Allentown plans to borrow more than $21.5 million to make improvements in the city.
“These are projects that desperately need to be done,” Mayor Ed Pawlowski told City Council late Monday afternoon. “We can’t keep putting off not fixing roofs; we can’t keep putting off not fixing pools.”
City Council expects to vote on the borrowings when it meets at 7 p.m. Wednesday.
Council gave initial unanimous recommendations for approval when it met as a committee-of-the-whole Monday.
Financing debt may not sound like a hot button issue, but during the meeting the mayor tangled with two residents who are frequent critics of city government.
Scott Shearer, managing director of Public Financial Management, the city’s financial consultant, summarized the borrowing and debt refinancing proposals.
The city plans to establish a line of credit of up to $6 million in 2015 to finance short-term capital projects for information technology, police and public works.
A portion of that money will be used to purchase body cameras for all Allentown police officers.
On Monday, President Obama proposed federal funding to provide body cameras for U.S. police departments in the aftermath of the Aug. 9 fatal shooting of Michael Brown by a police officer in Ferguson, Mo., which sparked riots and nationwide protests.
Allentown also plans to borrow more than $15.5 million next year by issuing bonds to finance long-term capital projects —including street paving, improving pools, buying large pieces of equipment and making other public improvements, some with additional funding from the state Department of Transportation.
Regarding the line of credit, Shearer told city officials “you only pay interest on what you draw down” and added the $6 million will not all be spent “on day one.”
He said that money will be spent between 2015 and 2017, as the city needs it.
After council gives final approval to seeking that line of credit, Shearer said the city will issue a request for proposals by mid-December from local and regional banks, to get the best deal.
“We’re also looking at potentially saving the city a little bit of money by refinancing some of its existing debt,” said Shearer.
Existing bond debt that will be refinanced totals $11.24 million, according to figures provided by Shearer.
Refinancing that debt should save the city about $350,000, he told City Council.
Interest rates are not at the all-time low levels “that we’ve seen over the last couple of years,” but still very low, Shearer told council.
He added interest rates remain at very attractive levels both for refinancing and new borrowing.
“If we’re going to borrow money, this is the time to borrow,” agreed City Council president Julio Guridy.
“This is the time to do it, because we don’t know what’s going to happen next year,” said the mayor. He predicted interest rates are going to go up — “they’re never going to be as low as they are now.
“If we don’t do it now, it’s only going to cost us more in the future, because eventually we’ll have to do some borrowing.”
Shearer told officials the city should be able to get the $6 million line of credit at less than four percent interest. He said that loan would be paid off by August 2019.
He said the $15.58-million bond borrowing would be paid off in 30 years, with an interest rate of about 4.2 percent.
Allentown’s debt
In response to a question from Guridy, Shearer said the city’s total current debt is over $88 million.
“That’s really good, compared to other cities,” said Guridy.
“That’s very good,” confirmed Shearer.
Pawlowski and Shearer said the city has eliminated nearly $50 million in debt within the past year or so, mostly by leasing its water and sanitary sewer operations to Lehigh County Authority.
Pawlowski told council: “We haven’t done any debt in almost eight years.”
The mayor maintained savings from the projects selected will reduce annual city costs in the general fund.
“We’re close to a wash,” said Pawlowski, indicating the total amount saved by making the improvements will be almost as much as the debt that must be incurred.
For example, he said, one $3 million item, called the ESCO project, should reduce electricity costs by 40-50 percent, saving the city $300,000 a year — meaning it would pay for itself in 10 years.
Another example he gave was that buying a new dump truck eliminates the need for annual repairs and replacement parts to keep an old dump truck running.
He said one new dump truck can cost $150,000-$200,000, but added most of the city’s trucks are about 25 years old. “They obviously are reaching the end of their useful life.”
An indirect police savings
Pawlowski said an indirect savings will come in the form of reduced potential liability costs, by giving police officers body cameras as well as putting cameras in their cars.
“It will improve the performance of our officers,” predicted the mayor.
Council member Daryl Hendricks, a retired Allentown police captain, said the city’s police department is light years ahead of the Ferguson, Mo., police department “and many others in this country.”
Said Hendricks: “We already have Tasers, which they don’t have. And now body cameras is the next step.
“It does cut down on the number of lawsuits. It makes it much safer for our officers and it gives them an alternative to deadly force.”
Mayor tangles with residents
Resident Lou Hershman told council that, with the mayor talking about all the savings, “I thought he was going to make an amendment to the [2015]budget and reduce our real estate taxes. I thought we were going to get a tax cut.”
“We haven’t raised taxes in 10 years,” said Pawlowski. “Please, Lou, tell me another major city in the state of Pennsylvania, or in the continental United States, that has not raised property taxes in 10 years.
“Can you tell us? You can’t. Thank you.”
When Hershman said: “I thought you could be a leader and cut our taxes,” the mayor responded: “We are a leader.”
Pawlowski also challenged resident Glenn Hunsicker, when Hunsicker asked if City Council would be hiring its own consultants to review the proposed new borrowing and bond refinancing.
Hunsicker said Shearer and Atty. Kevin Reid, the city’s bond counsel, work for the mayor, but council is supposed to be the guardian of the taxpayers.
“I’m not saying they’re not doing the right job, but the appearance is you don’t have representation,” Hunsicker told council.
He said council is taking what Shearer and Reid are saying as gospel, “which might be true. I just think City Council should have their own.”
Guridy said the consultants represent the city, including City Council. He asked Hunsicker: “Are you thinking they are doing something wrong?”
“No, I didn’t say that,” said Hunsicker.
The mayor jumped in, telling Hunsicker: “If you’re making the accusation that somehow they’re doing something improper —that these guys aren’t representing the city’s best interest — please make that accusation.
“But if you’re talking about saving money, and then you want us to hire more consultants to basically do the same work that these guys are going to do, that’s wasting the city’s money.”
The mayor said Reid and Shearer would not violate the state’s ethics code by giving the city false information about bond transactions.
“I’m not saying they’re violating anything,” said Hunsicker.
“Sure you are,” said Pawlowski.
Hunsicker indicated PFM was used for the city’s water and sewer lease, which “was going to save us and we wouldn’t have to do this. And then, within a year, you come and ask for all this extra money.”
But Pawlowski said that was a different issue, which involved reducing the city’s skyrocketing pension debt.
Guridy said City Council has full confidence in PFM, saying it has done a lot of work for council for a long time.
City Council vice president Ray O’Connell said he respects Hunsicker, but added: “You are making accusations. I personally have full confidence in Scott Shearer and Kevin Reid.”
Line of credit
The city plans to use the line of credit of up to $6 million in three areas:
• $3.3 million for public works, including trucks and police cars;
• $1.45 million for IT, including equipment replacement, an archives system and a voiceover phone system;
• and more than $1.1 million for police related improvements.
In addition to body cameras, which cost $950 each, and in-car cameras, police will get mobile data computers and more on-street cameras.
Long-term bond issue projects
The planned capital projects that will cost a total of $15 million include:
• ESCO project, $3 million;
• City-wide paving, $2.5 million;
• Large equipment, $3 million;
• City-wide pools, $3 million;
• Gordon Street Bridge, $426,000;
• Chew Street, $288,000;
• Hamilton Street, from 10th to 15th streets, $300,000;
• Hamilton Street, from Fourth to Sixth streets, $300,000;
• Mack Boulevard, $312,000;
• Building repairs, $500,000;
• Roof replacements, $250,000;
• 19th Street improvements, 300,000;
• American Parkway, $105,000;
• Traffic light upgrades, $200,000;
• Livingston Watershed, $200,000;
• Schreibers Bridge repairs, $150,000;
• Jefferson Street pedestrian crossing flasher: $169,000.
The Mack Boulevard and Gordon, Chew and Hamilton street projects also will receive funding from PennDOT.
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