Woodward Twp. to resurrect sewer authority to ease debt restriction
DUNNSTOWN — A majority of Woodward Township supervisors say they need to resurrect their municipal sewer authority to give the township flexibility to borrow money to pay for capital projects — and help with funding a new fire truck.
The board recently voted 2-1 to seek new authority members as part of the measure.
Voting in favor were Supervisors Wayne Love and John Barth. Supervisor Kyle Coleman voted no.
The same board in November 2018 voted to disband the authority because they desired to reduce the authority’s costs after the independent body purchased a residential home in Dunnstown and converted it into an office in what was considered a controversial move. They also said there were management issues at the time that needed resolved.
But taking over the sewer authority triggered a huge problem, according to Solicitor Robert O’Connor.
Unbeknownst to supervisors at the time — and apparently outside of the solicitor’s awareness at the time — by taking over the sewer authority the township assumed the agency’s debt — estimated $2.7 million — and that put the township at its legal limit for borrowing money under the Local Government Act.
That act sets borrowing limits for local governments and procedures to issue debt and tax anticipation notes.
The township only became aware of the debt restriction when it began to look ahead to helping Dunnstown Volunteer Fire Co. finance a new and needed fire truck.
The fire company has not asked for help at this point, company President Mike Fetzer told The Express on Wednesday.
He said the township would not have even known of the debt limit had not the fire truck issue been raised.
Further, Fetzer said it’s not fair to criticize the fire company in relation to the sewer board controversy.
“They are separate,” he said.
“They (supervisors) gave us the authorization to spec out a new fire truck. We have not reached out to the township to help us purchase the new fire truck, however,” Fetzer added.
The supervisors imposed .75 of a mill property tax increase for 2020 — one of the only “fire taxes” established in the region — and intend to use revenue from the tax for loan payments for a new truck at some point.
“The fire tax revenue will eventually be used to purchase a new fire truck for the fire company,” Fetzer added.
Regardless, the township cannot be kept from borrowing money should any significant capital project arise that requires financing for public safety, for example, the board has agreed.
“A sewer authority has no statutory limit as to the amount it can borrow and a township does. A township is set under the Local Government Act. A municipal authority does not have a ceiling for the level of debt unlike townships due to the act. How you find the debt limit is by taking the last three years and you figure out what the revenues are, add them together and divide them by three and that gives you the base borrowing. Then you have a multiplier of 2.5 which tells you how much the township is permitted to borrow. You can not borrow any more than that total,” he told The Express at Tuesday night’s meeting.
“There was a project where the county was the principle obligore and various municipal entities signed on for it. It was done in a wide geographical range around 10 years ago. The township’s obligation was about $2.7 million. At the time that the debt was incurred, the sewer authority was the principle obligore for the loan,” explained O’Connor. “It was based upon a self liquidation loan where by the authority would generate sufficient revenues in order to pay the loan as it became due and owing. The township, as it is required under these cases, was required to guarantee the loan, pledging its tax powers in the event that the authority would default.”
“Now we are beyond the ceiling, giving us no borrowing power as a township. The proposal was to recreate the authority, transfer back the debt to the authority and basically have more accommodation for the township to be able to borrow… in the event that it needed to borrow,” O’Connor added.
Love and Barth this week said they agree with O’Connor’s take on the issue.
“What transpired was that the township back a year or so ago — because of issues that they were having with the sewer authority — basically disbanded it. The issues were the fact that essentially nothing was getting done and there was a concern over the management of it. The problem that you have with a municipal authority is that you cannot regularly replace members unless they commit a crime or anything like that. They have a six-year term. At the time, the township elected to disband the authority, and by doing so, through some various paperwork, inherited the outstanding indebtedness that the sewer authority had,” explained O’Connor.
Coleman, however, said, “I stated in previous meetings that I felt that the township is in good financial condition right now with the accounts that we have. We do not need to borrow anymore money at this point.”
The supervisors intend to help Dunnstown Fire Co. purchase a new fire truck to replace a very old vehicle, thus the fire tax of a year ago. COVID-19 did not help the fire company — nor any fire companies for that matter — as virtually all of their fund-raising events had to be canceled in 2020.
Coleman this week reiterated his position on that.
“There was no tax hike for the truck. We implemented a fire tax last year, however. I was lobbying for half a mill and Wayne and John felt that we should step up to 1 mill. What I had said at one of the meetings was that I thought we should start at half a mill and then increase it every three years so that way it would be a gradual increase and we could notify people ahead of time before doing it. With budget numbers, they thought we should start at 1 mill right off the bat,” said Coleman.
Coleman also clarified that he disagrees with reinstating the sewer board.
“I was in disagreement with it because I felt that the only reason it came up was because of the discussion of purchasing a new fire truck. That is how we came about this issue with the debt,” Coleman explained. “It was when we went about borrowing money to purchase the truck, we could not.”
O’Connor pretty much echoed that.
“The only option … if you’re going to borrow money for the fire truck … is you’re going to have to recreate the sewer authority,” O’Connor told the supervisors a month ago as residents nearly packed the township garage for the March meeting.
That came just after a public hearing on the sewer authority reinstatement.
Thus, the township is now seeking applicants to serve on the new sewer authority.
Interested applicants are asked to call the township office at 570-748-6871.
“The appropriate candidates for (the authority) will rely on either of the following: You are a taxpayer, or owner of property in the township; you maintain a business in the township; or you are a citizen of the township,” he added. “That would also include people of a similar stature in Dunnstable Township without it being a joint authority.”
“Since the township’s sewer, which will ultimately be an authority, extends into Dunnstable Township, the same criteria for eligibility of employment applies,” he added.
A total five members will be voted onto the authority board and they will hire a secretary of their choosing, Barth said.
While the authority will manage the sanitary sewer system.
The municipal sewer system serves Dunnstown, Lockport and a part of Dunnstable Township and has approximately 747 customers.
Each residential customer pays a flat fee of $165 per equivalent dwelling unit on a quarterly basis.
The system also has capital project needs for line replacement and expansion.