Aug. 16--Pittsburgh borrowed $50.4 million this week at a "historically low interest rate" to make capital improvements, including upgrades to crumbling roads, bridges and buildings.
Finance Director Paul Leger said the interest rate on bonds City Council authorized last month is 3.2 percent, a lower rate "than anyone can remember." Annual debt service payments, now about $87.3 million, will increase about 4 percent over 18 years until the bonds are paid off in 2032, he said.
"This issuance preserves the debt cliff in 2019, which will save the City about $40 million per year," Leger said.
Leger attributed the low interest rate to a decision by Moody's Rating service in late July to upgrade the city's bond rating outlook from stable to positive.
The city is paying consultants $189,556 in fees as part of the deal, including payments to two Downtown law firms: $29,500 to Clark Hill as bond counsel and $24,000 to Buchanan Ingersoll as counsel for PNC, the bond underwriter.
Huntington Bank, the bond adviser, will receive $65,000. Moody's and Standard & Poor's, which provided credit ratings, will each receive $25,000. There are additional payments of $500 to $4,000 as part of the deal.
City debt service will increase about $2.2 million each year until 2019 and by about $4.5 million each year after that.
Annual debt service is about 18 percent of $487.1 million in budgeted expenses. The city has been working for years to reduce debt to comply with an ordinance that requires its debt payments to account for no more than 12 percent of expenses.
Leger said the city is on track to be well below the 12 percent threshold in 2019 when total debt payments fall to $42.6 million a year.
Bob Bauder is a staff writer for Trib Total Media.
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