Council looks to score savings

Adviser says benefits available by converting bond into a bank loan

Should Lansdale officials start making plans now to refinance what’s left from a 2010 bond borrowing, or start planning to borrow more?

Finance Director John Ramey reported last week that borough staff has begun talks with its bond adviser on whether it makes sense to refinancing outstanding debt at a lower rate through a different type of borrowing.

“There is some remaining bond issue from 2010 that wasn’t refinanced in 2015. He suggested doing a five-year, fixed rate bank loan, and the approximate savings is around $43,000 over the five years,” Ramey said.

“And that’s based on a 1.5 percent interest rate — if it shoots all the way up to two (percent), it’s still $20,000,” said Ramey.

Borough council has authorized $10 million bond issues in 2010, 2012 and 2014 to fund capital projects around the borough, including construction of the new

borough municipal building, capacity upgrades to its wastewater treatment plant, and road repairs. In 2015 council refinanced most of the 2010 bond issue into another bond offering, and the remainder is what Ramey told council’s administration and finance committee that he and bond advisor Ed Murray have discussed refinancing now into a bank loan to secure a lower rate than would be available with a bond.

“It’s about $2.8 million outstanding at the end of 2017, so that’s what we’d be looking to spread out,” Ramey said.

“It’s not extending the debt service at all. A fiveyear payment is left, so it’s a lower interest rate more than anything,” he said.

In addition to the refinancing, staff have also begun

talks with the bond advisor on whether the borough should proceed with another bank loan to fund additional infrastructure projects like road repairs.

“Interest rates are so low on these bank loans, right now we could do a ten-year, fixed rate, at 1.5 percent, for a debt service per year of $275,000,” on a bank loan of $2.5 million, Ramey said.

All of the savings quoted would be after processing fees, and Ramey said borrowing via bank loans typically costs roughly $40,000 while the typical bond issue costs $80,000 to $100,000, he said.

Borough staff have begun to tentatively identify large road projects that could be funded by such a borrowing, and Borough Manager Jake Ziegler said there are two that would be at the top of the list: Whites Road and North Line Street.

“We haven’t done any engineering, but based on our experience and looking at

our pavement management system, North Line Street is obvious, and I think the average person can see it and say it’s in bad shape,” Ziegler said.

Staff have begun talks with the North Penn Water Authority to see if any underground infrastructure repairs or upgrades would be needed on those two streets, Ziegler said, and the borough’s engineering consultants will start to look for similar projects that could be designed ahead of time, for when funds become available.

“What my goal would be is to actually get some engineering done on some of these projects that we would hope to do fairly quickly, within the next year or so, and then also get some engineering done in advance of some other projects that would get us more shovel-ready,” Ziegler said.

“You never know exactly what’s going to happen, but sometimes if you have a

shovel-ready project ready to go, people look fondly on that,” he said.

Council President Denton Burnell asked if staff are also updating the borough’s long-term capital plan, and said a larger conversation about priorities on that list could be held while, or after, council proceeds with the refinancing.

“We should do that anyway, there’s no reason not to do that. I don’t have any issue with the exploration, as long as there’s no significant dollar amount attached to that,” he said.

Ramey and Ziegler said staff will look into details for both options, the refinancing and the new borrowing, and will report back at future meetings. Borough council next meets at 7 p.m. on June 21 at the borough municipal building, 1 Vine St. For more information or meeting agendas and materials visit www.Lansdale.org or follow @LansdalePA on Twitter.