Authority gain is McKeesport's loss, official says

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New Castle, PA

#1 Feb 23, 2012
Authority gain is McKeesport's loss, official says

Thursday, February 23, 2012
By Jonathan Barnes

McKeesport lost more than $1 million by accepting an early payment on a loan the city made to the Municipal Authority of the City of McKeesport, city controller Ray Malinchak said.

City council voted in August to accept an early payment of $24.5 million from the sewer authority, saving the authority more than $1 million it would have paid in interest to the city. Advisers said at the time that the city could make up for the lost interest monies by using some of the money to make payments on its own loans and by investing the rest.

The city did use $10 million of the money to prepay some of its own debt, and it put $100,000 toward last year's budget and $500,000 toward this year's budget. But the lost interest payments cannot be recouped through investing the approximately $14 million left because no interest rate available to the city is comparable to the 4 percent interest that was being paid on the loan.

Mr. Malinchak, who has criticized the prepayment deal since it was approved Aug. 3, said the city wasn't obligated to accept the early payment and it should take action now to remedy the matter.

"The city ought to go out and get special counsel, outside of the county, and look into the possibility of a legal remedy. McKeesport should ask the authority for $1 million -- the full amount we lost in interest -- as part of a prepayment penalty," Mr. Malinchak said.

City solicitor Jason Elash, however, recently echoed Mayor Mike Cherepko's assertion that the city had to accept the prepayment of the loan.

"There was no provision in there to prohibit [the authority] from prepaying the loan," Mr. Elash said.

But Mr. Malinchak said that, according to a legal rule known as the "perfect tender in time rule," when loan documents are silent on the issue of prepayment, the borrower may not be permitted to make prepayments of the loan. The rule applies to borrowers who promise to repay loans in installments at specified times or at a specified date. It means that borrowers have no right to compel a creditor to accept prepayment because they are bound by the payment dates in the loan, he said.

Read more: http://www.post-gazette.com/pg/12054/1211994-...
News

New Castle, PA

#2 Feb 23, 2012
At the Aug. 3 meeting, council members Darryl Segina and A.J. Tedesco asked that city officials be given more time to consider the matter before voting on it. The two voted against accepting the prepayment.

Mr. Malinchak said he is just doing his job as controller, which is to protect the financial interests of the city.

"There could be someone out there who ... asks,'Where were you, Mr. Controller, as the taxpayers' watchdog?' No one was told that the best interest rate the city could get for monies it didn't immediately use to pay debt was less than one one-hundredth of 1 percent," Mr. Malinchak said.

At the current interest rate on the money, McKeesport is getting $1,417 annually on the funds, he said. The city's annual escrow agent fee for M&T Investment Group, which is handling the money, is $1,500. Thus, the net annual gain from the original $14 million investment is actually an $83 loss, Mr. Malinchak said.

In addition, the city was charged fees by financial and legal advisers involved with the deal. Consultants for the prepayment agreement charged the city a total of $92,500. For advising on the deal, bond counsel Mike Adams & Associates was paid $10,000, and co-bond counsel Grogan & Graffam was paid $10,000. Boenning & Scattergood was paid $10,000, and a special counsel fee of $45,000 was paid to Cohen & Grigsby. A $5,000 custodial fee was paid to M&T Investment Group, and a $12,500 fee to Public Finance Management has been OK'd but not yet paid.

"The same consultants are over on the other side and got $350,000 from the authority for the deal. The people who benefited from this are the consultants," Mr. Malinchak said.

Jonathan Barnes, freelance writer: suburbanliving@post-gazette.co m .

Read more: http://www.post-gazette.com/pg/12054/1211994-...
Its moot

Pittsburgh, PA

#3 Feb 23, 2012
All the hooha about this is nutz.

People act like the $1,000,000 saved by the MA is being pocketed by individuals.

Whether the authority or McKeesport got it, it benefits the people who matter...the taxpayers....the same way.

As it stands, McKeesport will pass on the cost of "losing" that money to the taxpayer anyways.

If McKeesport would have said "no" and gotten that interest, then the authority would just pass on that $1,000,000 expense to the people paying for services.

At least this gives the taxpayer some ammo when the authority goes to up rates again.....we can ask "what happened to the $1,000,000 (net $750,000 after the consultants get their windfall) savings?"

And dont forget that the early payment gave the city much needed liquidity at the time.

"A bird in the hand is better than two in the bush".
Mck hard times

New Castle, PA

#4 Feb 23, 2012
Its moot wrote:
All the hooha about this is nutz.
People act like the $1,000,000 saved by the MA is being pocketed by individuals.
Whether the authority or McKeesport got it, it benefits the people who matter...the taxpayers....the same way.
As it stands, McKeesport will pass on the cost of "losing" that money to the taxpayer anyways.
If McKeesport would have said "no" and gotten that interest, then the authority would just pass on that $1,000,000 expense to the people paying for services.
At least this gives the taxpayer some ammo when the authority goes to up rates again.....we can ask "what happened to the $1,000,000 (net $750,000 after the consultants get their windfall) savings?"
And dont forget that the early payment gave the city much needed liquidity at the time.
"A bird in the hand is better than two in the bush".
Absolutely! It's McKeesport, everyone pays while money is misused.
I agree

Mckeesport, PA

#5 Feb 23, 2012
Its moot wrote:
All the hooha about this is nutz.
People act like the $1,000,000 saved by the MA is being pocketed by individuals.
Whether the authority or McKeesport got it, it benefits the people who matter...the taxpayers....the same way.
As it stands, McKeesport will pass on the cost of "losing" that money to the taxpayer anyways.
If McKeesport would have said "no" and gotten that interest, then the authority would just pass on that $1,000,000 expense to the people paying for services.
At least this gives the taxpayer some ammo when the authority goes to up rates again.....we can ask "what happened to the $1,000,000 (net $750,000 after the consultants get their windfall) savings?"
And dont forget that the early payment gave the city much needed liquidity at the time.
"A bird in the hand is better than two in the bush".
The deal by nature is very suspicious being that a lot of folks got paid for handling the transfer. Are any of these firms known contributors to MDC candidates like Brewster or Cherepko? I like that Mr. Malinchall did his homework to determine that McKeesport did not have to accept prepayment of the loan by law. Add costing the city $1,000,000 of interest (plus fees) to the list of the Solicitor's offenses.
John Q Portman

Pittsburgh, PA

#6 Feb 23, 2012
Ray Ray was completly mistaken and showed why he is NOT qualified to handle such funds. If he was lisenced and regulated by the SEC, he can talk on this point, but he is not. The authority can re pay a loan in advance anytime it is not expressly prohibited in the contract. Just like if you pay off your mortgage, you get a payoff amopunt that is much less than the sum total of all intrest you would have paid taking the life of the loan into account. As far as a rate of return less than 1%, that is only because it is sitting in an escrow account. Any investment firm could get 6-8% conservatively on 14 Million with almost 0 risk. Pay someone who is qualified to handle the investing and the City will make even more than it would have at the 4% rate on the original loan.
Impeach the Controller

Mckeesport, PA

#7 Feb 23, 2012
John Q Portman wrote:
Ray Ray was completly mistaken and showed why he is NOT qualified to handle such funds. If he was lisenced and regulated by the SEC, he can talk on this point, but he is not. The authority can re pay a loan in advance anytime it is not expressly prohibited in the contract. Just like if you pay off your mortgage, you get a payoff amopunt that is much less than the sum total of all intrest you would have paid taking the life of the loan into account. As far as a rate of return less than 1%, that is only because it is sitting in an escrow account. Any investment firm could get 6-8% conservatively on 14 Million with almost 0 risk. Pay someone who is qualified to handle the investing and the City will make even more than it would have at the 4% rate on the original loan.
Can the mayor or council impeach the controller?
Not In Touch with Market

Mckeesport, PA

#8 Feb 23, 2012
John Q Portman wrote:
Ray Ray was completly mistaken and showed why he is NOT qualified to handle such funds. If he was lisenced and regulated by the SEC, he can talk on this point, but he is not. The authority can re pay a loan in advance anytime it is not expressly prohibited in the contract. Just like if you pay off your mortgage, you get a payoff amopunt that is much less than the sum total of all intrest you would have paid taking the life of the loan into account. As far as a rate of return less than 1%, that is only because it is sitting in an escrow account. Any investment firm could get 6-8% conservatively on 14 Million with almost 0 risk. Pay someone who is qualified to handle the investing and the City will make even more than it would have at the 4% rate on the original loan.
Are you practicing financial advising without a license? If you can earn me 8%, I will give you a 1% fee. This means you are making 12% of the interest on the deal.

You are not in touch with the world financial market and must be on a MDC diet.

Just name one ZERO RISK investment instrument at 6%. There are many out here just waiting to invest at that rate.
The Truth

Mckeesport, PA

#9 Feb 23, 2012
John Q Portman wrote:
Ray Ray was completly mistaken and showed why he is NOT qualified to handle such funds. If he was lisenced and regulated by the SEC, he can talk on this point, but he is not. The authority can re pay a loan in advance anytime it is not expressly prohibited in the contract. Just like if you pay off your mortgage, you get a payoff amopunt that is much less than the sum total of all intrest you would have paid taking the life of the loan into account. As far as a rate of return less than 1%, that is only because it is sitting in an escrow account. Any investment firm could get 6-8% conservatively on 14 Million with almost 0 risk. Pay someone who is qualified to handle the investing and the City will make even more than it would have at the 4% rate on the original loan.
You are so uneducated on these matters. Government entities can only invest in extremely low risk securities such as T-Bills and the like. Good lock getting much better than about 2.5% on these issues. Pittman could have investe the money and got us that without paying any of the "experts". Cherepko, Elash and the councilors that voted to the affirmative should be surcharged for malfeasance. Your friend Seggy, Tedesco and the Controller were and are correct.
What Happened

Mckeesport, PA

#10 Feb 23, 2012
The Truth wrote:
<quoted text> You are so uneducated on these matters. Government entities can only invest in extremely low risk securities such as T-Bills and the like. Good lock getting much better than about 2.5% on these issues. Pittman could have investe the money and got us that without paying any of the "experts". Cherepko, Elash and the councilors that voted to the affirmative should be surcharged for malfeasance. Your friend Seggy, Tedesco and the Controller were and are correct.
Where was the previous law firm Dice on this one? He was required to provide written approval of the ordinance? His firm along with those you mentioned should be the defendants in any legal attempt for indemnification.

This seems like the AG should take a lot of interest (no pun intended) in this one!
Anything Wrong Here

Mckeesport, PA

#11 Feb 23, 2012
What Happened wrote:
<quoted text>
Where was the previous law firm Dice on this one? He was required to provide written approval of the ordinance? His firm along with those you mentioned should be the defendants in any legal attempt for indemnification.
This seems like the AG should take a lot of interest (no pun intended) in this one!
Should the SEC be notified?
Orgy of MACM Nepotism

Mckeesport, PA

#12 Feb 23, 2012
I agree wrote:
<quoted text> Are any of these firms known contributors to MDC candidates like Brewster or Cherepko? I like that Mr. Malinchall did his homework to determine that McKeesport did not have to accept prepayment of the loan by law. Add costing the city $1,000,000 of interest (plus fees) to the list of the Solicitor's offenses.
All the beneficiaries of this sham contributed (or their spouse) to the JB or MC campaigns. The public records confirm this.

Or MACM board member enjoyed the orgy of nepotism with the creating about eight MACM jobs with money they screwed the city out of. One of MCs relative got a job.

Who put this plot together? MC did introduce the ordinance and then ramroded it through.
John Q Portman

Pittsburgh, PA

#13 Feb 23, 2012
The Truth wrote:
<quoted text> You are so uneducated on these matters. Government entities can only invest in extremely low risk securities such as T-Bills and the like. Good lock getting much better than about 2.5% on these issues. Pittman could have investe the money and got us that without paying any of the "experts". Cherepko, Elash and the councilors that voted to the affirmative should be surcharged for malfeasance. Your friend Seggy, Tedesco and the Controller were and are correct.
This is actually one area where you are off base. To answer your first question.. actually, yes, I am lisenced and bonded, and hold a series 6 and 7. There are no ZERO risk investments anywhere.. nor did I say there were. I said very low risk that can earn about 6%. Personally, I invest in more risky ventures than the law allows municipalities, but yes, if you had a clue... you would know. Also, the big advantage of using a real professional in our industry.... we are regulated by the SEC. If there is any question, and misappropriation is found, each offense is punishable by a $250,000.00 fine and possible revokation of the lisence. It is serious business. Ray RayTard could not do what a real professional does. You want results.. you pay for them.
John Q Portman

Pittsburgh, PA

#14 Feb 23, 2012
Oh.. and 1 more thing.. My officeis on Rt. 30 in Forrest Hills...not Ardmore Blvd.
Orgy of MACM Nepotism

Mckeesport, PA

#15 Feb 23, 2012
John Q Portman wrote:
Oh.. and 1 more thing.. My officeis on Rt. 30 in Forrest Hills...not Ardmore Blvd.
Pleasee usee speil chechek or lean too howe to tipe or speal.
John Q Asshat

Mars, PA

#16 Feb 23, 2012
John Q Portman wrote:
Oh.. and 1 more thing.. My officeis on Rt. 30 in Forrest Hills...not Ardmore Blvd.
What is it called MF Global - jackass!
John Q Portman

Pittsburgh, PA

#17 Feb 23, 2012
ahh...no.... and I am so much more than a Jack-Ass.... that is an insult to all Jack-asses. I so Own this board it is Freaking Hilarious. See you at the Rally in Export... oh wait... Mandatory meeting.
Slow Down

Mckeesport, PA

#18 Feb 23, 2012
John Q Portman wrote:
<quoted text>
This is actually one area where you are off base. To answer your first question.. actually, yes, I am lisenced and bonded, and hold a series 6 and 7. There are no ZERO risk investments anywhere.. nor did I say there were. I said very low risk that can earn about 6%. Personally, I invest in more risky ventures than the law allows municipalities, but yes, if you had a clue... you would know. Also, the big advantage of using a real professional in our industry.... we are regulated by the SEC. If there is any question, and misappropriation is found, each offense is punishable by a $250,000.00 fine and possible revokation of the lisence. It is serious business. Ray RayTard could not do what a real professional does. You want results.. you pay for them.
"Any investment firm could get 6-8% conservatively on 14 Million with almost 0 risk." You spew so many lies that you can't keep track of them. I guess we paid for the 0% results Cherepko and Elash had us pay for. What a bargain! Putz.
Branch Closed

New Castle, PA

#19 Feb 23, 2012
John Q Portman wrote:
Ray Ray was completly mistaken and showed why he is NOT qualified to handle such funds. If he was lisenced and regulated by the SEC, he can talk on this point, but he is not. The authority can re pay a loan in advance anytime it is not expressly prohibited in the contract. Just like if you pay off your mortgage, you get a payoff amopunt that is much less than the sum total of all intrest you would have paid taking the life of the loan into account. As far as a rate of return less than 1%, that is only because it is sitting in an escrow account. Any investment firm could get 6-8% conservatively on 14 Million with almost 0 risk. Pay someone who is qualified to handle the investing and the City will make even more than it would have at the 4% rate on the original loan.
Elash one of your DUI drunk tank offices closed.

Ray Malinchak was right you are a waste of money. Ray is actually smarter than you. His sincerity versus your pride before your fall helps McKeesport.
Prove it

Pittsburgh, PA

#20 Feb 24, 2012
John Q Portman wrote:
<quoted text>
This is actually one area where you are off base. To answer your first question.. actually, yes, I am lisenced and bonded, and hold a series 6 and 7. There are no ZERO risk investments anywhere.. nor did I say there were. I said very low risk that can earn about 6%.
You know of "very low risk" investments that pay 6%!?!? PLEASE PLEASE dont hold back and tell us where to invest to get 6% with "very low risk!!!!" Lord knows my 401K managers cant seem to find that sort of investment.

PLEASE do tell!

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