Luzerne County government’s outstanding debt would decrease $8.5 million — from $316.3 million to $307.8 million — through 2029 if council members proceed with a refinancing, financial adviser Scott Shearer estimated Tuesday.
But if council opts to absorb a $7.5 million energy-saving project in the refinancing, it would cost $12.1 million with interest and boost the county’s overall debt $3.5 million to $319.9 million, he said.
Shearer, of Harrisburg-based Public Financial Management, or PFM, presented the estimates because the previously released documents had projected the debt would balloon up to $68 million, to a maximum $383.9 million, if council proceeds with the refinancing and energy project.
These maximum estimates were a worst-case scenario that must be presented, but county officials said they would not sign off on the package unless the figures end up at or below those released by Shearer on Tuesday.
There are two parts of the $8.5 million in savings from the refinancing. The lowering of interest rates would reduce the debt $3.4 million. The remaining money would stem from the unlocking and use of millions that had to be set aside during a past borrowing package now subject to refinancing.
Shearer expects the county will obtain an interest rate of 4 percent or less. In comparison, the county currently pays average interest rates ranging from 4.75 percent to 7.7 percent on the debt involved in the refinancing, according to documents he presented.
Eight of 11 council members voted Tuesday to introduce a pair of ordinances to proceed with the refinancing including the energy project, with the understanding they could later remove the plan to fund lighting, heating, plumbing and other upgrades at multiple county buildings.
The McClure Company, which has an office in Wilkes-Barre, has projected the county will save $12.89 million over 20 years through the energy projects.
Council members Stephen A. Urban, Kathy Dobash and Eileen Sorokas voted against the ordinance introduction.
Dobash questioned if the energy investments would save money.
Urban said the county completed an energy-savings project years ago and asked why new borrowing was needed to switch to more efficient lighting and toilets.
McClure representatives presented a series of photographs and charts Tuesday outlining a range of recommended work, including a new central heating system for the courthouse to allow abandonment of old and deteriorating underground piping that is part of a steam tunnel system with the Water Street prison.
The prison hot water system is “on its last leg,” a McClure representative said.
‘Have to fix’
County Manager C. David Pedri said the energy project is more than changing light bulbs and fixing toilets. For example, the county’s boilers are too big, require replacement parts that are difficult to locate and won’t meet state environmental standards in the next inspection, an employee said.
“We have to fix these things,” said Pedri.
Shearer said the energy project was rolled into the refinancing to save the estimated $116,000 administrative expense of executing standalone borrowing at a later date, but he stressed the refinancing can proceed without it.
An Aug. 22 public hearing will be held on the refinancing proposal, with council’s final approval vote slated for Sept. 12, allowing a mid-October closing.
Councilman Rick Williams asked why the package was “front-loaded” to reduce annual debt repayments in 2017 and 2018 while increasing the amounts owed in subsequent years.
Under the current plan, the county pays around $26 million this year through 2028, with the final payment dropping to $3.9 million in 2029.
Under the scenario presented Tuesday, the county will pay $20.5 million in 2017, $23.7 million in 2018 and $26.3 million or $26.4 million until 2029, when the final payment would be $12 million.
Shearer said it’s common for governments to schedule savings in the first year or two, but the repayment may be reconfigured as long as there are no drastic hikes from year to year.
Williams said the current plan will allow a surplus this year and make budgeting easier in 2018, but it would saddle future council members and county administrators with increased payments.
Shearer said he’d suggest the county apply the savings to deficit reduction in 2017 and 2018. The county’s deficit was $8 million at the end of 2016.