The Washington Township Municipal Authority’s (WTMA) gargantuan debt may soon be shrinking thanks to some new financing options.
Last Thursday night Michael Vind, managing director of Financial Solutions (FSL), met with the board of the WTMA to present a plan to refinance the $12 million bond debt of the sewer authority. FSL is an independent financial advisory group that assists with municipal and sewer debt restructuring.
Vind explained because municipal bond rates are at a 50-year low, and Washington Township sewer rates and taxes were increased to offset the authority’s debt, there is an excellent opportunity for the WTMA to save between $1 and $2 million over the life of the loan.
In one scenario presented by Vind, if the sewer authority restructured its debt, the savings to the WTMA would be $50,000 per year. Vind said his conservative estimate for the restructured loan would be an interest rate of less than 4 percent, with the term of the loan to remain the same.
The current loan will be paid in full by 2033. Presently, the interest rate on the WTMA loan is 6 percent.
Another option is for Washington Township to assume the debt of the sewer authority. Because the township has little debt and is in good financial shape, unlike its sewer authority, the township can get a better interest rate on a loan.
The projected savings on the $12 million debt would be roughly $120,000 per year, more than double what the sewer authority could save. Several years ago, because of the financial difficulties of the WTMA, the township was forced to guarantee the debt of the sewer authority. If the sewer authority should default on its debt, the township would be forced to pay the loans.
If Washington Township’s board of supervisors decides to assume the sewer authority debt, it is quite possible supervisors would disband the WTMA. Currently, the three members of the board of supervisors also hold positions on the five-member WTMA board.
Township Solicitor Dan Becker explained there is a trend for municipalities in the commonwealth to disband their sewer authorities. However, the board of supervisors has given no hint that they intend to disband the WTMA.
The problem with Washington Township assuming the $12 million debt, officials said, is that townships in Pennsylvania are limited in their borrowing capacity by the state. Additionally, not all residents of the township would favor acquiring the debt of the sewer authority, especially those who do not have sewer service.
Under both solutions presented by Vind there is no reduction in sewer rates or taxes.
Over the last several months, the board and WTMA meetings have been packed to overflowing with irate citizens concerned with increased taxes and sewer rates. Citizens who attended last Thursday’s meeting were also extremely vocal.
One unidentified resident claimed that no matter how the WTMA debt was restructured, the savings to the average citizens in a township of 3,800 people was between $13 and $26 per year. He claimed the savings was around $1,000 over the life of the loan. The resident demanded that land owned by the township be sold to offset the debt and be put on the “fast track” for development.
Amy Sutryn, WTMA chairperson, explained, “We are here because the real estate market came down. We cannot fast track land.”
Ernest Gehman, supervisor and WTMA member, noted the township owns almost no land suitable for development.
The resident retorted, “I don’t exist to pay for other people’s mistakes. I work 14-hour days and own two companies. With sewer fees taxes are $7,000 on a $200,000 house.”
On May 24, the township board of supervisors will discuss the options presented by FSL. It is expected at that time the board will give some direction to FSL how it wishes to proceed with the WTMA financial restructuring.