To finance a new municipal building and police station, the Butler Twp. supervisors plan to take out a bond issue rather than a bank loan, reversing a decision from last month.
After requesting proposals for a $3.5 million loan, the supervisors learned that banks can't guarantee the interest rate for more than 10 years, whereas they want to borrow for 30 years, township Manager Maryanne Petrilla said.
At a work session on Thursday, bond counsel Jens Damgaard of Rhoads and Sinon and David Payne of PNC Capital Markets outlined a process for issuing the bonds by June.
Payne said Moody's Investors Service in November 2016 reaffirmed Butler's credit rating as A1 and stable, which Payne called very strong.
He said the interest rates now would vary from 1 percent for the earliest-redeemed bonds to 3.8 percent for the bonds redeemed last. By June, when the township closes the deal, the rate might drop to 3.75 percent or 3.5 percent, he said.
Petrilla said that's better than the 4 percent loan that Butler initially wanted to take from the U.S. Department of Agriculture before she learned there would be delays in borrowing from the department.
Damgaard said the bond proceeds can cover some bills already incurred, such as fees for architects, engineers and a site manager hired last month, but not the $100,600 that the township paid when buying the land for the building in the CAN DO Corporate Center in August 2016.
When planning a building to replace the 28-year-old municipal building on West Butler Drive that the police force and administrative staff have outgrown, Petrilla said the supervisors decided that they could afford annual payments of one-third of the fund balance.
Moody's, in the November review, said the fund balance dropped to $1.3 million in 2015 because property tax revenues fell slightly below expectations but reported that township officials expected the balance to return to $1.5 million by the end of last year. The fund balance is "a strong 45 percent of revenue," Moody's said when giving Butler a stable A1 rating.
A1 is Moody's fifth-highest rating. It indicates a low credit risk and is higher than 16 other categories from moderate risk to default.
Through 2015, Moody's said Butler had median family income that was 117 percent of the national median; below-average pension liability of $628,000 in 2014, the latest year available; and debt repaid by municipal taxes of $2.8 million. Also, the township secured a debt of approximately $9.5 million remaining for a $17 million wastewater treatment plant completed seven years ago. The bond is being repaid by sewage fee revenues.
Moody's said Butler's tax base has grown through the building of 2,100 homes in the past two decades and expects growth to continue because approximately 2,320 building lots remain.
"We're lucky to have growth," Petrilla said when discussing the bond rating, which she said a balanced budget and frugality helped maintain.
The township also was lucky enough to receive a $400,000 state grant last week to build another building, a garage for the Highway and Wastewater departments.
For the garage, the supervisors gave consulting engineer Joseph Calabrese permission to start applying for a water runoff permit, which will take the state about five months to issue.
By then, the township expects to receive the grant and enter a contract for a pole-building style of garage on the northern section of the 88-acre Freedom Park.
Meanwhile, township workers and Calabrese are discussing how to run a natural gas line to the garage and a concession stand at new ballfields before they pave a new entrance to Freedom Park off Mill Mountain Road.
The garage will have a separate driveway off Mill Mountain Road north of the new park entrance.
