Cambria County takes out $5M loan
EBENSBURG – With the security of a $5 million loan and long-term debt refinancing, Cambria County commissioners said they believe they may have solved the county’s cash-flow problem.
President Commissioner Douglas Lengenfelder announced at the commissioners’ Thursday morning meeting that the county has reached an agreement with First National Bank for a $5 million loan to pay off the remaining half of the county’s yearly $10 million tax anticipation note loan, which will be repaid over the next eight years.
The deal also includes reducing the $10 million loan to $5 million from now on, and it restructures the county’s $19 million debt, lowering the interest rate and shortening payments from 17 to 15 years.
Commissioner Mark Wissinger said the agreement was reached after months of meetings and financial exploration.
“This, to me, looks like the best avenue possible,” he said.
But not everyone agrees.
Controller Ed Cernic Jr. said the loan is nothing more than taking out long-term debt to pay off short-term debt.
“All we’re doing is kicking the can down the road,” Cernic said.
He also took issue with a $25,000 origination fee paid to First National as part of the loan agreement and the loan’s accompanying interest rate of more than 4 percent. He compared it to the $10 million tax anticipation note loan rate of 1.5 percent.
“I understand [the loan] wasn’t shopped around for any competitive rates,” he said.
Lengenfelder disagreed, saying it was the best deal the county could get and that the loan and debt refinancing will save the county $1.2 million over the next 15 years through reduced interest and fee payments.
The debt refinancing will save about $264,000 over the first seven to eight years, said Joel Valentine, a CPA with Wessel & Co., the county’s accounting firm.
“It’s meeting the county’s needs without raising taxes and not kicking the can down the road,” Lengenfelder said, looking to Cernic.
“This is a great answer for some of the problems the controller’s office has asked to be solved,” he added.
Cernic said the plan might have had more merit if the county wasn’t on the hook for an additional $8 million debt, not including the $5 million tax anticipation note, and only $3 million in cash to pay for everything.
About $4.4 million has been borrowed from county agencies, and there is $3.4 million owed in unpaid bills.
Several agencies are over budget for this year, he said – between $120,000 and $150,000 for food alone at the Cambria County Prison, for example – and it’s unfair for the county to keep squeezing money out of them to pay its bills.
“We’re trying to find budget monies to transfer, and [they’re] just not there,” he said.
Cernic said the real problem with the agreement is that it won’t solve continual budget shortfalls, which he attributed to the commissioners’ mishandling of the budget. The county always has been unable to pay its tax anticipation note without needing more loans, he said.
Lengenfelder acknowledged that the bank deal will not solve the county’s ongoing budget problems, but Chief Clerk Steve Ettien said Cernic might be looking at Cambria’s finances the wrong way.
Close to $2 million of the $3.4 million in unpaid bills is for the county’s health care fund, which will be paid next year. He also said the county has been overpaying into the fund by about $80,000 each month and will be reducing its payments next year.
Also, he said, about $1 million of a $2 million insurance bill payment will be coming back to the county, and other bills will be rolled over until next year, which is common procedure for every county.
The county’s budget isn’t what he would call healthy, Ettien said, but it is getting better.
“You could add it in there and you could make it look much worse than it is. … I could twist numbers all day,” he said.
Mirror Staff Writer Kelly Cernetich is at 946-7520.