Cambria and Somerset county commissioners are working to quickly hammer out a deal both can agree on to refinance the bonds both guarantee for the Cambria Somerset Authority.
With interest rates rising and chipping away at their potential savings, there seemed to be a sense of urgency to get it done. The sides left a meeting on Thursday in Somerset mulling two options that would have Somerset County “guaranteeing” the entire $7.5 million for the CSA while strengthening language to compel Cambria to pay its share on time.
“The goal here is to come to an agreement that will benefit both counties,” Cambria President Commissioner Doug Lengenfelder said, noting both counties would be able to reduce their annual bond payments.
The reduction may not be nearly as much as much as the boards originally expected.
Interest rates have spiked since the quote the counties received in March, Somerset Solicitor Dan Rullo said.
So much so, that the projected savings over 20 years has dipped to approximately $465,000 – or $232,500 for each county – even with Somerset fully backing the restructured debt with its A-1 bond rating, he said.
Thanks to agreements already in place, Rullo said Somerset County essentially won’t be further tied to the bonds even if it guarantees the full amount.
Neither county serves as the bondholder – that’s the CSA’s role. And Cambria County still will owe annual payments toward the repayment equal to Somerset’s, Rullo said.
“The only way this guarantee becomes a factor is if the CSA goes under,” he said, describing it as an unlikely scenario that either county would want to see occur.
Somerset County officials have expressed some hesitancy in recent weeks to fully guarantee the bonds because Cambria was late on a 2011 payment share to the CSA, making it in early 2012. The current, then newly-elected commissioners board needed a few extra months that year to make its 2012 payment. Its 2013 payments were made on schedule.
Lengenfelder said payments were held by the Controller’s Office, despite commissioners’ requests during times cash was short, but that all payments have been made.
He said the Commissioners’ Office sought and received a judge’s writ ordering the payment to occur, and suggested Somerset officials tie language to any bond restructuring agreement that would require Cambria to take steps such as that again if necessary. In such a case, commissioners would be required to pay annual obligations a month before the due date or seek a judge’s order forcing payment, if needed, to ensure it is paid on time.
Somerset County officials suggested a county lose CSA board members – they currently each have four – if they are late on payments.
The sides left the meeting saying they will follow up with one another in the coming days.
If a tentative agreement can be reached, it would need to be ratified separately by both boards at public meetings, Rullo said.
The annual bond payment for each is county is approximately $464,000.
Commissioners John Vatavuk and Mark Wissinger, both CSA board members, suggested structuring a front-loaded savings that would steeply cut those payments the first year or two. After that, the annual bond dues would go back above $400,000 annually.
Both pointed to CSA efforts to boost its own revenues through mine leases and a potential deal with Pristine Resources for an unused CSA pipeline that could pump in millions of dollars that could be directed toward the bonds in the years ahead.
“That Pristine deal alone could make a big difference,” Vatavuk said.
Follow Tribune-Democrat reporter David Hurst on Twitter @tddavidhurst.