By Steven Hoffman
When Brant Kucera was hired as the borough manager of Kennett Square in 2008, the town’s total bonded indebtedness stood at $23,868,064—which was too high, in Kucera's opinion, for a town with an annual budget of about $14 million.
He knew right away that one of his goals would be to work to reduce the debt level.
“I felt that, for the size of the budget, the amount of outstanding debt was too high,” he said in an interview last week.
Kucera worked with borough council to find ways to hold the line on spending. Kennett Square avoided taking on new debt and capital improvement projects were planned for and included only if the budget allowed. Decisions on staffing further reduced expenditures. The sewer and water rates were adjusted to make sure that sewer fund and water fund remained solvent. The borough refinanced some of its debt to get more favorable rates that saved more money.
Now, almost six years later, $7,459,483 of that debt has been paid off thanks to a more conservative fiscal approach. By the end of 2014, the borough’s bonded indebtedness is projected to stand at $16,408,581, which is 31.25 percent less than it was in 2008.
“I think a $31.25 percent decrease is pretty aggressive,” Kucera said. “Overall, our bonded indebtedness is still high. But am I a lot more comfortable with where our debt is? Absolutely.”
Kucera said that he believes that a borough with a $14 million budget should ideally have between $4 million and $8 million in debt—but he emphasized that that’s his own comfort level, and not everyone would share that view. Even in 2008, when the town’s debt approached $24 million, it was nowhere near the limit where it would have been necessary to seek voter approval to take on more bonded indebtedness. Even so, Kucera said that it remains a goal to push the debt level even lower.
Later this year, the borough is expected to take out a bank loan of $300,000 to pay for the new Yeatman well project that has been in the planning stages for several years. The total cost of the project is $1.2 million, but approximately $900,000 of the funding for the project came from a grant. That illustrates how Kennett Square has been approaching capital improvement projects in recent years: the borough maximizes the use of grant money to fund projects and takes on additional debt only as a last resort.
While the borough will be taking on some debt for the Yeatman well, the addition of the well will significantly reduce the amount of money that the borough will spend each year on additional water from the Chester Water Authority, so the well more than pay for itself.
“We will save more money than we will pay out,” Kucera explained.
Kucera said that he’s pleased by the fact that borough officials have made a series of financial decisions that have not only reduced the overall debt, but also resulted in financially healthy water and sewer funds. Too much debt, especially in the water or sewer fund, would result in higher rates for residents.
“Our rates are in the middle to lower side,” Kucera said. “We’ve only had inflationary increases in water and sewer in the last few years. We’ve done a better job of maintenance and we’ve been able to maintain the rates.”
Maintenance is important for a town, whether it’s working out a schedule to repair streets, replace police cars, or make water or sewer infrastructure improvements. Kucera said that budgeting for these necessary expenditures puts the borough in a better financial position.
“It allows us to do proactive work instead of reactive work,” he explained.
Kennett Square’s financial picture has improved to the point where Kucera would feel comfortable if borough council authorized a necessary project that would require additional bonded debt. Like a household that has to take on debt to pay for necessary expenditures, there will be projects that Kennett Square officials will want to take on for the betterment of the community.
“For larger projects, we will feel comfortable bonding again,” Kucera said. “To make sure the community is moving forward sometimes you have to be willing to take on debt. We’re really trying to show people how much progress we can make and part of that is taking on debt to accomplish our goals.”