'Net auction nets good interest rate for borough

August 30, 2002|by STACEY DANZUSO

CHAMBERSBURG, Pa. - An Internet auction yielded a record-low average interest rate on a $10 million bond the Borough of Chambersburg will use to help pay for a new power plant.

"This is the lowest interest rate in the 25 years of our firm," said Gregg McLanahan, senior managing consultant for Public Financial Management in Harrisburg, Pa.

Within 13 minutes Monday afternoon, eight companies bid a total of 29 times during the online bond auction. Legg Mason, which offered an average interest rate of 4.2457 percent, was the top bidder, McLanahan said.


"There was fairly aggressive bidding. There is a strong demand for Chambersburg bonds," he said.

Over the life of the 20-year loan, the borough will pay about $5 million in interest.

The Borough Council unanimously approved an ordinance authorizing the $10 million bond Tuesday.

The borough will need a second $10 million bond this winter or spring for the remaining payments on the power plant.

"I think we just made a very important step that in the future will pay tremendous dividends to residents of Chambersburg," Council President Bill McLaughlin.

The council has already approved a contract with Wartsila for four diesel engines for the facility, which will be located in the Chambers-5 Business Park.

The additional 20 to 25 megawatts of electrical generation will improve reliability for borough electric customers, protect against price spikes and provide local control, borough officials said.

Consultants predict the borough will save about $400,000 a year when the new plant is running, which could be as soon as June.

Even after the borough pays off the bonds, the power plant should be operational for another 30 years.

The new facility will add to the 7.5-megawatt generation capacity the borough currently has to cover the need generated during peak times, like the current hot summer days. The proposed station would cover the variable usage on most days, allowing the borough to enter into a wholesale power agreement to purchase just its basic power load.

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