One of the roles of the Towamencin Township Supervisors is to oversee the finances of the township. This includes not only developing the annual budget but also looking ahead to identify expenses that that the township will be facing in the future.
In looking at the future expenses for Towamencin we see numerous replacements, upgrades and improvements that will be required to our infrastructure (sewer, storm water and roads). Our local infrastructure to include the sewer system was built out of necessity to facilitate growth in the post-WWII era. Much of that infrastructure is 50 to 70 years old and nearing the end of its service life. Because much of it was installed at the same time, it also requiring replacement at the same time. In addition, there are also investments that need to be made in the area of public safety, specifically the fire service.
In examining the projections, we are looking at having to borrow and spend the following:
To meet these expenses, we would have to increase our debt and raise both sewer rates and real estate taxes. Our current debt is $19M with an annual debt service of $2.2M. Over the next ten years, we would have to borrow additional funds which would raise our debt to over $34M and increase our annual debt service payments to $4.5M-per-year. We estimate that real estate taxes would increase to almost $900-per-year — from $450-per-year — while the sewer rates would increase from $450-per-year to over $800-per-year. In the meantime, most other township quality of life initiatives, including parks, trails, the pool, and athletic fields, would have to be put on hold while we wait to collect impact fees and apply for various grants.
In looking at options to meet these financial challenges, we noted that other local municipalities have sold their sanitary sewer systems to private operators, such as PA American Water or Aqua America. In speaking to the elected officials and staff of these municipalities, they were generally pleased with the results of selling their systems, so we felt that we had a fiduciary responsibility to see if this could be a viable option to help us meet our projected future needs as a community.
We began the process in earnest in early 2021 with the solicitation and pre-qualification of bidders. They were given financial information and technical information on the wastewater treatment plant and the collection system. They were able to tour the plant and were also presented with our ten-year capital improvement plan.
Proposals were received in February of this year with four bids for an outright purchase and one bid for a thirty-year lease. Bidders were asked for both the purchase prices as well as a rate schedule indicating how their rates would increase over the next 10 years.
The highest bid we received was from NextEra Energy for $115M. This was quite a bit more than we anticipated, but NextEra is looking to enter the Pennsylvania market and were willing to pay a premium to do so.
In analyzing the proposals, we made the following presentation at our second townhall meeting to illustrate the effect on the individual ratepayer/taxpayer, as well as the impact to the township’s financial position:
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With the pay-off of the outstanding debt/long-term liabilities of $34,765,000, there is a savings in the operating budget of $1,245,000 annually which allows for future growth in expenses and for the increase in the homestead exemption to the current maximum of $76,000, an additional $130 in tax relief to each household.
After paying off township debt/long term liabilities and setting aside $5,000,000 for planned short-term capital improvements, reserves in the amount of $87,000,000 are created. These reserves are intended to be perpetual. The reserves will generate $2.6M in interest every year, $26 million over the 10-year comparison period, which will fund the township’s anticipated capital project needs.
Projected combined tax/sewer rates for the average taxpayer/ratepayer would be $1,702 without the sale compared to $1,381 with the sale. Not only do township residents benefit from the sale, the township’s financial position is significantly enhanced — debt goes from $19M to zero and capital reserves go from $4M to $87M.
We found NextEra — a Fortune 200 American based environmental company — to have a strong mission statement touting a commitment to clean American energy. Fortune lists them in top 20 worldwide for Innovation and named them to the list of "World's Most Admired Companies." NextEra's origins can be traced back to 1925. They must be approved to do business in PA by the Public Utility Commission (PUC) which will oversee rates. PA Department of Environmental Protection (DEP) regulations will apply to NextEra’s operations just as they did to the township operations.
The NextEra proposal offers our township a generational opportunity to reboot and reset our finances for the foreseeable future. With the money we collect in taxes, fees and the interest generated from the capital reserves, Towamencin will be in an outstanding position to meet its obligations to improve and maintain the infrastructure of our township and to upgrade and improve the quality-of-life services we deliver to our citizens.
See also:
Despite Vocal Opposition, Towamencin Supervisors Sell Sewer System for $115M in Historic 4-1 Vote
Towamencin Supervisors Vote 4-1 to Advertise Sale of Sewer System for $115M, Final Vote May 25
Letter to the Editor: Vote No on Selling Sewer System
Residents Speak Out After Towamencin Supervisors Signal Intent to Sell Sewer System
Towamencin Supervisor Majority Says They’re in Favor of Selling Sewer System Despite Opposition
North Penn Says Proposed Towamencin Sewer Sale Would Have Minimal Impact on District
To Sell or Not to Sell: Towamencin Board to Decide Sanitary Sewer Fate in May
Towamencin Inches Closer To Possible Sewer Privatization With Feb. 11 Bid Deadline
Editorial: Selling the Sewer System Would Be Bad for Towamencin (and Elsewhere)
