If it seems like only yesterday that an editorial about local government borrowing ran in this space, that’s probably because it is close to true.
Last Friday’s opinion piece conceded that Wilkes-Barre City probably has to borrow $41.3 million just to stave off financial turmoil, even if the 20-year loan will actually cost the city a total of $71 million thanks to all the interest.
And talking government debt is admittedly the equivalent of a monotone lecture on hair growth. But bear with it, this is where the rubber meets the road. Or more exactly where government decisions meet your pocketbook.
As noted in Friday’s editorial, such borrowing immediately evokes two issues: How did a government get to the point where it needed to borrow so much just to stay afloat, and what is being done to make sure the move is a one-time thing, not a recurring ploy to balance today’s books on tomorrow’s taxpayers.
Yet the issue is worth revisiting because Luzerne County Council voted Tuesday to proceed with refinancing that would include new borrowing of $12.1 million (counting interest), boosting overall debt.
Their are important differences between the city and county proposals, biggest of which is the debt itself. The city was borrowing because it can’t afford to pay its mounting debts, and wanted to stretch payments out. The county is looking primarily to save money through lower interest rates.
The county currently owes a whopping $316.3 million. Adding anything to that has to be weighed with tremendous caution. But context matters: In 2010, the total county debt was $466 million. That’s a very impressive reduction of almost $150 million — a 32 percent decline — in seven years.
Which clearly shows the county took debt reduction seriously and has been tackling it effectively.
On Monday, the county presented a “worst case” scenario that made this proposed refinancing sound insane: It could balloon county debt back up to almost $384 million.
By the time Tuesday’s council vote rolled around, officials had a much more palatable forecast: Refinancing would reduce interest payments and unlock millions that had to be set aside in order to borrow money in the past, so the move would actually reduce county debt by $8.5 million.
Even if a $12.1 million cost of new borrowing for energy-savings projects is added, total debt goes up only $3.5 million — a 1.1 percent increase after that 32 percent decline. And those projects are expected to pay for themselves, saving nearly $13 million over two decades.
So, assuming that worst-case scenario scare from Monday never materializes, this sounds like refinancing done right, taking advantage of opportunity after years of effective debt management. By comparison, the city plan sounds like refinancing done from necessity, a move made from avoidable debt desperation.
In both cases, taxpayers have the most to gain by keeping a gimlet eye on how it all unfolds.
— Times Leader