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Palmerton School District to borrow $5 million and restructure bond issue

Published December 08. 2010 05:00PM

Palmerton Area School District has adopted a resolution to borrow $5 million and restructure its 2006 bond issue.

The school board unanimously agreed to take that action at a special meeting on Tuesday after it heard from Henry Sallusti, the district's financial adviser.

That means the district will borrow $5 million in bond funding and restructure a 2006 bond in the amount of $5.4 million that is scheduled to be paid off in 2026.

Sallusti said the bonds have a five-year call, and the interest rate will be 3.95-percent from 2011-2026. He said the evening marked the sale date, and that the district was now locked in, with the closing date being Dec. 30.

In October, the board agreed to borrow an additional $5 million to fund maintenance and repair projects, with the stipulation that unused borrowed money be used to pay down the debt.

That decision came after two prior motions, one to borrow $5 million, and the other, to borrow $2 million, were defeated.

Also at that time, the board agreed to refinance a pair of bond issues and the energy performance lease.

The district has a 2007 bond in the amount of $1,545,000 scheduled to be paid off in 2018. But, Sallusti said the 2007 bond issue has been taken out, and "will stay as it is."

Also, Sallusti said the energy savings had a 1 percent premium, which made it "not feasible to refinance."

"It's no one's fault; it's just the market," Sallusti said. "Interest rates are going up."

In July, the board agreed to refinance its 2005 bond issue in the amount of $6 million that is scheduled to be paid off in 2016. In the process, it saved $175,314.

Last month, the board on an 8-1 vote agreed to authorize Barry Isett & Associates to begin design work on the high school roof.

In a related matter, the board, on a 7-2 vote, agreed to authorize the firm as engineer of record for the district, effective immediately.

Prior to both votes, the board heard a presentation from Rob Sarnowski of Barry Isett & Associates, who reviewed a list of districtwide projects that need to be addressed.

Among those are the high school stadium; the high school tennis courts; repointing work at Towamensing Elementary, an air dryer at S.S. Palmer Elementary; the junior high school gymnasium floor; the high school gymnasium floor; and the high school auditorium.

Sarnowski said a three-year construction plan has been created that would address the high school roof, among other projects, in year one; the high school auditorium in year two; and any alternates in year three.

The high school roof project is scheduled to go out to bid early next year.

Business manager Lisa Vignone said that while the payments will go up, the district will not exceed the $1.6 million a year in debt service without impacting the amount of the loan payments for the next eight years.

As a result, the debt service for 12 years will be about $1.6 million, Vignone said, with the remaining four years at about $1.2 million, she said.

Had the board not agreed to borrow, the debt service would have decreased to $1.2 million in 2019, Vignone said. From 2020-2023, it would have been about $670,000, and from 2024-2026, about $470,000, at which point the district would have been done with its debt service, she said.

The board previously heard from representatives from Performance Roofing Systems, which said it could replace the high school roof for $900,000, complete with a 30-year warranty. Or, it could replace the high school roof for $600,000 with a 20-year warranty.

That came after a review of the board's project priority list in September showed the repair of the roof was clearly at the top of its to-do list.

In June, Alan Behnke of Tremco Roofing, said the cost to restore the high school roof would be about $583,090, and would include the restoration of the boiler room roof. Or, he said, the district could replace the roof at a cost of about $2 million.

Behnke also noted at that time the weightroom roof is also in dire need of repair, and added that it couldn't be done until the bleacher system is addressed. He said the cost to replace that roof would be about $133,076.

The district could also have done a combined project that would cost $350,000; $200,000 for the bleachers, and $150,000 for the roof, Behnke said at that time.

Next on the board's project priority list was the generator at S.S. Palmer Elementary; the junior high school gym floor, tiles and bleachers; Parkside Education Center building repairs; and high school renovations.

Projects that rounded out the top 10 were the junior high boiler; oil tank removal; tennis courts; S.S. Palmer steps; and the high school hot water boiler.

All told, the list of 23 projects on that priority list came in at $1,641,039, said Superintendent Carol Boyce, who cautioned the figure was a best guess estimate at that time.

In August, the board reviewed a potential three-year expenditure supposition created by Vignone at the behest of the board. The supposition presumed level funding on all department line items, as well as a 3 percent increase in salary and 5 percent increase in benefits in each of the next three years.

It also presumed a category known as other, which refers to the other agencies with whom the district does business, such as the Carbon Lehigh Intermediate Unit, outplacement providers where some of the district's students receive services, and places with whom the district has educational service contracts, whereby the district anticipates a possible 10 percent increase.

Boyce said at that time the district had lost $23,000 in grant funding it was counting on in the 2010-11 school year in the educational areas, and added that it appeared the only way it will be able to afford to pay for any major facilities and buildings and grounds projects is through the bonding process.

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