State College Borough Council on Monday approved borrowing $10 million to refinance existing bond debt, construct parking facility improvements and acquire an unnamed building.
Chris Gibbons, of Concord Public Finance, said that interest rates are historically low and the borough will save on costs by combining all three into one 10-year loan. The proposal approved by council, from Riverview Bank, has a 1.59% fixed interest rate through the first seven years of debt service and a variable rate capped at 2.5% for the final three years.
The General Obligation Note will fund just over $4 million for design and construction of improvements to the borough’s parking garages and other facilities.
A condition appraisal of the Beaver, Fraser and Pugh garages and McAllister Deck conducted by Walker Consultants in 2020 identified a series of repairs needed over the next three years. Those repairs were outlined in a report to council in March, when Gibbons first discussed using low interest rates to fund the repairs and refunding 2016 General Obligation Bonds.
About $4.4 million of the loan will go toward refunding those bonds, giving the borough better terms on the debt.
The final $1.5 million is designated to “acquire and improve an existing building for municipal purposes,” Borough Manager Tom Fountaine said. He added later that the building is “part of a housing project the Redevelopment Authority is working on.”
Douglas Shontz, assistant to the borough manager, said he could not comment on a real estate negotiation, but that the matter will be on an upcoming council agenda.
Gibbons said Concord received 10 proposals from six banks for the financing, with Riverview offering the best deal. They also evaluated the current bond market, which was better by about $41,000. But, he said, the bank proposal was more attractive because it offers the ability to draw down funds over three years and only pay interest on debt drawn down; the variable rate at the end of the term could mean lower interest expenses; and it can be prepaid any time without penalty.
He said the offers received show the borough is in good financial standing.
“Your general standing in the community allows you to obtain very significantly low interest rate proposals, and a lot of proposals,” he said.