Part 1 of a series

AHOSKIE – On one hand, Ahoskie has drastically improved its aging infrastructure over the past several years.

The town’s growth, once stymied due to a small and outdated wastewater treatment plant, is now welcomed thanks to a state-of-the-art sewer plant.

At one time, the town’s police and fire department shared cramped quarters within one of the town’s oldest structures in the downtown district. Each department now boasts of individual new homes, both built over the past five years.

Meanwhile, a beautifully landscaped and fully equipped Ahoskie Creek Recreational Park has developed from a former residential area that was part of a FEMA buy-out following Hurricane Floyd.

On the other hand, all these improvement to infrastructure come with a healthy price tag, now part of growing debt that the town owes. Meanwhile, the revenue that annually drives the Town of Ahoskie’s operating budget is showing little or no growth, thus leaving local officials scrambling to cover their debt without impacting the town’s typical services offered to its citizens and businesses.

Newly hired Town Manager Kerry McDuffie has been in town for one month and has already reported as much as a $475,000 deficit in the 2017-18 budget, one that was adopted effective July 1.

“We have some really nice facilities here, but from what I’ve seen we’re making our citizens ride in a Cadillac when they can’t afford the payments on a Cadillac,” said McDuffie during an interview with this newspaper last week. “We’ve got to do a better job in managing the taxpayer’s money.

“We already have a high (property) tax rate at 81 cents,” McDuffie added. “We cannot afford to increase the tax rate. The Council has instructed me to look for ways to cut spending and reduce our costs of doing business.”

At the root of the town’s current financial crisis is its debt service. McDuffie supplied this newspaper with a spreadsheet, one showing that the town is currently making payments on 21 loans.

“Between the General Fund and Enterprise Fund (water and sewer services), we have loans totaling $21,273,000 as of last week, that’s if we paid it all off today,” McDuffie observed. “With interest, the total debt is over $33 million. Following the current payment schedule, it would be 2057 before all the current debt is totally off the books.”

The most recent debt incurred by the town is $1.84 million from the USDA for the town’s street repaving project. Payback, annually at $88,176, on that loan covers 40 years.

“The life expectancy of a street, depending on traffic volume, is about 20 to 30 years,” McDuffie remarked. “We just financed maintenance on our streets for 40 years, meaning we will not have this current loan paid off before these streets will need repaving again.”

The other major debt service payments made annually by the town include:

Wastewater Treatment Plant – two separate loans ($562,587.50);

Capital equipment/vehicles – three separate loans ($306,025.95);

Sewer Rehab Project ($119,235.74);

Ahoskie Creek Recreation Complex ($110,248.88)

Fire Station ($99,135);

Police Station ($90,925);

Annexation ($83,770)

Water meters ($73,067);

Vacuum truck (($55,179.95)

Two fire trucks ($52,795)

McDuffie said just making the minimum payments on the 21 debts totals a share over $1.9 million annually.

He added that the worst interest rate on any of the 21 debts is 4.375 percent. There are four others at 4.0 percent or slightly above, but the majority range from 1.59 percent to 3.75 percent.

“We have decent (interest) rates on these loans, so it’s not likely that we would save a tremendous amount of money (in interest) through refinancing,” McDuffie observed. “Plus, I’m not aware of a lender that would absorb that much debt at one time from a town this far in debt such as Ahoskie. Even if we opted to go that route (combining debt), we would have to pay, up front, $30,000 to $40,000 to a bonding company to receive a bond rating. I don’t expect, because of the situation we’re in, that our (bond) rating would be very favorable.”

In building an annual budget, managers always begin with the amount of debt owed. In Ahoskie’s case, its 2017-18 operating budget, which took effect on July 1, is $9,947,473 – between the General Fund [$6,287,282] and Enterprise – Water/Sewer Fund [$3,660,191]. That means nearly 20 percent of revenue generated annually by the town is obligated to make the minimum debt service payments.

McDuffie stressed that the current budget is “no frills.” It lacks money for capital improvements and no funding to purchase new vehicles.

“Over time, vehicles break down to the point they’re beyond repair; that’s why there’s typically money set aside in the budget to make those purchases as needed,” McDuffie said. “There’s no money in this year’s budget for that. We can get by for one year without replacing a vehicle, but it’s impossible to do that two, three, four years in a row, especially when it comes to replacing police vehicles. I need to start finding money now in order to build some sort of reserve to make those capital purchases next year and beyond.”

McDuffie referenced a delay in making capital purchases  as a “bad business model.”

“You can’t keep doing that year after year because you find yourself getting further and further in the hole,” he said. “Sure, we have a balanced budget for 2017-18; our revenue matches our expenditures, but there is no savings in that scenario and no way to make capital improvements. We’ve either got to cut something out or raise (property) taxes, and the (town) Council has made it very clear to me that they are not in favor of raising taxes.”

Next in the series: Lack of cash flow.