Elk Lake to borrow $7.6 million
BY PAT FARNELLI
The Elk Lake school board approved a $7.6 million loan application Thursday night for a proposed expansion of the Susquehanna County Career and Technology Center.
SCCTC will be a co-applicant for the loan.
Attorney Brian Koscelansky, who was instrumental in developing the resolutions between SCCTC, the district and Peoples Neighborhood Bank, said the Pennsylvania Commonwealth Local Government Unit Debt Act “has very specific ways that a school district can take a debt action.”
The process is simpler for a vocational/technical school, which is not subject to the Debt Act.
After the board passes the resolution, the loan application will be subject to a state review, and then the bank and schools can wrap up the financing, Koscelansky said.
According to the bank commitment letter, the loan is for a 20 year amortization plan, at 3.5 percent tax exempt interest for the first 10 years, 3.65 percent for the eleventh through fifteenth year, and at a variable rate from the sixteenth year through maturity, at 20 years. The variable rate will have a floor of 3.65 percent, and a ceiling of 5.5 percent.
Superintendent William Bush said the school district wanted to go with 15 years.
Koscelansky explained that the bank’s commitment letter was for 20 years, but that the letter states the school has the right to pay the debt off early, or to accelerate payments.
“The 20 years is the longest amortization that the bank is willing to give you,” he said.
“We had already decided we wanted to pay it in 15 years,” Bush said.
“Staying inside of 15 years, we wouldn’t even get to the higher interest,” said board president Chuck Place.
“If rates are better in a few years, you can get a new bank deal later and go through the same process you are now,” Koscelansky said.
The bank commitment states that if the amount of interest on the loan is such that the Internal Revenue Service becomes involved, the most the interest can be is 6 percent, with a 5 percent debt penalty.
“The worst case scenario is 11 percent, which is why that is given as the maximum rate,” he explained.
Place thanked Koscelansky for breaking the commitment letter and resolutions down so clearly.
According to Koscelansky, it is possible for the district to request for the bank to extend the original interest rates. He said that the state has 20 days to complete the review process, which he said would be fairly simple, since this is the only debt the school has.
The board unanimously voted to approve the resolution, which will be advertised.
During the public cmment part of the meeting, Sue Heed asked about how much money had been received by the district from gas well royalties to date.
Business manager Kim Hollister said that with a recent check received for roughly $50,000, the total royalties received by the district from gas well production from Cabot from July through December was $322,197.
The expansion project includes new facilities for existing educational programs as well as several new programs to be added, such as auto body collision and repair technician; vehicle maintenance and small engine repair technology; security and protective services; electrical, electronics and communications engineering technology; health information and medical records technology, and criminal justice / police science.
Bids for the actual building came in at $5.4 million, with the balance to be used for equipment and supplies to get the center operational. They will be bid later in the process.
In addition to Elk Lake, six other school districts send students to the center, including Blue Ridge, Lackawanna Trail, Montrose Area, Mountain View, Susquehanna Community and Tunkhannock Area.