Leaders discuss repaying debt

Mike Vind, a member of the consulting team hired by the city to shop its water and sewer systems for lease to the highest bidder, has said the Altoona Water Authority, which operates the systems, won’t need to pay off its own $114 million debt to participate in the proposed lease auction.

That would reduce the barrier for the authority’s participation, because the money put up by the other bidders would need to include that payoff. Authority solicitor Alan Krier, however, said recently he thinks Vind may be wrong.

“I think we would at least need to pay back the bonds,” based on a provision in the Municipality Authorities Act and on the bond indentures – the contract between the authority and the bondholders, Krier said.

The same requirement might not be necessary for the authority’s debt to Pennvest, a state agency that provides low-interest loans, because Pennvest, which holds about half the authority’s debt, could waive the requirement, Krier said.

The provision in the law and the indentures are designed to protect bondholders – lenders – because when the authority is operating the systems, the rates it can charge for water and sewer services ensures it can pay the bonds back as they come due, according to Krier.

The potential revenue is thus collateral.

Under the auction plan, the city would take back the systems from the authority and lease them, probably for 50 years, to the successful bidder.

The implication of Krier’s argument is that those legal restrictions would trump the authority’s repossession of the systems under the

lease agreement.

Griffin Financial Group, the city’s consulting firm, has suggested the city can limit rate increases by the lessee with an initial freeze and subsequent yoking of the rates to inflation.

Other attorneys in Krier’s firm agree with him, Krier said.

The authority has made it clear that it hopes to retain control of the systems.

Mirror Staff Writer William Kibler is at 949-7038.