Why NorCo Should Wait Before Borrowing $65 Million

Last week, Northampton County Council voted 5-4 to reject a $65 million borrowing plan in the form of municipal bonds to cover the cost of a new parking deck, county office building, updated radio system for first responders and other capital projects that include improvements to the Civil War era jail. Because I believe these are all needed, I would have joined Council members Ron Heckman, Jeff Warren, Kelly Keegan and Ken Kraft in voting Yes. But the five Council members who voted No might have done us all a favor. Instead of full speed ahead, we might wish to lower the sails of SS NorCo County until the winds die down following Trump's election as President. 

According to Governing, Trump tariffs and renewed tax cuts means a larger federal budget deficit and increased inflation, and that means higher interest rates on municipal bonds. In fact, that's what has been happening over the past two months. 

In an attempt to reduce the increased deficit caused by renewed tax cuts and tariffs, Bloomberg reports that some Republicans are considering the elimination of tax-exempt municipal bonds, under which investors pay no tax on the interest earned. Though the likelihood of this happening is small, Republicans now control all three branches of government. 

Even if the tax exemption for muni bonds is untouched, there is likely going to be less demand for them. That's because of a reduction in corporate taxes, favored by Trump and his Republican government.

In the short time since Trump's election, interest rates on muni bonds have soared. Once things have settled down, the actaul cost to taxpayers of a borrowing plan will be more certain. Right now it is not. 

Hanover Township "Fantastic", Says Independent Auditor

"Fantastic" is not usually in the lexicon of a CPA auditing municipal finance. But that's exactly the word used by CPA Todd Bushta, several times, to describe Hanover Township's audited 2010 budget. Bushta, an independent auditor, presented his findings to the Board of Supervisors at their April 12 meeting.

In the absence of Chairman John N. Diacogiannis and Vice Chair Glenn R. Walbert, "Acting, Acting Chairman" Steve Salvesen (pictured above) held the gavel. Bushta was especially impressed at the Township's ability to keep expenses at or below budget. "I said earlier that Jay was cracking the whip, and he certainly was," remarked the auditor. "The Township is certainly healthy, certainly liquid. ...We can certainly feel comfortable that you are weathering this fiscal stress quite well. Obviously, the staff has done a great job managing its financial operations, and we're satisfied with the internal controls."

Bushta's independent audit is loaded for public inspection on the Township web page, and reveals that Hanover finished 2010 with a net surplus of $615,905, with net assets of $21,703,821 and unrestricted cash assets of $4,161,892. This is nothing unusual. Township Manager Jay Finnigan indicated there's been a surplus in every year since he's been Township Manager, and Supervisor Steve Salvesen added that the Township has been in the black since '94 or '95.

According to Salvesen, one of the reasons for this rosy financial picture is that the Township converted several bonds, on which it was paying interest rates between 6 and 7%, to bank loans with interest rates between 3 and 4%.

Solicitor Jim Broughal noted that Hanover has practically no legacy costs associated with pensions. "This Township doesn't appear to have any legacy costs. Is that because it is not a defined benefit pension plan?" Bushta acknowledged that was the primary reason. A defined benefit pension, common in most municipalities, is one in which the employee is guaranteed a specified monthly benefit on retirement, regardless of investment returns.

In other business, Supervisors authorized the Zoning Officer to advertise a Conditional Use Hearing for May 10, 2011, on Richard Bartolacci's application for an expansion of an exercise facility at Just Be Natural (JBN), located on 8.2 acres at the northeast intersection of Courtney Street and Highland Avenue. Bartolacci also maintains professional offices and a wholesale warehouse at the site.

Supervisors also authorized Solicitor Broughal to advertise an Ordinance to regulate standing and parked vehicles within LVIP IV and Bethlehem Business Park. Although there are "codes and covenants" within the business parks to prohibit parked and standing vehicles, there are no enforcement provisions. "Without signs, you can't enforce," noted Manager Jay Finnigan.

Supervisors also observed a moment of silence for Glenn Taggart, a former Planning Commission member who passed away on April 2. Taggart most recently served as a member of Bethlehem's Zoning Hearing Board.

RenewLV Brownbaggers to Discuss Municipal Finance

Although RenewLV hosts periodic brown-bag forums on topics of local concern, I've yet to make it to even one of them. Unless I have babysitting duties, and I never know that until the last minute, I'll be there this Friday for a discussion of municipal finance, especially as it impacts on older communities. You're supposed to bring your own lunch, plus a few cookies for me. Here are the details:

Who: Gerald Cross, Executive Director of the Pennsylvania Economy League, Central Division

What: Informal brown-bag forum, free and open to the public, to discuss Pennsylvania’s current system of municipal finance and the major structural challenges that this system poses for older core communities, especially cities and boroughs. Session will include brief presentation followed by plenty of time for questions and discussion.

When: Friday, August 27, 12:00 p.m. (noon) to 1:15 p.m.

Where: Sigal Museum [New home of the Northampton County Historical & Genealogical Society], 342 Northampton St, Easton, PA.

Note: The session will be held in the 2nd Floor Conference Room at the museum. Upon checking in at the admissions desk, you will be directed upstairs. Metered street parking is available throughout Easton. A public parking garage is located on 27 South Third St.