Six western Monmouth County municipalities participated in the Monmouth County Improvement Authority’s (MCIA) 2007 Pooled Capital Equipment Lease Program, which produced a total of $934,024 in budget relief and reduced debt service costs by $244,436 countywide, according to a press release.
The MCIA announced the results of the sale of $19.9 million in revenue bonds on behalf of 20 towns and three school districts at its Oct. 11 meeting in Freehold.
The western Monmouth County towns of Colts Neck, Freehold Township, Howell, Manalapan, Marlboro and Millstone participated in the MCIA 2007 Pooled Capital Equipment Lease Program.
Freehold Township, Howell, Manalapan and Marlboro used the MCIA financing to obtain police vehicles. Four of the municipalities obtained vehicles and equipment for public works and street maintenance while two others used part of their financing for computers. The amount of equipment they obtained ranged from $515,000 for Marlboro to $971,200 for Manalapan.
The Monmouth County Board of Freeholders’ decision to back the bonds for the MCIA’s 2007 Pooled Capital Equipment Lease Program with a county guaranty helped the improvement authority complete the financing at an attractive true interest cost of 3.7122 percent, according to the press release. The MCIA sold the bonds for its ninth Pooled Capital Equipment Lease Program to fund a wide range of equipment that included police cars, ambulances and firefighting vehicles, office furniture, computers and playground equipment.
“This financing demonstrates the number of ways the MCIA is able to help Monmouth County municipalities and school districts reduce their financing costs,” said MCIA Chairman Al Rosenthal. “Since the improvement authority began offering the Pooled Equipment Lease Program every other year 18 years ago, we have financed a total of $131 million in equipment for 37 towns, seven school districts and a sewerage authority. Over the life of the program those financings have achieved $4.8 million in budget relief for the participants that did not have to make the 5 percent down payment required in traditional equipment purchases.”
Towns and school districts also save through economies of scale by pooling their equipment needs into a single MCIA financing and sharing the issuance costs, according to the press release.
Under the MCIA Pooled Equipment Lease Program, which was the first of its kind to be offered by an improvement authority in New Jersey when the MICA introduced it, the Monmouth County Improvement Authority owns the equipment and leases it to the towns and school districts. Lease payments are structured to match the debt service on the bonds. The bond maturities are based on the useful life of the equipment and structured to meet each individual participant’s debt service needs. Each participant takes ownership of the equipment as it pays off its share of the bonds.
All of the bonds for the 2007 Pooled Equipment Lease Program sold at a premium. The premiums were used to reduce the overall cost of borrowing to the 23 participants, said MCIA financial adviser Jennifer Edwards.
By guarantying the MCIA bonds, the freeholders extended Monmouth County’s excellent credit rating – AAA by Standard & Poor’s and Fitch Investors Service and Aaa by Moody’s Investors Service – to the bonds. The county guaranty was the primary factor in achieving the low true interest cost of just over 3.7 percent.
Improvement authorities have flexibility in approaching the public bond markets that individual towns and school districts do not have, including the ability to conduct a negotiated bond sale. That enables the MCIA’s professional finance team to time the pricing of the bonds to take advantage of changing market conditions. In the case of this year’s program, the MCIA waited to price the bonds until after the Federal Reserve Board’s Open Market Committee announced its decision on lowering interest rates, according to the press release.
The Monmouth County Improvement Authority has served as an alternative financing vehicle for municipal and county government entities, school districts and regional and local authorities, fire districts and first aid squads for 21 years. Since its creation by the Monmouth County Board of Freeholders, the MCIA has provided more than $1 billion in financing for 49 of the county’s 53 municipalities through a variety of pooled and individual financing programs.