Unity municipal authority blames rate hike on past actions
Unity Township Municipal Authority distributed a 22-page document to about 20 residents attending the board’s Wednesday meeting to explain a rate hike planned for 2015.
The authority reviewed a timeline, including board records stretching back to 2004, to illustrate financial decisions of previous members that included a “swaption agreement” with PNC Bank that paid $2.6 million upfront on $34 million in bonds to fund plant, collection line and administration construction costs.
Authority board member Thomas Couch said the interest rates on the bonds were comparable to a variable-rate mortgage, which seemed like a risk worth taking until interest rates plummeted, starting in 2007.
“In a sense you’re betting that the interest rate is going to work in your favor,” he said.
Over time, the authority lost $8.1 million negotiating and renegotiating the bonds, according to the documents.
In December, the board began soliciting for advice to recall the 2004 bonds and refund them with fixed-rate bonds, approving the new terms in October.
Couch said the board considered expectations for interest rates and tried to refinance the bond on the board’s terms, expecting the bank to call the bonds at the end of the year.
“There is no indication interest rates are going to go any lower, so the earlier we act on this it’s going to help us secure a better rate,” he said. “We chose to be more proactive on that and get it done early.”
Operations manager Doug Pike highlighted a pie chart in the documents showing that 75 percent, or $8.57, of the $11.50 increase in residential customers’ base rate will go toward the cost of the bond refinancing.
About 10 percent, or $1.17, will go toward operations, maintenance and treatment costs. The remaining $1.76 is planned for contributions to long-term projects, including a proposed stormwater plan and sewage realignment in conjunction with a PennDOT project on Route 981.
Monthly rates will rise, depending on water usage, from about $39 to $50 for residential customers.
Supervisors Mike O’Barto and Tom Ulishney attended the meeting to voice their concern for seniors who live on fixed incomes.
“It just kind of adds insult to injury because the cost of everything is going up,” he said. “We’re telling them because of mistakes that were made financially, they have to pay more money in their sewage bills.”
Authority board chairman Ron Carey said the panel didn’t want to wait for the bank to call the bonds, which would have resulted in a bigger rate increase.
Stacey Federoff is a staff writer for Trib Total Media.