Council committee advances $32 million interim loan to buy materials for 42-inch water transmission main

Lancaster City officials on the finance committee voted to send Administration Bill 6-20-25 to the full council for first reading, a measure that would authorize interim bank financing of up to $32 million to pre-purchase pipe, hydrants and other materials for a planned 42-inch water transmission main.

City Director Tina Campbell introduced the ordinance as interim financing for a project the city has included in its capital plan for several years, saying the debt “will be financed through the water enterprise fund and will not affect the general fund.”

The interim note is intended to allow the city to order long‑lead materials before receiving a permanent loan from the Pennsylvania Infrastructure Investment Authority (PENNVEST). Daryl, a representative of Concorde who spoke to the committee, said the interim borrowing will be rolled into PENNVEST permanent financing once the project is shovel‑ready and PENNVEST issues a loan. “By having that letter of no prejudice, you can now incur the costs and potentially even pay the costs, before you actually get the PENNVEST financing,” Daryl said.

City staff and its financial advisor told the committee the interim amount — presented as a not‑to‑exceed $32 million — reflects roughly $30 million for materials, about $900,000 for capitalized interest and roughly $1 million for a project cash‑flow reserve. The project’s total cost was described as about $41 million; the $32 million interim note would finance the materials portion now so those costs can be included in the lower‑cost PENNVEST loan later.

Committee members asked about term and rate. Campbell said the city will request both fixed and variable bids in the banks’ RFPs, and that the presentation assumed an illustrative 5 percent rate for planning. Councilor Hirsch asked whether the 4–6 month materials lead time is firm; staff said Public Works felt reasonably confident but that Public Works would provide more details at a later date.

Mayor Sarratti praised the aggressive schedule and the city’s effort to avoid holding borrowed funds idle, saying the approach should speed delivery and get capital dollars “in the ground.”

Vice President Arroyo moved the bill to the city council for first reading on Sept. 23; a second was recorded and the motion passed by voice vote in committee.

Next steps laid out by staff: secure a PENNVEST “letter of no prejudice” in mid‑September, issue an RFP for interim financing, accept bank proposals in mid‑October, close interim financing in mid‑November, receive materials Feb–March 2026 and pursue permanent PENNVEST financing in spring 2026. Project construction is expected to begin in April–May 2026, with project completion estimated in April 2027.

Discussion at the committee clarified that the interim note is a drawdown facility (the city will pay interest only on amounts actually drawn), and that the interim financing may include an interest reserve to avoid immediate budget impacts while the city completes the PUC rate case. Staff also noted the interim note’s maturity would extend to one year after estimated completion to provide schedule flexibility.

Action: the committee approved referral of Administration Bill 6-20-25 to the full council for first reading on Sept. 23.