(UPDATE) The Township of Montclair Annual Debt Statement for budget year ending 12-31-2012 is now posted on the township website.
Montclair Township Manager Marc Dashield took the opportunity at the Montclair Township Council conference meeting of February 5 to announce that the town’s debt reduction diet is working. The township reduced its gross debt — combined municipal, school, and utility debt — by $8.2 million (down from about $220 million) in the first six months of the council’s term. The township was able to authorize the cancellation of $1.072 million in debt while making principal payments totaling $3.2 million on top of the council’s approval of $4.2 million grants for outstanding debt.
Bob Benecke, of Benecke Economics of Moonachie, took the council through a plethora of numbers to explain where the township stands on its debt and where it’s going. He said that the overall debt was comprised of long-term bonds, short-term notes, and authorized but not issued (ABNI) components.
Benecke, as an advisor to the Montclair municipal government, laid out a plan anticipated in resolutions up for a vote during the meeting, one spelling out the form of bonds totaling $32.5 million bonds to be sold and the other two providing for the combination of said bonds into two single issues, one for $10.5 million in general improvement bonds over 11 years and the other for $22 million in school bonds over 15 years.
“The lowest payment for each side . . . cannot be less than 50 percent of the highest payment, or vice versa, so that you will not have swings in your tax payments and tax rates because of the debt,” Benecke said. He added that the bonds are being issued for as many years as they are to accommodate the useful life of a bond and the projects it finances. Short-term notes are expected to be paid out at an interest rate of 4.25 percent, which would allow for the reduction of debt by the value of the long-term bonds. The ultimate goal is to get the debt to below $120 million by the end of 2022.
“We just can’t in a vacuum reduce debt,” Benecke said. “As we go through the next ten years, there’s going to be needs for roads, needs for facility improvements . . . so these are net numbers.”
The council’s policy is not to fund projects at more than 50 percent of the total principal payments for any one year. This means that for every dollar in revenue, most notable in a grant from the state, 50 cents will be used to pay down the debt. The plan calls for a reduction of overall debt by approximately $68 million by 2022. Benecke added that Montclair’s AA bond rating, along with its diverse population and high tax base, makes it very favorable in terms of reducing debt.
Mayor Robert Jackson was pleased with the presentation, noting that the disciplined principal payment schedule reduced the debt by 4 percent in six months.
“I’m ecstatic about it,” he said. “I think it really points to the fact that with some discipline, and being creative, and scrubbing the books and really looking for cash in every corner, and not using that to spend but using it to reduce debt is exactly what we’ve been looking to do.”
Township Attorney Gets Pay Raise
The council took the time to pass an ordinance on first reading in addition to resolutions those relating to bonds. Township Attorney Ira Karasick is seeking a pay raise for his office in light of the increased workload due to the Law Department taking on tax appeals, redevelopment negotiations and contracts, and various other forms of litigation once outsourced but since brought back in-house, along with his new role as counsel to the Historic Preservation Commission.
“It’s made the job basically a full-time job,” he said.
Fourth Ward Councilor Renée Baskerville cited the latter point, asking if outside counsel was considered for the Historic Preservation Commission. Karasick responded that it would cost more for the township to outsource counsel for the commission. He also said the lack of compensation for general redevelopment planning, as opposed to specific redevelopment planning, and he noted the unpredictability of the workload of tax appeals, which can vary annually. Mayor Jackson made it clear that an increase in Karasick’s salary would still cost less money than bringing in outside counsel.
Dr. Baskerville saw it differently. “We don’t know if there are other people out there that might give us a more competitive price for the same services,” she said, “because we just have never gone out to request proposal to see what other people might be able to do for us.”
The ordinance passed on first reading by a vote of 6-1, with Dr. Baskerville the only dissenter.
Karasick also brought to the council’s attention an affordable housing unit at the Bay Street Commons that was vacant for two-and-a-half-years before being sold. It was over-assessed, and the developer is seeking a refund on taxes paid in the last two years. The council is expected to look further into the matter.
Forest & Chestnut Streets to Get 4-Way Stop Sign
In addition to passage of a resolution expressing interest to representatives and senators in Congress over acquiring the former Social Security building on Bloomfield Avenue form the federals government, the council finally passed on second reading an ordinance creating a four-way stop zone at Forest and Chestnut Street, with new stop signs to be installed by the end of the week. Students from the Montclair Cooperative School then gave Mayor Jackson and each council member a bag of four stop sign cookies as an act of gratitude.
“Before the vote, it would have been considered a bribe,” Karasick joked about the gift.