HOWELL – The members of the Howell Township Council have authorized the issuance and sale of tax anticipation notes in an amount up to $16 million.
According to investopedia.com, a tax anticipation note (TAN) is a short-term debt security issued by a municipal government to finance (immediate needs) that will be repaid with future tax collections.
Mayor Theresa Berger, Deputy Mayor Evelyn O’Donnell, Councilman John Bonevich, Councilwoman Pamela Richmond and Councilman Thomas Russo took the action on May 19.
Township Manager Brian Geoghegan read a statement from Howell Chief Financial Officer Louis Palazzo regarding the action.
Palazzo wrote that the action was taken “to accommodate any potential cash flow issues from the July to September time frame. The $16 million amount is a not-to-exceed amount. We are pursuing this TAN deal with the Monmouth County Improvement Authority to help with better market exposure and the sale of the note.”
Palazzo wrote he has been advised by Howell’s bond counsel and financial advisers it would be prudent strategy in case New Jersey is late in delivering state aid.
“We do not want to be put in the position where we potentially need $16 million and we are capped at $12 million … We would rather request approval for more than probably necessary, and hopefully needing less. … The action we are taking to increase the amount is one of a proactive nature and is based solely on the cause and effect of the coronavirus circumstances. Interest due on this note will be payable in 2021 and budgeted for in that calendar year,” Palazzo wrote.
The CFO said the issue is one of cash flow, adding, “I can’t take the money out (to pay expenses) if I do not have it in the bank.”
