County Plans $61M Bond for Upgrades

CREST HAVEN — County bonds and budgets don’t get much attention from the average Cape May County taxpayer even though they impact taxes.
So it was on Tue., July 26, as Edmund Grant, county chief financial officer, presented to freeholders a series of charts outlining debt analysis and future bonds.
As world attention turned to Washington, D.C. where Congress dallied with raising national debt as the nation teetered on a downgrade of U.S. Treasury bonds, Cape May County freeholders were discussing how best to spend $61 million in an upcoming bond ordinance.
That bond, which gets a public hearing Aug. 9 at 7 p.m. before freeholders, includes:
• $15 million for a jail renovation and expansion to alleviate overcrowding that had dogged the facility for at least four years, with promises to state inspectors to remedy the situation.
• $4 million to make county buildings more energy efficient, with anticipated savings that will exceed that amount.
• $6 million for bridges operated by Cape May County Bridge Commission, with a $1-million state grant to partially offset that amount.
• $23.7 million for county facilities, with a $965,000 direct reimbursement anticipated. (Renovation of the jail is included in this section. Other improvements listed in the ordinance include Fishing Creek pump station, County Park in Swainton, main library in Court House, Upper Township Senior Citizens Center, Wildwood Crest Library ($1 million to Cape Island Masonic Lodge No. 30 for the Wildwood Crest facility), security system upgrades and energy upgrades.
• $25.9 million for upgrades on county roads, with $13.8 million in offsetting state and federal grants.
The county’s bond rating set by Moody’s is Aa3.
“That is an exceptional bond rating that we have achieved by our budgetary restraints and sound fiscal planning,” stated county Administrator Stephen O’Connor. “There are only two rates higher given to government entities, Aa2 and Aa1,” he added.
That translates into benefits for taxpayers, the same as a better credit score helps an individual get better interest rates on loans.
Is the county borrowing at a “safe level?”
“Yes,” O’Connor replied. “Again, the county has planned its borrowing to move forward with projects while maintaining a steady annual debt amount.”
While the bond ordinance is for $61 million, a total of $18 million is anticipated in grants and other reimbursements, he said.
At the meeting, it was explained to the board that, should it appear that grants may not be forthcoming for a project, that project can, and usually is, shelved until a future date when grants will be available.
It is important, noted Engineer Dale Foster, that projects be “shovel ready” because, when grants become available, those projects that are ready to go, have a greater possibility of winning approval from federal or state entities.
Adoption of a bond ordinance is the freeholders’ approval of projects to be undertaken. Added approval will be needed when the projects are funded.
Somewhat like a home improvement loan, funds are ready, but there is no deadline mandate when projects must begin.
“It is expected that the funding of the projects will be scheduled as plans are developed, permits granted and any corresponding federal and or state grants are guaranteed,” stated O’Connor.
“We can expect this to be a multi-year funding program,” he added.
Available to the county are three methods to pay for projects:
• Pay as you go. This method is for smaller projects that the county pays directly from its capital budget without borrowing.
• Bond Anticipation Notes (BAN) which are short-term financing, used to get projects started without permanent, more
expensive financing. The interest rates are lowest for BANs in the present market. It is expected that the county will get those “shovel ready” projects using those type of funds.
• Bonding, (permanent). This is used for the bulk of projects as they become “active” and are need to be funded.
“It is the county’s intention to move the projects along and go to permanent financing in the 2013 budget year. As the county has developed its capital projects, it has tried to maintain annual debt under $10 million, O’Connor said.
In 2013, much of the county’s existing debt will be retired and annual debt payments will be reduced to under $6 million.
The county will, in all likelihood, use BANs until permanent financing for the 2013 budget. That will allow the county to increase its debt payments without impacting direct taxes or the tax rate.
“This is an exceptional method in project financial planning,” O’Connor stated.
“While county government provides a host of services that are essential to the well-being of its residents, investing in roads and bridges is one of its most critical functions,” he added.
“Maintaining safe, reliable and convenient modes of transportation affects everyone,” he added. “Not only is it what most people expect from county government, it is indispensable in keeping our tourism economy strong.”
Regarding assumption of the Bridge Commission’s annual debt, O’Connor stated that the county took over $1.1 million from the commission.
Under the new bond ordinance, the county would be funding an additional $5 million for new projects.
That would increase annual debt for Bridge Commission bridges an estimated $340,000.
He added that a general rule of thumb to determine annual costs for bridge projects is to multiply $68,000 for each million borrowed.
Economic times crest and fall, and with it the fortunes of county government.
As Grant discussed with the board the bond plan, he cited years when interest rates were higher, and “we were struggling with the rate, so we cut back, then in two years it built back up.”
He also cited a time when “Everything was wonderful and we had too much surplus. The board agreed to lower the surplus by giving allocations back to municipalities for capital projects.
He also said the county did its best to “keep us on an even keel” without spikes that could alter the tax rate.
Parts of this story were first published at capemaycountyherald.com
Contact Campbell at (609) 886-8600 Ext 28 or at: al.c@cmcherald.com