City Council approves bond issue for improvements
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Pittsburgh City Council approved a bond issue and refinancing Tuesday that will generate more than $80 million for capital investment -- a deal hailed for its low interest rates, low costs and big potential to lift a city that has deferred projects for years.
"You're going to see a different city now," Councilman Ricky Burgess, the finance chairman, predicted after council gave the borrowing final approval.
Officials said market interest in the borrowing, which comes about two weeks after two ratings agencies revised the city's financial outlook from "negative" to "stable," offered additional evidence of the city's financial progress.
"This is proof positive that our mayor has been leading the city on strong fiscal ground and is leading us toward economic recovery," Mr. Burgess said.
Because some investors agreed to pay more than face value for the bonds, the city will float less than $72 million in new debt but receive $80 million in sale proceeds, finance director Scott Kunka said. The city also will save $4.7 million from the refinancing of about $42 million in old debt.
This is the first borrowing of Mayor Luke Ravenstahl's tenure.
Over the past six years, Mr. Ravenstahl opted to pay down $243 million of the old debt that helped land the city in financial oversight. During that time, he cobbled together a capital budget from operating funds, putting many projects on the back burner.
Now, Mr. Ravenstahl has said, it's time to do some of those projects. Mr. Burgess said he expects a fair share of the new money to flow to long-neglected low- and moderate-income neighborhoods.
He wants to use the bond money over two years, When federal block grant dollars and other sources of funds are added to bond money, the city's capital budget could total as much as $72 million this year and again in 2013.
Last year, an especially lean year, the city spent $25 million on capital projects.
The 15-year borrowing will have an annual average interest rate of 3.29 percent, described as the lowest rate on a city borrowing in more than 20 years. In another sign of market confidence, the city was not required to purchase bond insurance as protection for investors.
"That saves us a little over $1 million in transaction costs," Mr. Kunka said.
In all, Mr. Kunka said, the city will spend about $42 million in interest and costs, including $870,000 to lawyers, underwriters and other consultants who worked on the deal. Mr. Kunka and Councilman Bill Peduto said transaction costs usually are much higher.
After Mr. Ravenstahl proposed the borrowing last year, some council members expressed concern that Mr. Ravenstahl wanted to throw money around city neighborhoods before the 2013 mayoral election.
But there was no talk of that Tuesday. Even Mr. Peduto, a likely mayoral candidate, was satisfied.
"You have me 100 percent," he said.
First Published February 1, 2012 12:00 am
