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MABL OKs debt resolution

Lewistown to refinance debt of water authority

LEWISTOWN — At a special meeting Monday, board members approved a resolution by a 3 – 1 margin that asks the borough of Lewistown to take over the Municipal Authority of the Borough of Lewistown’s (MABL) debt.

In a roll call vote, board president Ben Rager and members Jennifer Miller and Frank Berrier voted in favor. Board member Jeff Rocco, appearing via Zoom, voted against, chastising the board in the process.

By allowing the borough to refinance its debt, the borough is a step closer to its previously discussed proposition to take ownership of the municipal authority and lease it to generate revenue for the borough.

As founder of the authority, Lewistown borough “Has the right, at its discretion, to pay off the indebtedness and take over the authority,” said Thomas Smida, bond counsel associated with Mette Evans and Woodside of Harrisburg.

Under the resolution passed Monday, the borough’s assumption of MABL’s debt will mean a savings in interest paid of more than $600,000. However, that money could go entirely to the borough, according to the agreement.

And, in response to a question asked by board member Frank Berrier, Smida said the authority’s debt service reserve fund of $1.7 million will be used as part of the refinancing, leaving the authority without those funds.

There were further discussions on this later in the meeting, fueled by a question asked by Ron Napikoski of Derry Township, who wondered if Lewistown Borough Council will now have to approve expenditures for system needs outside the borough. No clear answer was given.

Because the authority’s revenue will be pledged to the borough and MABL’s hands will be tied as far as borrowing, the authority will have to go through the borough for future capital funds, and the borough may have to vote on whether to issue more bonds, Smida explained.

The resolution asks the borough to pay three obligations of MABL: A 2014 Water Revenue Bond (original principal $4.3 million); a 2015 Water Revenue Refunding Bond (original principal $15,975,000; and a $2,992,996 (original principal) Water Revenue Bond that is related to the Pennsylvania Infrastructure Investment Authority (PennVest).

The borough would issue one or more general obligation bonds that would retire the three MABL obligations, existing borough obligations and pay for street improvements and other capital projects of the borough.

The authority also must approve a subsidy agreement under which it would pay the scheduled principal and interest on the three MABL obligations using revenue and receipts from the water system. If MABL is required to pay the full amount of the bonds as they exist, as stated in the resolution, it would realize no savings under this agreement.

The final schedule of payments will outline the debt to be subsidized on annual basis. Savings amounts will not be final until the borough outlines the cost of the 2021 bond issue.

Smida said interest rates have been consistent and he imagined a rate of roughly 4% for the new bonds. The authority solicitor, David Consiglio of State College firm Miller, Kistler and Campbell, said that rate was lower than when the authority bonds were issued. However, the actual rate on the existing bonds was not stated at the meeting.

Although it regards a smaller debt, the PennVest loan had a 1% rate when it was issued and may still be below the 4% threshold.

Smida said the authority could have refinanced the debt on its own, maintaining its independence as a quasigovernmental entity — in fact, that was the authority’s plan before the borough acted against it. He said the borough should be able to receive a better rate because municipals tend to have a better credit rating.

“This is not an unusual transaction in terms of financing across the commonwealth,” he said.

It’s still unclear whether the borough’s actions will be allowed, pending a decision by Senior Judge David Grine of Centre County in a still-existing case against the borough over this action.

MABL initially sued the borough, but withdrew from the suit earlier this year after borough council appointed a new member to the MABL board, a borough employee. The Pennsylvania Municipal Authorities Association, of which MABL was previously a member, has asked to continue the suit, and Grine said in March he would rule on that request.

Mifflin County Municipal Authority, formed with the intent of replacing MABL, also has a request pending in court to enforce the Memorandum of Understanding approved by all municipalities that are part of the water system, including Lewistown.

The state legislature is considering a bill that would require authorities serving more than one municipality to have all municipalities represented on their boards. State Rep. John Hershey (R-Mifflintown) has said he supports such a move. House Majority Leader Kerry Benninghoff (R-Bellefonte) has indicated he will get behind the bill if it reaches the House floor.

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