Camden Town Council approved an extra $13,000 payment on the principal of its 40-year town hall mortgage to save $50,000 and shave four months of time off the life of the $3 million loan during its meeting Monday night in the Camden Municipal Complex.
Camden Mayor W.G. Edmanson had been pushing for the measure for months and he finally got his wish with a 3-1 vote, with one absent.
Camden Finance Director Cullen said the move of taking excess funds from the account set aside specifically for the town's monthly, $13,260 mortgage payment was a conservative way to save the town money long term. In all, Cullen found that there would be an extra $13,956.69 in the fund the town had kept at WSFS to essentially keep an extra, 13th mortgage payment on hand as a rainy day fund at the end of the fiscal year, he said.
Cullen's recommendation included keeping $956.69 in reserve for the town's mortgage payment account while using the rest of the money as an extra payment to be made this month (March 2013).
"When you have a low interest environment like we're in now, the amounts in the bank are really nominal interest earning [accounts]," Cullen said.
He said paying down the mortgage with 4.375 percent quicker was better than earning 0.1 percent interest in a savings account. Cullen said the extra payment would reduce the interest on Camden's 40-year loan with the U.S. Department of Agriculture to 4.2875 percent without having to refinance.
Councilman Larry Dougherty was the loan no vote because he was concerned with taking money from the mortgage's rainy day fund. Dougherty supported the idea of reducing the interest and life of the loan even if, at 66, he would not be around to see it paid off entirely, he explained. He just didn't like where the extra payment would come from.
"If the vote had been to take $15,000 out of the general fund and apply it to the mortgage, I would have voted yes," Dougherty said. "I voted no just because of the line item [in the budget] this was coming out of. I think we'll have to replace it with general fund money next fiscal year."
In other financial news, Cullen reported that projections showed the $1.9 million 2013 fiscal year budget would have a surplus of between $8,000 and $25,000 at the end of the fiscal year on June 30.
In addition, Cullen transferred $125,500 from the town's savings account with an interest of .1 percent for budget expenses to a money market account with a total of $500,000 with an interest 2.5 times greater than the savings account, Cullen said. That gave Camden three months' worth of expenses put away with a better interest rate, he added.
Page 2 of 2 - Dougherty had requested the transfer at last month's meeting. Dougherty, sworn in for his first full term on council at the outset of the meeting, reiterated his wish to see the town eventually obtain a $1 million account to give Camden a six-month cushion.
According to www.money-rates.com, banks often require higher initial deposits and higher minimum balances for money markets usually in return for paying higher interest rates than would be seen with savings accounts.