggests checking bank rates

HERMITAGE — The city of Hermitage’s bond consultant told city commissioners Thursday they could score some money for capital projects by refinancing a 2009 bond issue.

But, Michael Zubasic also told officials they might get an even better deal by taking out a loan from a bank.

“Your bond guy is telling you to go to a bank,” Zubasic said, confirming to the commissioners that they were hearing him correctly.

The 2009 issue has just more than $2 million left to be paid over the next eight years at an average interest rate of 4.25 percent.

Interest rates are such that the bonds could be paid off and new bonds issued at current rates, about 2.5 percent, resulting in the city making the same payments as the old bonds for the same length of time, but netting $150,000 to spend for capital projects, Zubasic said.

“That’s a lot of savings there for $2 million,” said Zubasic, managing director of the public finance division of PNC Capital Markets, Pittsburgh.

However, with that relatively small amount to be paid, the city might get a better deal by borrowing from a bank loan. The interest rate might be higher, but the costs would be less and the city could end up with more money to spend, Zubasic said.

City Manager Gary P. Hinkson said officials will take a couple of weeks to talk to banks and see if they would be interested in lending the city money and what the terms would be.

Commissioners said city staff should contact banks that have branches in Hermitage; First National Bank already has been approached.

At Zubasic’s request, however, PNC will not be contacted. He said he did not want it to look like he was trying to steer business to his employer.

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