Last night I voted in favor of establishing a 7 million dollar line of credit. (PASSED 5-0) But AGAINST hiring various civil, mechanical and structural engineers to move forward a 5 million dollar gym expansion project. (PASSED 4-1) I was the lone dissenting vote.
With the first issue, the majority of new debt is envisioned to expand the community center. ($5.5 million) This is my primary concern. While I initially supported a relatively affordable and much needed expansion of the library, one that would have been in large part funded with grants and aggressive fundraising campaign by the library (skin in the game), the conversation very quickly escalated. It ended up a 5.5 million dollar gym expansion funded primarily with debt. I have concerns with both the cost and pace at which the project expanded once debt was identified as a funding component. I am uncomfortable with the price tag. In the two links above you see how the conversation rapidly changed from summer to November during the budget process.
I still voted in favor of establishing the line of credit after it was agreed the debt would be in that form as opposed to a bond. A line of credit means we will vote individually on each and every “withdrawal”. Only paying interest on what we actually use. Establishing the line of credit in and of itself doesn’t mean we have to spend 7 million dollars. It’s my hope the township does not. Had this been a bond I would have voted no since that would have obligated us to spend that entire amount. Since we were only establishing a line of credit I voted in favor. It was a prudent move locking in historically low interest rates.
For example, another component of the debt is 1.7 million for a new aerial firetruck for the Lower Macungie Fire Department. I support this. It’s something I think is appropriate to use the line of credit for. The 3rd component is for farmland preservation. As an advocate for preservation I want to make it clear I did not ask for that component to be included. I believe we should pay for preservation initiatives with cash reserves as the opportunities present themselves. And debt only if absolutely necessary. The township has a responsible fund balance policy that requires we keep a rainy day fund. Anything above and beyond that set % is unencumbered money. Essentially, savings. When the township wants to make a major discretionary purchase we should save the money instead of borrow the money.
The biggest goal I have moving forward is to avoid our debt service payments from increasing. Right now with our 2009 and 2012 debt our payments (both retire in 2019) we pay approximately 500,000 a year. If we end up borrowing the full 7 million dollars those debt payments will increase to 732,000 a year beginning in 2018. This is in large part why I oppose funding the gym expansion with debt. I will make this an issue during the upcoming election since I am currently in the minority. The gym expansion would have been a excellent candidate for a referendum item.
I feel very strongly that we should not be increasing our yearly debt payments.
The second vote tonight related to formally beginning the process for the expansion. Again, I voted NO. And was disappointed I was the lone dissenting vote.
The gym expansion is similar to but also in some ways different from the Quarry park turf park proposal which was defeated a few years ago. (I voted NO on that) The gym expansion (and certainly library expansion) is probably more of an immediate need and certainly more justified. The concept has been talked about for years. However, that doesn’t change the fact it’s being funded with debt and I believe that debt funded led to the project to rapidly expand in scope. On the gym side of things there is no skin in the game from any other entities. And most importantly no mandate from voters. An item of this scale should have been a referendum item. Or a centerpiece of a campaign. Where voters could voice an opinion.
It’s been brought up that I support and have voted for major expenditures for preservation initiatives. This is true. The difference in my opinion is that I ran on that platform. I won convincingly (with a strong mandate) on those issues. I very clearly campaigned on it. Not a single person on the board campaigned on spending 5 million dollars for a gym expansion. In fact one Commissioner campaigned on and won a race on his opposition to the turf fields. So I find it a bit hypocritical that he support this project.
I also worry that reducing our cash reserves (the 7 million capital plan calls for using 2 million of reserves above and beyond the amount required by the fund balance policy) is actually weakening our position to pursue preservation. As evidenced by the golf course preservation, the township needs the ability to react quickly to opportunities as they arise. And as they say in the private sector, cash is King. Savings is always preferable to debt. Offers the most flexibility and also best bang for buck.
The amount of interest payments the township will make over the next 13 years on this loan should we take out the entire amount? 1.5 million dollars.
So let me know. What questions do you have?