41% (and rising) of Pennsylvanians live in a municipality that is financially distressed. We have a problem in this Commonwealth with a boom/bust cycle of distress that’s well documented. It’s a pattern. Cyclical.
The 5 stages of municipal distress go something like this:
1. Low taxes with Greenfield Growth
2. Gradually rising tax rates and increasing demand for services.
3. Plateau of tax base with reductions in non-core services.
4. Insufficient taxes or tax base with reductions in core services.
5. Loss of tax base and distress
Lower Mac as most are is in the cycle. We are not in distress. Far from it. But we are in the cycle. The boom cycle. Stage one. Knocking on the door of stage two. (The prior board initiated the first property tax hike in over a decade. One that the current board in part rolled back at least for residential tax payers). Stage one for Lower Mac is livin high on the hog on a wave of greenfield growth. Developers pay for infrastructure improvements and the one time tax receipts roll in. Times are good. But it can’t last. Because land is a finite resource.
We are now tightly locked within the cycle. I wrote about this many times including this post in 2012. All the crystal clear signs are here.
In that post I wrote about 5 strategies we must employ to break the cycle. They were:
1. Requiring more bang for our taxpayer buck (ROI) on existing infrastructure. (value capture). Not accept anymore unfunded maintenance obligations associated with dumb growth.
2. Conserving farmland and green space with market mechanisms. Therefore reducing reigning in future liabilities.
3. Require complete cost benefit analysis of new greenfield projects. Don’t approve tax base drainers. Stop indirectly subsidizing bad development.
4. Engage the community wholly in development and spending decisions.
5. Don’t issue new bonds until the townships current debts are fully paid off and limit what you bond for. Use cash. Cash is king.
I have been pretty disciplined and consistent in votes relating to above. I consider these combination of strategies as guiding principles. We’ve had some success with #1. We’re driving the convo. Solid progress on #2. Our staff does a good job (relative to land use planning) on #4. Pertaining to #3 I voted against a major developer tax subsidy. Unfortunately it still passed, but we raised the issue and voters responded at the polls defeating a major subsidy supporter in a subsequent election.
#5 is now front and center. As the township is about to retire current debt in 2019 and since interest rates are historically low we’re hearing the siren song of bond financing for major discretionary projects and initiatives. This happens whenever debt is about to be retired and is amplified when rates are good. Everyones eyes get big.
When the sirens sing, the drunken sailors come out.
Last night, I voted against an application for a new major bond. Since we’re retiring existing debt this is wraparound debt. My problem is it’s far too much. Way too large an amount of money. A municipality with our tax base can and should work towards breaking or drastically reducing the debt cycle with the lofty goal of operating 100% debt free. This in turn would help us break the documented boom bust municipal cycle.
For me this is personal. I am not going anywhere. My forever house is in this township. So I have no option but to think long term. I’ll be a taxpayer in this township 10 years from now. 30 years from now. (hopefully longer) We must to do a better job of playing the long game. This requires discipline.
This does not mean stop improving the community. This issue is different from the turf project. I did not believe in that project. It wasn’t a priority and not a good way to address needs from a cost benefit standpoint. On the contrary, I support the library expansion. There are just other ways to pay for an expansion. We need the new fire aerial (in large part because of proliferation of warehouses) And absent of mechanisms to make the warehouse industry pay for we have reserves for the purchase. With preservation? And as we’ve demonstrated for 2 years we can accomplish that without debt. Though I am a supporter of preservation, I did not ask for bond money for preservation. (The county is in a much different situation than we are. And they were very disciplined in the bond process)
Lower Mac continues to live high on the hog because of greenfield growth. When new growth comes in there are short term advantages. But the problem becomes the new long term liability. The benefit of new growth is front loaded. Taxes are very low right now. The question is, is it sustainable. The goal is long term sustainably low taxes. We spend large amounts of money on discretionary items. And now another very large bond issue. I worry about what happens when we’re faced with one of the looming 10,000 lb gorillas. Any number could become issues. Police, fire, infrastructure. Already we’re facing down one in SCARP. When we finally land, and we will – we could crash hard. This isn’t speculation. It’s a fact. Underlying factor is availability of raw land. We’re running out. The only way to prevent the crash is to break certain cycles. One of those is the debt cycle. A municipality with our tax base can and should break the paradigm and operate 100% debt free.
The “playbook” states – retiring current debt, rates low? Spending spree! There is a reason 41% of PA muni’s are in distress, the problem IS the playbook. Stop answering the siren call. Break the cycle. Don’t stop improving/making the community better. But get creative in funding.