Unable to get continued bank financing for its building project, Summit Hill Borough Council last night agreed to float a five-year bond issue for $214,052.
The amount is to pay off a loan the borough currently has with First Niagara Bank (formerly Harleysville Bank). Harleysville had provided financing for two years for the project but the bank won't provide the additional financing, it was reported.
The loan with Harleysville initially totaled $650,000, but a state grant got the amount that is owed down to $214,000.
Because the borough has been paying only interest on this amount, the combination of interest and principal will be taking a big chunk out the borough's budget starting next year.
The interest for the bank loan had totaled about $2,137.25 per quarter, said Michael A. Gaul of King, Spry, Herman, Freund & Faul LLC of Bethlehem, the borough's bond counsel.
The new bond, which has an interest rate of 3.95 percent and is tax-free to purchasers, must be repaid in five years.
The first payment for the bond, to be made Sept. 25, will be $2,160.74, which is an interest-only payment. After this, the borough must pay interest and principal, which combined comes to about $12,000 per quarter or $48,000 a year with this first payment due on Christmas Day of this year.
The borough is awaiting payment of $1.25 million in a state grant obtained through the office of State Representative Keith McCall. If the grant is received, then that money can be used to pay off the bond issue, said Gaul.
It's not known when the state grant will arrive or if complications involving a contractor will delay the grant. The borough has been sparring with its heating and air conditioning contractor regarding problems with the HVAC system.
Four members of council were present for the meeting. They were Council President Joe Weber, Harry Miller Jr., John O'Gurek, and William Chapman.
The motion for the bond issue passed 4-0.
"Is it something we can live with?" asked Chapman, regarding the affordability of the bond.
"I don't think we have much of a choice," responded Weber.
The financing is in regards to a 2008 building project, which cost $3.5 million and included construction of a new borough hall with a police station attached, and a fire station with a community center attached.