Lansdale bond borrowing could be finalized in March

The next few weeks of 2025 could bring final terms on a bond borrowing Lansdale has discussed for years, and that could help shape the town for decades.

Council members heard details this month on a possible $12 million bond borrowing that could be finalized soon, and work the town plans to tackle with the funds.

“We did get a packet of information, on three options for the bond borrowing. There’s a tight wraparound option, there’s a 20-year option, and a 25-year option. Obviously, the interest rates vary with the three options,” said councilwoman Carrie Oglesby.

Lansdale last held detailed talks on a bond borrowing in late 2023, after a year of talks on infrastructure needs around town, including potholes and road repair projects, aging equipment at the town’s wastewater treatment plant that prompted a rare summer sewer rate increase, and an electric rate study that could pave the way for a rate hike. A new borrowing was referenced during budget talks throughout 2024, but put on the back burner as the town’s finance and public works directors left and were replaced, and new arrivals took a fresh look at the town’s various reserve fund balances and policies.

During the administration and finance committee meeting on Feb. 5, bond advisor Ed Murray gave details, showing the town’s current outstanding debt, the schedules of payments on the balance remaining, and options for the future borrowing. As of mid-January, the borough has a total outstanding debt of roughly $25.7 million, slated to be paid down at a rate of roughly $2.3 million per year in 2025 and ’26, then down to $2.1 million per year through 2033, before those payments drop to $1.9 million per year for 2034-36.

In the three options provided by the bond advisor, those annual payments will both increase and extend, with the payment periods and levels varying depending on which option council chooses. In a ‘tight wrap’ scenario, total debt service payments would increase by just over $600,000 starting in 2026 and the annual debt payments would increase to $2.9 million that year, then stay level at roughly $2.7 million until the new borrowing is paid off in 2041.

Under a 20-year wrap option, those increased payments would taper down, with annual payments dropping down to $1.7 million starting in 2037 and running through 2045; the 25-year option would use a similar drop, with the debt payments falling to $1.2 million in 2037 and running through 2050.

All costs of the borrowing will be rolled into the amount borrowed, Murray added, and the bond advisor will likely present details to full council when that group meets on Feb. 19. The admin and finance committee could vote on March 5 to direct staff to work with the bond counsel to prepare the borrowing, with final approval possible at the March 19 full council meeting.

“Unlike in 2020 and ’21, there’s a lot of people that want to buy bonds at higher interest rates than what everyone has seen from 2019 to ’22,” Murray said.

All bonds will be callable within seven or eight years so they can be refinanced if interest rates drop, he added, but rates won’t be as low as the town scored with their last round of refinancing in the early days of the pandemic.

Projects on drawing board

Projects identified so far by staff include the major renovations of the borough’s Whites Road pool complex, and road repaving and repair projects on Edgemont Avenue, North Cannon Avenue, Poplar Street, and West Third Street, all infrastructure meant to last decades and thus be paid down over time.

“We’re going to give you the money, and it’s going to go out the door pretty quickly,” said Murray, and borough Manager John Ernst replied: “We are reasonably sure we could use all of that money in a very short time.”

All projections assume the borough maintains its current AA- bond rating, Murray added, and a rating call will likely be held in late February or early March, so terms can be finalized before any approval votes from council. The impact to taxpayers will depend in part on that rating and the final terms, Murray said, and part of what the bond advisor will present to council will include specifics on whether an increase is needed to the town’s debt service tax millage.

Finance director Jim Lathrop asked if the bond proceeds would have any restrictions in how they are used, since the town has separate enterprise funds for its electric, sewer, parking, and other funds, and Murray said any limits would be up to council and can be detailed by the bond advisor for accounting purposes.

Oglesby then asked if the new borrowing would have any impact on the town’s percentage of debt as compared to the overall annual budget, and Lathrop said it would cause an increase, but not a worrisome one.

“Your debt service is running about 12, 12.5 percent of the overall. We’ve talked about how between 10 and 15 percent is a range to be in. With the new debt, you’re starting to push up into that 13, 14, 15 range,” he said.

Murray added that rating agencies tend to look at a town’s debt to income ratio, available funds, and policies governing that debt, and Lathrop said he and finance staff would develop draft recommendations, and the committee could discuss those policies in future meetings.

Lansdale’s borough council next meets at 7 p.m. on Feb. 19 and the administration and finance committee next meets at 6:30 p.m. on March 5, both at the borough municipal building, 1 Vine Street. For more information visit www.Lansdale.org.

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