Village now focused on paying debt, not big buys

The Village of Fredonia plans on holding off on large purchases over the next couple of years as it begins to pay off a front-loaded $821,000 loan for items it bought in keeping with its financial strategy.

Village Administrator Christophe Jenkins told the Village Board earlier this month that the borrowing package is done every two years.

“The whole point of doing this is so we spread out our debt burden on the taxpayers,” he said. “That way it doesn’t negatively impact anybody or we don’t have any crazy spikes or drops over time as we’re still trying to purchase the various capital items that we need to purchase.”

The village already paid for items in its capital fund that had been budgeted for, such as the reconstruction of Washington Avenue, Stoney Creek parking lot and the lot along Filmore Street, as well as a mini-excavator/loader.

“In a sense, we made those purchases in the capital fund. Now we’re reimbursing ourselves through this bonding,” Jenkins said.

The Village Board this month unanimously approved borrowing the money with a 4% interest rate from Port Washington State Bank, bringing the total price tag to just more than $1 million.

The village had three options to find the best rate — the state trust fund, the open market or a local lender.

Jenkins said the loan is front loaded, with the village paying the majority of the interest and principal up front.

Next year, the village will pay nearly $137,000 in principal and almost $55,000 in interest. That could add 92 cents to the village’s mill rate, but Jenkins is proposing that the Finance Committee use debt-levy cash to subsidize some of that payment, which would bring the debt-levy mill rate increase closer to the current increase of 83 cents.

“By doing that, that’s how we’re not spiking the tax rate up and down but we’re still able to pay off that up-front cost,” Jenkins said.

The loan repayment schedule has interest and principal decreasing in subsequent years, along with the mill rate impact until it reaches a dime in 2044.

That, Jenkins said, “will free up our debt capacity of the next round whenever that comes.”

Trustee Shane Van Roo asked why the village is front loading the payments.

“If you spread it out, it just spreads the pain out longer,” Jenkins said.

That also means the village will have to hold off on big buys in the short term.

“Over the next two or three years, as I’ve been very frank with all our department heads, they’re going to be very tight and we’re not going to make as large of capital purchases as we have planned until we get over this spending hike right now and we have that breathing room again to do our next round of capital purchases,” Jenkins said.