Bank loan for road projects moves ahead

A new bank borrowing is being discussed by Lansdale officials that could provide the funds to tackle several local road projects as soon as next year.

Council is proceeding toward finalizing a bank loan of $2.5 million that could be used for projects not covered by a series of bond issues over the past several years.

“It’s kind of the best of all worlds: it’s the lowest-cost financing, the best and cheapest terms that we can get, and it doesn’t preclude us from doing another later,” said bond advisor Ed Murray.

Borough council has approved

$10 million bond issues in 2010, 2012 and 2014 to fund capital projects around town, including construction of the new borough municipal building and police station, increased capacity at its wastewater treatment plant, and various road repair projects.

Murray and bond adviser Dave Nasitir gave council’s Administration and Finance committee an update last week on a borrowing first discussed in June, which would be done as a bank loan instead of a bond in order to save on processing fees and provide more flexibility at a lower interest rate.

“We knew the loan would be very short, and smaller than your bond issues, and we wanted more flexible terms and conditions,” Murray said.

“Right now, this is very, very competitive. It

doesn’t preclude us from doing another (loan) later, it doesn’t preclude us from a bond issue later,” he said.

The proposed bank loan would take out roughly $2.56 million over a 15year term at an interest rate of 2.59 percent, and Murray said a proposal from TD Bank was the lowest of four qualified responses to a request for quotes. The loan would increase the borough’s annual debt service payments by roughly $200,000 per year, and that level is at roughly $2.3 million per year now, but slated to decrease starting in 2027 as bonds from 2010 and before are paid down.

Council could vote Sept. 20 to proceed with the borrowing, and closing would then be scheduled for Oct. 19, according to Murray, who said speed is advisable since interest rates have stayed relatively low since the last borough borrowings.

“There was a very, very tiny window back in 2012, when you were putting the financing together for this building, that was your baseline low. You hit the very, very bottom, but aside from a small period in 2012 when they were lower, they’re the lowest they’ve been in a long time,” Murray said.

Borough Manager Jake Ziegler said staff have worked with the North Penn Water Authority to identify several road projects that could be funded by the borrowing, including utility work and repairs to Whites Road, which is jointly owned by Lansdale and Upper Gwynedd. The Upper Gwynedd portion runs from Towamencin Avenue to Valley Forge Road, and Lansdale could time their section from Towamencin Avenue to Broad Street to coincide with the other, so the water authority’s lines could be upgraded on both phase at once.

“That one is largely going to consist of milling, overlay, some utility work, and some ADA (accessibility) work as far as we’re concerned,” Ziegler said.

A second project that could be funded by the borrowing would be a

similar road repaving project of north Line Street from Main Street north to the area of Seventh Street, and a third project prompted by the water authority could be a portion of Third Street from Cannon Avenue and valley Forge Road.

“The end result of that is, for these three projects, we’re right at about $4.5 million,” Ziegler said.

“We think, with the idea of this borrowing plus some funds from reserves, plus fine-tuning the estimates and the work we’re actually going to be doing, that we should be well within the realm of being able to accomplish all of those,” he said.

The administration and finance committee voted unanimously to recommend full council move ahead with the borrowing, and committee Chairman Jason Van Dame said, while the borough is still updating its list of long-term capital projects, he will be glad to see several of them funded.

“There’s nothing worse than one township doing half of a road, and ending up with the Lansdale side of the street undone, so I’m all for getting this

infrastructure taken care of,” Van Dame said.

“Everybody always talks about working on our streets here, and we’re taking some steps to try to move that process forward,” he said.

Councilman Denton Burnell said the borrowing would allow for three projects to be done of a size that the borough typically only funds once each year, like work this year to rebuild part of Perkiomen Avenue from Cannon Avenue to Valley Forge Road that cost roughly $1 million for three blocks.

“Under normal circumstances, we might only be able to do one of these things, and even then we’d be a little stretched,” he said.

Councilman Steve Malagari, chairman of the Public Works committee that chooses and vets the projects, said it was “comforting” to hear funding discussed for projects that have been on the drawing board for months, if not years.

“It’s definitely needed. We talk about it all the time, so I’m happy to see it. It will come at an expense, I’m sure, because these projects aren’t cheap,” he said.