Township to assume $12 million debt
In a bold and unexpected move Thursday night, the Washington Township board of supervisors voted unanimously to disband the township’s sewer authority and assume its debt. Supervisors also passed a resolution to authorize Financial Solutions (FS&L), an independent financial advisory group, to seek refinancing for the Washington Township Municipal Authority’s (WTMA) $12 million bond debt.
Additionally, supervisors passed a resolution ordering the WTMA to turn over all its property to Washington Township and to cooperate with the township in the WTMA dissolution. The WTMA is a legal and separate entity from the township.
A township board of supervisors has the power to create, disband, and appoint members to a sewer authority, according to legal experts. However, supervisors are not permitted to oversee the operations of a sewer authority, including the sewer authority’s ability to borrow money.
With the decision to disband the WTMA, the supervisors will be in charge of sewer operations in the township.
Several years ago, the WTMA had constructed a sewer facility that anticipated a great deal of new development. When the real estate market foundered, the authority found itself with a tremendous amount of debt and not enough revenue. At one point the township was forced to guarantee the WTMA debt. If the sewer authority could not meet its financial obligations, the township would be liable for the debt.
The WTMA tried to refinance its loans, and thus lower its payments, but several financial institutions, including Concord Financial and Susquehanna Bank, were unable to help. The sewer authority raised its rates to $1,381 per year and the township designated a 2 mill tax increase to assist the WTMA.
On May 17 Michael Vind, a representative from FS&L, presented a plan to reduce the debt of the WTMA. If WTMA refinanced its loans, the yearly savings would be $50,000 and approximately $1 million over the life of the loan. Because Washington Township is in “good financial shape” and sewer rates and taxes have been increased, if the township refinanced the WTMA loans, $120,000 per year and at least $2 million could be saved.
There would be no increase in the term of the loan. However, there would be no tax or sewer rate decrease. The board of the WTMA deferred its decision on the refinancing to the township board of supervisors.
After careful consideration the board of supervisors concluded that since the township was financially obligated if the sewer authority defaulted, the logical decision was for the township to refinance the loans and disband the sewer authority.
Township Solicitor Dan Becker observed there is a trend for townships in Pennsylvania to disband their sewer authorities. Becker said, “If the township guarantees the $12 million, the township has oversight and it has control. If the township does not disband the WTMA, it could lower its rates and the township would have not control.”
Becker also noted that a township board of supervisors is elected and must answer to the people, while a sewer authority board is appointed. James Roma, a member of the board of supervisors noted, “The difference in the savings of $1 million if the WTMA refinances and $2 million if the township does it is hard to ignore. The WTMA has a boatload of debt we have to tackle.”
A large group of concerned residents attended the meeting and sat in stunned silence at the board of supervisors’ announcement to disband the WTMA.
Dave Starnes, a Spring Valley Village resident, spoke for the audience.
“I am trying to take this all in. Let’s see how the finances develop. At the appropriate time, EDUs can be added. Then perhaps rates and taxes can be reduced.”
Supervisors’ Chairperson Tonya Bauer said, “That is our goal to save residents money, but we do not have a crystal ball.”
Starnes replied, “Any option is better than what we have.”
In other business, the board of supervisors approved the rezoning of some sections of Route 100 between Limekiln Pike and Barto from high density village to commercial.
Additionally, the board of supervisors approved the rezoning of property south of Limekiln Pike from industrial to commercial.
Supervisors passed an ordinance to accept a cable franchise agreement with Comcast.