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Minutes: October 19, 2011*

Township Council Special Meeting/Work Session

The Special Work Session of the Township Council of the Township of Vernon was convened at 7:05 p.m. on Wednesday, October 19, 2011 in the Vernon Municipal Center, 21 Church Street, Vernon, New Jersey. The purpose of this Work Session was to review introduced bond ordinances #11-22 and #11-23.

Statement of Compliance

Adequate notice of this meeting had been provided to the public and the press on October 14, 2011, and was posted on the bulletin board in the Municipal Building in accordance with the Open Public Meetings Act, N.J.S.A. 10:4-6.

Roll Call of Members

Present were Council Members Daniel Kadish, Pat Rizzuto, Dick Wetzel. Council Member Eddie Dunn was present via speakerphone. Also present was Mayor Vic Marotta and Township Attorney Kevin Kelly. Council President Brian Lynch was absent.

Acting Council President

Council Member Wetzel nominated Council Member Rizzuto to act as Council President in Mr. Lynch’s stead. All were in favor. Mr. Rizzuto led the meeting.

Salute to the Flag

The Acting Council President led the assemblage in the salute to the flag. Mr. Rizzuto asked for a moment of silence to those fallen soldiers in protection of our country.

Mr. Rizzuto noted the discussion items this evening and introduced the various professionals who were in attendance: Chuck Ferraioli, MUA auditor; Bob Beinfeld, Twp. auditor; and John Ruschke, MUA engineer. He gave a brief statement of what the Sewer project will be, and the reasons why Council feels it is important to the Township.

Mayor and Council Comments

Mayor Marotta asked Mr. Ferraioli if the Township opted not to go forward with the sewer project, what the effect would be. Mr. Ferraioli explained the current status of sewer usage and the current obligations with SCMUA, noting that even if the Township decided not to go forward, it would still have to make payments to SCMUA on an ongoing basis.

Mr. Rizzuto asked for information on bonding for the MUA vs. the Township. Mr. Ferraioli gave an overview of various credit rating issues, noting that the MUA is currently not able to bond due to the following: there is no service agreement or debt agreement with the Township (if they can’t make the bond payments, the debt would normally fall to the Township, but can’t without the agreement); there isn’t enough time to complete the bonding process by the end of the year; they must go before the Local Finance Board to get approval, but can’t without an agreement with the Township. Mr. Beinfeld concurred with Mr. Ferraioli’s assessment. Mr. Ferraioli added that without a credit rating, the MUA’s bond rate would be much higher than that of the Township.

Mr. Wetzel asked how long the bond note would be for. Mr. Ferraioli suggested that it would usually be for 1 year, but in this case he believed the MUA would ask for 3 years.

Mr. Wetzel inquired what the average rate of return was on a municipal bond. Mr. Ferraioli advised that it was a little over 1%.

Mr. Rizzuto asked if the Township chose to sell the bonds, could the MUA do so.

Mr. Wetzel asked what the Township’s current credit rating was. Mr. Beinfeld advised that it was Aa. Mr. Zuckerman noted that the principal gets paid during the third year, with only interest payments during the first and second years.

Mayor Marotta inquired about the arrangement of MUA’s vs. municipalities in other towns. Mr. Beinfeld advised that well over 90% of the MUA’s have some kind of arrangements with their towns to utilize the lower municipal rates for bonding.

Mr. Ferraioli noted that he would imagine that if the MUA failed to make a payment, the Township would require them to raise their rates to cover the required payments.

Mr. Dunn asked if it cost more for the Township to do nothing vs. the 2 bond ordinances being considered. Mr. Ferraioli believed that to be so, based on the projections. He noted that Mt. Creek and the Town Center would generate revenue as they increase/expand.

The Mayor asked how much the Township had paid out already on the sewers. Mr. Zuckerman advised that $623,000 had been paid on SCMUA and Mt. Creek obligations, and that there was still $325,000 to be paid in this year’s budget that has not been accounted for—the goal is for the MUA to be self-funding. He advised that the two bond ordinances being considered were broken down as follows: $4 million is to purchase the United Water portion; and $2.6 million is to recapture monies already paid out + 3 years of operating expenses.

Mr. Ferraioli advised that it would be beneficial for the Township to take over the United Water portion. Right now, the billings are based on flow, with a projected 2% increase per year for SCMUA billings.

Mayor Marotta noted that confusion seemed to be centered on Ordinance #11-23.

Mr. Ferraioli noted that the intent is to provide cash to keep the SCMUA bills out of the Township billings.

Mr. Kadish asked what the total Township debt was. Mr. Zuckerman advised that it is $31 million with these bonds and other bonds, and that the asset/debt ratio is 1.04 (the State allows up to 3.5).

Mayor Marotta advised that he had spoken to the Tax Assessor earlier in the day and the current tax point = $278,000. He further advised that the Tax Collector and Finance Departments will do the billings for the MUA as well as financial management services to save money for the MUA—they won’t need to hire people for these services. He added that he had been in talks with Hardyston on a possible shared service for maintenance of the MUA facilities. Another possibility would be for the DPW to be trained by Hardyston to do the maintenance on their own.

The Mayor noted that the biggest user at present was Stonehill at 190,000/1443 units, with Mt. Creek at 166,000 and 380,000 gallons/day. The Town Center is at 90,000.

Open to Public Comments

Acting Council President Rizzuto asked that questions be directed only towards going forward with the Ordinances, and nothing in the past.

Robert Oliver—asked about the current debt (31 million per Mr. Zuckerman), and asked about off-balance sheet debt.

A discussion ensued on the statutory requirements as to what constitutes debt in the eyes of the State, and what other Township professionals have been paid for this project.

Mr. Zuckerman and the Mayor advised that there are 2 grants for this project: 3 million and 1.5 million.

Mayor Marotta noted that in order for Mt. Creek to start, they had to put up 5 million for this project.

Jessi Paladini—noted the confusion about how much is the total cost of sewers so far. She also had a few issues with Council on the validity of having Mr. Dunn on speaker phone for the meeting, as well as Mr. Rizzuto’s request to keep questions only on the ordinances. Mr. Kelly disagreed with Ms. Paladini’s assessments on both items. Ms. Paladini had many more questions on the MUA issue.

Mr. Dunn noted that the EDAC was working to re-acquire the Town Center.

Tom McClachrie—felt the “missing link” of 1,500 feet needed to be completed before going forward. Mr. Ruschke, of Hatch Mott MacDonald, advised that this should be completed within the next 3 weeks in the Mt. Creek village. Mr. McClachrie noted that the pumping station needed to be rebuilt to handle the increased flow. Mr. Ruschke advised that his office was already working with the developer on this issue and explained the issue further. Mr. McClachrie had a number of additional questions to clarify the issues concerning him.

Carol Gunn Kadish—asked for clarification on when the MUA would take over payments on the bond. Mr. Ferraioli noted that he anticipated it would take 3 years before they could bond for themselves and buy the Township’s bond; and if they couldn’t, then the taxpayers would be on the hook.

Mayor Marotta advised the following: there were 36 buildings along the system affected, and they represent 31,000 gallons/day; when the system goes on line, a “notice to connect” will go out to these properties allowing them to pay the connection fee within 90 days; and any buildings owned by the Township or a subsidiary of the Township (such as the Board of Education) would be exempt from fees. Mr. Wetzel noted that the connection fee for the A&P would be about $100,000.

Mary Ellen Vischiconti—asked how all this information will be distributed to the public.

Mr. Rizzuto noted that he had asked the Mayor to prepare a fact sheet. Mr. Wetzel noted that out of the over 20,000 people in Vernon, only 10 were at this meeting and should be commended for coming out. Ms. Vischiconti noted that there were a number of vacant buildings in town, and that they could have a negative effect on the success of the MUA/Township with breaking even.

The Mayor noted that this meeting would be codified by the Clerk and letters would go out to each resident. He added that it was known it would take some time, but he had wanted to be ready going forward.

Ms. Vischiconti cautioned the Mayor and Council not to rely only on recreations, and not to neglect the regular taxpayers.

Mr. Borstad—pointed out that that this was never supposed to cost the taxpayers any money. He was concerned with what was being paid to SCMUA now.

Robert Oliver—added his concerns to Mr. Borstad’s. Mayor Marotta noted he had been investigating the past and current billings for SCMUA. Mr. Oliver questioned the assessments to those locations being connected. A discussion followed on this issue.

Jessi Paladini—noted that this work session was very informative, but that the public trust would be improved if work sessions were held before introduction of ordinances as promised during campaigning. Mr. Rizzuto advised that items could not be discussed until they were placed on the table. Mr. Dunn noted that Council had been informed prior to the introduction.

Closed to Public Comments

Mr. Kadish asked about the assessments—why the users weren’t being given added assessments. Mr. Beinfeld noted that would be local improvement assessment vs. a change in service comments. Mr. Ruschke advised that special assessments were problematic. Mr. Beinfeld explained the reason for the wording in the ordinance.

A brief discussion followed on the structuring of costs.

Adjournment

Council Member Daniel Kadish moved to adjourn the Special Work Session of the Township Council of the Township of Vernon. Council Member Dick Wetzel made the second; all were in agreement. The work session was adjourned at 9:46 p.m.

Respectfully submitted,
Susan S. Nelson
Municipal Clerk

Minutes approved: November 14, 2011