30-26 CY 2026 Debt Presentation Plan.pdf

30-26 Township of West Orange Debt & Finance Presentation Presented by: John C. Ditinyak, CFO Phoenix Advisors December 9, 2025

The State of the Township’s Debt! • The Township’s net debt as of 2024 is over $171 million! • Net debt has increased by 56% over the last five years! • Payment of debt is 12.5% of the budget! • The Township, recognizing that allowing the debt to increase exponentially places a financial burden on the residents, has developed a long-term debt management plan that will guide this and future councils’ capital planning. 2

Debt Management Plan Goals: • Continue to pay down outstanding debt thereby reducing the related debt services over time • Look to take advantage of lower interest rates, when possible, to permanently finance outstanding notes, thereby reducing interest rate risk • Over time, replace borrowing with “pay-as-you-go” funding using cash rather than credit for capital investment • Carefully manage capital spending with strategic planning to build “pay-go” capability • Achieve strategic success by freeing up millions of debt service dollars annually to support operations, capital investment, and when possible, return value to the taxpayers through increased usage of surplus rather than taxation. 3

What is Municipal Debt? • The Township has both Operating Expenses and Capital Expenses: • Operating Expenses include the salaries and wages of employees, utility expenses, garbage and community programming - just to name a few. Operating Expenses are broadly defined as the ongoing expenses to run the day-to-day Township services. • Capital Expenses are individual purchases for land, infrastructure improvements, equipment, vehicles and major renovation/construction projects. Capital Expenses are typical high value purchases. For that reason, the cost is too great to include the full amount of the purchase in one budget year. • For example, let’s say the Township wants to construct a new public works building. The cost of the construction could be $30M. The Township will go out into the capital markets and issue bonds for $30M so that we have the funds to pay for the project. The bonds will then be repaid, with interest, via annual appropriations in the budget. The repayment schedule follows the useful life of the asset that was purchased to spread the cost over the generations of residents who benefit from the project. In this example, the repayment would be over 25 years. 4

What is Municipal Debt? (cont.) • Municipal debt can best be compared to a resident’s mortgage. Most homeowners do not have the funds to pay cash for their home, so they go to a bank and get a long- term loan (i.e. a mortgage). The homeowner pays principal and interest every month until the loan is repaid. • The interest rate on the loan determines the amount of interest the homeowner will pay over the life of the loan. For example, a 30-year mortgage for $500,000 at 5% will cost the homeowner $465,000 in interest. If the rate moves up 1%, then the homeowner will pay $580,000 in interest over the life of the loan. • Just as market conditions can raise or reduce interest rates for homeowners, the Township’s short and long-term debt is impacted by changes in the municipal bond market. As rates climb, the Township’s debt service expense will increase and will generally be passed along to the taxpayer. • Due to the size and credit rating of municipal entities, municipal bond rates are generally lower than those of a resident. For example, a 30-year mortgage rate is currently 6.25% and a 30-year tax-exempt municipal bond rate is currently 4.25%. 5

Historical Municipal Bond Rates Percentage of Time "AAA" Municipal Rates Have Been Lower than Current Levels (Since 1985) 48% 45% Municipal Rates ° 42% a % Ht 33%33%33%33% | Maturity (Year) | (Year) mma % of Time Rates Have Been Lower Than Current Levels (Since1985) ====Current Municipal Rate Curve ====Average Municipal Rate Curve (Since 1985) 8% 37% 36% 36%37%37%38%38% 38% 38%38% 38%38% 38% 38% 38% 35%, 138% £33,33% 94 % of Time Municipal Rates Have Been Lower Than Current Levels

Current Debt Profile • The Township’s Statutory Net Debt is approximately $170 million. This includes: • $54 million of long-term, fixed rate bonds • $11.4 million of bond anticipation notes (“BANs”) coming due in March 2026 • $62.7 million of BANs coming due in November 2026 • $3.3 million of special emergency notes (“SENs”) coming due in November 2026 • $38 million of authorized but not issued debt (includes JMEU authorizations) • $700k of NJIB loans (JMEU) • For 2025, debt service and deferred charges (SENs) combined for $13.5 million, or 12.5% of the total budget. • There are large drops in aggregate debt service in 2029 and 2038. • The Township’s current bond rating is “AA” (3rd highest) by S&P Global and was last affirmed in October 2025. A bond rating is similar to a resident’s credit score, as it impacts their cost to borrow. • The CFO and Phoenix review the outstanding debt annually to make sure the debt is managed in the most cost-effective way possible given market conditions, future debt authorizations, budgetary concerns and current capital needs. 7

Outstanding Bonded Debt Service by Series (1) Excludes special assessment bonds, authorized but not issued debt, short-term debt (BANs) and deferred charges (SENs). (2) Long-term bonds may be refinanced from time-to-time based on market conditions and redemption provisions. 8

Future Debt & Capital Discussion • The Township Council and CFO have expressed a desire to begin to transition to an annual pay-go capital plan funded by the budget in lieu of borrowing short and long- term debt. • The Township expects to receive $6.3 million in green acres grants (Rock Spring) and $10.8 million from the sale of land (55 Lakeside). These funds will be used towards the repayment of debt. • The CFO has identified approximately $22.8 million of authorized but not issued bond ordinances that will also need to be funded over the next two (2) years, as the projects are ongoing and will require cash to fund them. • This excludes approximately $15 million of JMEU authorizations that may not need to be funded by the Township. • Based on the Township’s outstanding long-term debt, a bond issuance between 2026- 2028 would be the best time to permanently finance the debt, assuming favorable market conditions. 9

Proposed Debt & Capital Plan • The proposed debt plan targets an annual pay-go capital program of $5.5 million per year ($5 million capital and $500k special emergencies), which is expected to be 100% funded by the budget by 2038 with 2% annual increases to debt service in the interim. • For 2025, we included $6.7 million of new debt authorization (ordinance 2915-25) and $800,000 of special emergencies. • From 2026 to 2036, new annual capital needs of $5.5 million would be funded by a mix of debt authorizations, special emergencies and pay-go capital. • In addition, approximately $22.8 million of authorized but not issued bond ordinances will be funded over the next two (2) years by debt issuance. • The proposed future debt issuances include: • Roll existing notes to 2028 • Issue new notes in 2025-2036 to finance "Expected New Debt" • Issue $81.4 million bonds between 2026-2028 to finance all outstanding notes • Roll new notes to 2037 • Issue $14.6 million bonds in 2037 to finance all outstanding notes • Roll SENs with mandatory pay downs and annual new money as shown above • Full migration to pay-go capital funding beginning 2038 10