Committee wants a better handle on the complex $38.5 million plan.
By: Steve Rauscher
MONTGOMERY The members of the Township Committee postponed their decision on whether to issue $38.5 million in bonds last week, preferring to wait until they understood the complexities of the issue fully.
Township Administrator Donato Nieman and Chief Financial Officer Randy Bahr put together a proposal to combine much of the township’s existing debt with about $10 million in previously authorized new spending. The bonds would consolidate 30 previously authorized spending projects dating back to the mid-1980s into one, fixed-rate package to be paid down over 16 years.
Most of the projects for which the debt had been authorized but never issued have been completed using other revenue sources, such as the capital fund or short-term bond anticipation notes. A sizable portion of the $38.5 million would be used to replenish the capital fund and pay off the notes.
Township staff favor the bond issue because it allows the township to take advantage of record-low long-term interest rates. Furthermore, consolidating the township’s bond anticipation notes which have been issued at varying interest rates into a single, fixed-interest payment affords the township a measure of predictability that lends itself to accurate long-term financial forecasting.
"We’re experiencing a 40- to 50-year low in interest rates," Mr. Bahr told the committee. "And we’re looking to make debt service payments uniform over the coming years."
Township Committeeman Don Matthews said he wasn’t convinced the bond issue would be a good idea. Because the township is currently able to issue bond anticipation notes at interest rates below 2 percent, but would be unlikely to be able to issue a long-term bond at rates below 4 percent, he said, the township would spend more in the long run.
"I keep getting further and further away from thinking this is a good idea," he said. "I think we’ve got a good system now."
Mr. Nieman said that because townships are required to pay off 10 percent of each bond anticipation note per year in addition to making interest payments, the township’s yearly debt-service costs could be higher without consolidation.
"You’re right," he told Mr. Matthews. "(Consolidation) does cost a bit more over time. … But this gives you cash at a time when there’s less cash coming in."
The committee delayed voting on the bonding ordinance until its next meeting Oct. 17, or possibly Nov. 7.