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An Explanation of Our Debt
Posted 12-23-2003
Much has been written lately
about Westmoreland County's debt and the annual payments we must make to
repay that debt. Unfortunately, the complete story has not been presented,
and many important details have been left out. First and foremost, an
examination of the county's debt will show how much has been initiated by
Commissioner Tom Ceraso and I and how much we inherited from the decisions
of previous Boards of Commissioners, particularly the Dick Vidmer and Terry
Marolt partnership.
The debt service from the
most recent bond issue is the only indebtedness initiated by the current
Board. The county must make gross debt service payment of $10.545 million in
2004. It is comprised of a 1974 issue for Westmoreland Manor ($577,300); a
1991 issue ($3.195 million), a 1993 issue ($110,117); a 1997 issue
($26,677); a 1998 issue ($45,000); a 1999 issue for the Industrial
Development Corporation ($390,000); forward refinancings of debt approved by
Vidmer and Marolt before they left office that required payments beginning
in 2000 ($3.9 million) and 2001 ($5,000); another Industrial Development
Corporation forward refinancing issue in 2003 ($633,437); and finally the
issue we initiated in 2003 that will require a debt service payment of
$1.676 million.
I voted against the
refinancings in the late 1990s and the forward refinancings because they
were not necessary. Because some of the debt had already been refinanced
once, it made the bonds taxable rather than tax-free. It caused us to offer
higher payments to the buyers of the bonds, as did the forward refinancings.
Because the buyers of those bonds must wait to receive a benefit, a higher
rate of return must be offered. Also, by tying up all of our existing debt,
the Vidmer-Marolt team kept us from refinancing it in 2003 when interest
rates were much more favorable for the county.
It is important to understand
the reasons we incurred the debt in 2003. A major investment in public
safety was the largest part of the bond issue. It was one that Homeland
Security Director Tom Ridge commended Commissioner Ceraso and I for having
the good judgment and foresight to invest in. Another portion of the most
recent bond issue was done for the Guaranteed Energy Savings Act that
allowed us to make improvements in the physical plant of county buildings
that will result in reduced energy consumption. If we do not realize reduced
energy consumption, we are guaranteed a repayment of our investment.
The other portion was
originally intended to build a new juvenile detention center. Since recent
trends have shown a decline in the number of juvenile detainees, we adjusted
the plan to more effectively meet our needs. We will rehabilitate the
existing juvenile detention center and construct a new office building for
the juvenile probation services that are currently crammed into insufficient
space at the detention center. A portion will be used to rehabilitate the
former Troutman's Building in downtown Greensburg for the Children's Bureau.
When completed, rent payments from the State Department of Public Welfare
will allow us to recoup those costs.
Any remaining money will
either be used to pay for new voting machines that the Republican Congress
in Washington is mandating us to acquire by 2006, even though our lever
machines still work fine. I should add, of course, that the federal
government will provide funding for only about one-third of the costs. If a
local match is needed for a proposed new business park, we can use the bond
proceeds and be repaid for that portion of the debt by the Industrial
Development Corporation.
The bond issue we did in 2003
was the first in the modern history of the county that a financial advisor
was hired to help conduct a competitive process. We hired two investment
banking firms to do the issue that created competition between the mangers
to sell our bonds. Ultimately, we sold them at rates that will save
taxpayers hundreds of thousands of dollars over the life of the issue.
We are dealing with the debt
that has been laid on our laps. At the same time, there are important
projects that require investment so Westmoreland County government can
continue to effectively fulfill its mission. We must balance the
responsibility of paying off the debts of previous Boards of Commissioners
with our obligation to invest in the future of this county. |
