The loan was been taken out to cover expenses related to the resignation of borough police officers in connection with a fatal beating of an illegal Mexican immigrant in
"Before we go any further with the public section of this meeting, I would like to announce something which we believe is of great importance to this community," Segal said. "We have received a letter from a local bank, announcing a default on a loan that was instituted in about 2010. It has been carried on the budget of this borough as an unfunded debt and has accrued interest for the past few years and now stands at about
Segal continued, "The majority of the previous council, before the end of the year 2013, decided to approve the budget, approve contracts, award raises and hire personnel at full time, before the new council convened at the beginning of 2014. Some contracts may be reopened and reviewed. There is another matter which is the complete disagreement of the budget for 2014, but we are forced to accept it as is with certain reservations. Because of all these happenings, we believe drastic measures must be taken. We feel we will institute a different way of how we deal with future matters."
Segal called for public comment on the matter. Resident Donna Gawrylik was the first and only person to ask questions and comment on the loan default, questioning the council, borough Manager
"In 2010, you took out a loan for
Segal said the loan was not for that amount, but the current amount includes accrued interest.
"So nothing was paid on it?" Gawrylik asked.
"What's happened in 2010 is that because of the unfortunate and tragic incident that happened about two years before that, it resulted in the borough incurring additional expense in the amount of
The incident that Palubinsky referred to was the beating of
In the case, a
Meanwhile, two former
Referring to the additional expenses, Palubinsky said, "That included accumulated time for officers who had resigned at that time, an automatic liability increase of
Gawrylik asked what were the payments to those officers for. Palubinsky said the borough was required to pay any accumulated time when they resigned, such as vacation and sick time. He said the borough needed to hire additional part-time police officers since 50 percent of the police force was lost at that time.
"Since 2010, why wasn't there anything paid out (on the loan)," Gawrylik asked.
"We were working with the local financial institution in rolling over a tax anticipation note until we got to an unfunded debt process," Palubinsky said. "What we were going to do is proceed with an unfunded debt action whereby we would get approval by the courts and maybe pay that over a five- or six-year period. We were working with the bank (M&T) to retire that, and we're also working with another institution to proceed with our unfunded debt process.
Gawrylik asked when was the first payment on the loan expected. Palubinsky said that first payment was supposed to be in 2010, but the bank worked with the borough due to the "extraordinary, extenuating expenses" in 2010.
"So now they're calling in the loan," Gawrylik said. "Who would be considered responsible for this debt?"
"The borough," Segal said.
After the meeting, Segal said, "Right now, we're at the mercy of the bank at this point. Nobody expected this."
"We're waiting to hear back from the bank," Palubinsky said. "We're in the process of negotiating with the bank hoping that they're going to help us out in this situation. We want to resolve this and move forward on this thing. Up until this time, we never had an issue. In a small town, to incur that debt at that time, it's an extraordinary cost that is a severe financial burden that we're trying to address. However, during this period of time, we've also been able to maintain services, provide police protection, maintain benefits. Hopefully, we're going to move forward on this.
The unfunded debt process would have the borough refinance the loan and paying it off over a set number of years. Palubinsky said after the meeting that the borough would need permission from the
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