Erwin board zeroing in on new budget and debt restructure

Sue Guinn Legg • Jun 14, 2018 at 10:13 PM

ERWIN — With fixed interest rates more attractive than the mix of variable and fixed rates the town of Erwin is paying on its estimated $5.5 million total debt, the Board of Mayor and Aldermen on Thursday continued to explore its options for debt restructuring.

New financing to cover a list of more than $600,000 in unfunded capital and personnel needs was also up for discussion on Thursday in what may have been the board’s last budget work session before its first reading vote on town’s 2018-19 budget.

The consensus at Thursday’s work session appeared to be the board members’ preference for new financing rather than an estimated 5.5-cent property tax increase to cover the costs of a list of needs Mayor Doris Hensley said will become more urgent in time.

“It’s more than a wish list. At some point, these will become necessities,” Hensley said, referencing the town’s needs for a two additional police officers, two new patrol cars, an engine and rescue truck for the fire department, a new all-purpose public works truck, stormwater improvements, parks and recreation facility repairs, road resurfacing projects and more.

On debt restructuring, Town Recorder Glenn Rosenoff told the board the variable interest rates the town is paying on approximately half the town’s existing debt began at less than 1 percent but over have climbed to close to to close 2.5 percent while the fixed rate the town is paying on the other half of its debt ranges from 3.8 percent to 4.5 percent

A financing company exploring options for the town advised the board in late May its variable interest rates will continue to rise. Rosenoff told the board Thursday the company now expects the fixed rates on the town’s existing debt to come in at less than 3.5 percent and to improve with any new debt the town adds to its debt restructuring.

“If you go this year or next year, they think they can get us in in the low 3s,” Ronsenoff said. “If you go in the next years after that, you will be financing not knowing what the rate will be.”

Rather than financing, Hensley recommended a bond issue also currently available at less than 3.5 percent. “If we do a bond issue, we can get it all in one rather than four or five different loans. We won’t have to worry about raising taxes and we can give all our departments the proper equipment and tools they need to work with,” she said.

Hensley also recommended a single bond issue for debt restructuring, saying, “If you roll it all (existing debt) into one bond issue, that takes care of the ... eight loans we have now and you’re going to save around $200,000 (in payments) on those.”

Aldermen Virgil Moore, Vice Mayor Gary Edwards and Alderman Mark Lefever all indicated they favored financing over a tax increase.

Lefever said, while he also favored bundling the debt restructuring and new debt into a single bond issue, he felt the board was in need of firmer cost estimates on projects such as stormwater improvements that he said could run as high as $2 million.

With the board’s first vote on the town 2018-19 budget set for June 25, Alderman Rachelle Shurtz suggested the board budget for only what is needed this fiscal year and delay the other expenditures until next year.

Hensley said, “The interest rates are low now.” She suggested the board pass the budget “as it is without a tax increase” and look at the interest rates again on June 25.

“If we want do it, we can always amend the budget later,” she said.

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