Paint Township took a first step toward erasing its 2012 cash flow issues Monday, voting to borrow $350,000 from a local bank.
Now, it just has to navigate through a six-week process necessary to obtain the money.
Township officials tentatively approved an ordinance to borrow the funds from 1st Summit Bank during a special meeting Monday night.
It’s a five-year-loan at 4 percent interest that would be repaid in $38,960 payments every six months, Supervisor Joe Huff Jr. said.
The first payment would likely be due this summer – or six months after the loan’s yet-to-be-set effective date, he added.
Huff said he initially favored a two-year loan.
“But the bank suggested this was the best route for us,” he added, noting there’s no penalty for early repayment. “The last thing we wanted to do was run the risk of getting back in another jam.”
Township officials have learned plenty about that scenario this year, by their own admission.
The township spent more than it generated in revenue in recent years, entering 2012 with a six-figure shortfall, audit reports show.
Despite that, the board opted against a tax increase at the time, saying it didn’t want to turn to taxpayers twice in the same year, considering a multimillion dollar sewer project was already under way.
By summer, the township was nearly out of cash. It threatened the shutdown of the police department, which was bailed out through early payments from the communities the force serves. Township layoffs followed this fall.
Even on a shoestring budget, the township still has $60,000 in bills owed from recent months, the board said.
The 1st Summit loan will allow the township to pay that off as well as the $89,000 remaining from this year’s tax anticipation note, Huff said.
The rest of the loan will be relied upon to get the township through to spring, when tax revenue, likely bolstered by a tax hike, begins flowing in, Supervisor Dave Blough added.
The 1st Summit loan will likely erase the need for a 2013 tax anticipation loan, Blough added.
This year’s loan is another matter altogether, Huff said, noting terms called for it to be repaid by Dec. 31.
That won’t happen, he added.
But its tax note lender, Slovenian Savings & Loan, has been kept aware of the township’s situation – and that money will soon be on the way, Huff said.
Solicitor Dennis Stofko will be meeting with the bank, he added, noting a penalty for late repayment is possible.
“We won’t know until after the meeting,” Huff said.
“This is all new (territory) to us.”
It will also have to take its $350,000 loan request and plans to increase debt service to repay it to Somerset County Court before a check is in the township’s hands. It will also require another public advertisement and township meeting, Huff noted.
Meanwhile, the township, alongside auditor Barnes, Saly & Co., is getting close to having a 2013 budget ready for tentative adoption, the board said.
The board said it wasn’t ready to say exactly how much millage will rise next year – but agreed its earlier 6-mill projection probably won’t change much, if at all.