Montclair is getting serious about reducing its debt.
In the past six months alone, the township has erased $8.1 million of red ink from its books, and plans to nix about $68 million during the next 10 years.
“We’ve done a yeomen’s job ... in the last six months of really tackling that [debt] issue,” said Township Manager Marc Dashield.
The township’s overall debt at the end of 2012 was approximately $212 million –which is made up of $92.8 million in school debt, $38.1 million in utility debt and $80.9 million in township debt. The debt figure was at about $220.2 million on June 30, 2012.
In addition to paying down the township’s principal payment of $3.2 million in 2012, Dashield said the council was able to reduce the debt by taking advantage of about $4.1 million in grants, canceling $1 million in school debt and nixing another half a million in general obligation debt.
A 10 Year, $68 million Plan
After 10 years of spending, the council voted to reverse course on Tuesday and attempt to get the township’s school and municipal debt below $120 million by 2022.
The council approved resolutions to issue bonds which will pay down school debt by $22 million over 15 years and municipal debt by $10.5 million over 11 years. Bob Benecke, an independent consultant hired by the township, said these new bonds are not new debt but rather will impose a strict repayment plan for the township to payoff its debt.
This debt plan does not factor in the township’s $38.1 million in utility debt, which is self-liquidating and not covered by taxpayers.
The plan locks principal payments and more in for the next decade, which is expected to reduce the municipal and school debt about $68 million, cutting it from $183 to $115 million.
Benecke, of Benecke Economics out of Moonachie, said the bond issue will ensure lower interest rates, and will also consolidate Montclair’s school and municipal debt.
“We lock in the interest rates and we lock in the principal schedule so we can start reducing debt even further,” said Benecke.
General capital will drop from $84 million to $48 million, and school debt will move from $99 million to $67 million in the next decade. Benecke added that the payment models do not reduce debt in a vacuum, but rather factor in new spending.
The model, said Benecke, “is not being blind to the fact that we have needs. ... We just can’t in a vacuum reduce debt. As we go through the next 10 years, there’s going to be needs for roads, a need for facility improvements, a need for schools ....”
To keep pace with the debt reduction plan, the township and schools will limit their spending to about $24 million and $35 million, respectively, during the next 10 years.
Benecke told the council that the debt plan is an aggressive approach, and a model for others municipalities in the state.
“We can’t say how excited we are about this program,” said Benecke. “We use this as an example all throughout the state .... Bringing this down by $60 to $70 million over the next decade is a home run.”