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  • Writer's pictureGOP Blogger

Debt and Taxes

Debt and taxes, deb, and taxes Go together like a horse and carriage This I tell ya, brother, you can’t have one without the other

Yes, we took a little literary license with the famous song by Frank Sinatra, but we felt that it was apropos to the situation in Warminster as we begin 2021.

The Warminster Board of Supervisors (BOS) voted unanimously to approve issuing $15 million of debt for the township. While this sounds like a ridiculous thing to do, there are some good things wrapped in this new debt package. We will break it all down for you so you understand exactly what this money will be used for and how it will be paid back.

First, a little history of how we went from a $8.5 million draw down loan to a $15 million 20-year General Obligation Note (GON). In 2020, the BOS voted to execute an $8.5 million draw down loan to pay for the purchase and reclamation of the Shenandoah Woods property, as well as to pay for the Warminster Community Park (WCP) project. A draw down loan is much like a Home Equity Line of Credit. You draw money as you needed, and you do not pay it back until/unless you draw down that money. The original plan was to use that “line of credit” to pay for the WCP project as well as the Shenandoah Woods property and pay it back with grant money and debt service in 5-8 years. This is the reason why the Board of Supervisors increased the debt service mill rate 169% in 2020.

In October 2020, the BOS fired the Township Manager and brought in the former Manager of Bristol Township on an interim basis. This was right in the middle of “budget season.” Along with the new Interim Manager came a new budget, which included raising money through the issuance of debt. The original $8.5 million draw down loan was now going to be a $12 million GON. But that changed in late 2020 and early 2021 to now be a $15 million GON. While not all this debt is a bad thing, there are some questionable items that will be paid for with this money, which will be paid back over a 20-year period.

  1. Refinancing Existing Debt ($3,091,000)   As of the end of 2020, the township was expected to be carrying just over $3 million in debt. Of this $3 million, $2.2 million was remaining for golf course upgrades in 2015 (about $900,000) and an irrigation system in 2020 ($1.3 million). The golf course notes were scheduled to be paid off from golf course revenues by 2023 and 2027, respectively. Since none of this debt was being paid for with tax dollars, it had no impact on the debt service mill rate. In addition, there are two township notes from 2014 ($120,000) and 2015 ($770,000) that are included in this refinancing. All this existing debt is being refinanced at a lower rate and longer term. The combined outcome of the new plan will ensure that the debt service mill rate will not only not be reduced but will most likely need to be increased in 2 or 3 years. At least this was the assumption made by the Interim Township Manager in the December 2020 meeting. Yes, spreading out the golf course debt will allow the course to make smaller debt payments over a longer period, which will allow them to send money to the general fund. But, as stated above, this will guarantee that the taxpayers will not get any relief in the taxes we pay.

  2. WCP Project ($5,197,000) – The township needs to pay the upfront costs associated with the WCP project. The cost of this project increased while at the same time some of the originally planned features were removed. The biggest item that was removed was the splash park, which originally was the cornerstone feature being added. That will now have to wait until a future phase of the project can be financed. It did not help that the BOS awarded the contracts to the highest bidder, which added nearly $300,000 to the cost of the project. As stated above, a good portion of these costs will be reimbursed through multiple grants. We are not sure exactly how much will be reimbursed of the expected $5 million in costs, but the assumption is that it will be a little more than half. The remaining costs will be financed over 20 years.

  3. Shenandoah Woods ($3,200,000) – The township has agreed to purchase the Shenandoah Woods property for $1 million, of which $100,000 was paid as a deposit a couple of years ago. Included in the costs of this property is $2.3 million for the reclamation of that property, which currently includes old housing used by the Navy when the WCP was an operational military base. Finally, the Aldi Organization filed suit against the Navy as well as the township, claiming they had an agreement with the Navy to have a portion of that property turned over them. The township paid Aldie $175,000 to have the lawsuit dropped.

  4. Public Works ($2,500,000) – Until last year, the township’s plan for road paving was to use the Public Works crew to pave the roads using the liquid fuels tax dollars that is sent from the state. The township would pave as many roads as they could until the money ran out for that year. The township was split into 6 zones, and one zone would be worked on each year, paving those roads which were deemed to be in the worst condition. It would take 6 years to cover the entire township, and only a fraction of the roads would be paved in that time. So, if a road just missed the cut during a particular year, it would not even be considered for paving for another 6 years, or unless that road became a hazard, at which time the township would pave that road if any money from the liquid fuels tax were left over for that year. On average about 4 or 5 miles of road was paved each year. In 2021, the BOS agreed to outsource the paving, and finance this paving using $2.5 million of the $12 million in new debt. This $2.5 million for paving represents 4 times more than was spent on paving in 2020 and 5 times more than 2019. The big difference here is that instead of the paving being paid for with the liquid fuels tax, it will now be financed by the taxpayers of Warminster over a 20-year period. There will be some savings doing it this way, as there is widespread speculation that the township will lay off several Public Works employees to realize that savings.

  5. Miscellaneous Capital Expenses ($490,000) – Also in the Capital Reserve Fund expense column are smaller ticket items totaling $490,000, including $400,000 for “Capital Engineering”, which we assume includes engineering projects for Shenandoah Woods and Public Works projects, including paving and curb ramp installation, $70,000 for the Fire Marshal and $20,000 for miscellaneous IT Equipment/Supplies, both of which were moved from the general fund budget to the capital reserve fund expenses.

If you add up the Capital Reserve Fund Expenses ($11,387,000) and the current debt to be refinanced ($3,091,727), you get a total of $14,478,727, or about a half million less than the new debt that we are incurring. We assume this excess will sit in the Capital Reserve Fund for future projects. But we will be paying interest on that money while it sits idle. Not to mention the $600,000 or more of the liquid fuels tax money that normally would be used for street paving. That money will sit in the Highway Aid Fund until a future date. That is over $1 million of debt that the taxpayers will be paying interest on that we should not be paying.

In summary, since the current board has been seated, municipal taxes (not including county or school taxes) have risen by 35% and our debt has increased by 385%. See graphs below to show these increases. The Chairman of the Board of Supervisors stated in 2020 that he would not sell assets or lay people off to balance the budget. Not only has the BOS done both in the 13 months they have had control of the local government, but they have also saddled the township with enormous debt and high taxes. But at least we still have the beloved Water Authority, which has increased the water rates and service charges for 2021 to pay off the debt incurred when they purchased the storm water system from the township. Suddenly, it is a lot more expensive to live in Warminster Township.

Warminster Long Term Debt 2016 - 2021

Warminster Municipal Taxes 2016 - 2021


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