Brick looks to save money on debt payments

Plan would include deferring principal
payments until 2008
BY JENNIFER DOME
Staff Writer

BRICK — Township officials say they’re hoping to take advantage of low interest rates and save taxpayers $1.8 million over the next three years.

The township expects to appear before the Local Finance Board in September to request a deviation from their typical debt-repayment schedule. Township Chief Financial Officer Scott Pezarras said, if the township pays interest only through 2008 on already approved capital projects, it will avoid sharp increases in its annual principal and interest payments.

If the new debt-repayment schedule is approved, the township will save approximately 3.7 cents per $100 of assessed property value over the next three years. That figure would mean about 1.36 cents in savings per $100 of assessed property value next year, Pezarras said.

"We’re trying to save on the cost of carrying the debt," he said.

He explained that this new plan is based on the governing body authorizing $4 million each year for capital projects through 2008. Therefore, because it is just an assumption, Pezarras said the savings projections could fluctuate some.

The township is paying off debt now for projects the township did 10 years ago and preparing to put on new debt, Pezarras said. Changing the debt-repayment schedule would level out the impact of this new debt.

In 2008, the township will begin paying the principal and will pay an additional $1.5 million through 2025.

The township will convert $19 million in short-term notes into bonds soon because the bond market is at its best rate in 30 years, township officials said. Of the $19 million in bonds, $7 million is from this year’s capital projects and the remainder was approved by previous township councils, according to Pezarras.

It has become very common for municipalities to request a deviation from their debt-repayment schedule such as this, Pezarras said.

At the Township Council’s Aug. 10 meeting, Noreen White, of Municipal Advisory Partners, said "More towns and counties are doing this now because of the level of pressure to level out debts."

Pezarras explained that it’s also important to do this now because after the presidential election in November, interest rates may change. He said that if something happens between now and January to affect the interest rates, he does not want the township to be caught in the middle.

"I’m very conservative when it comes to fiscal issues," Pezarras said.

Township Business Administrator Scott MacFadden, who sits on the Local Finance Board, said it’s best for the township to move forward with this plan because they don’t want a front-loaded repayment schedule that adversely impacts the residents right now, rather than spreading it out.

"I really think it’s a sound financial move on our part," Mayor Joseph Scarpelli said at the Aug. 10 meeting.

Council members Ruthanne Scaturro and Michael Thulen said they also agreed with the plan.

The motion to approve the application and go before the Local Finance Board was unanimously approved at the Aug. 10 meeting. Councilman Gregory Kavanagh was absent.