Board signals support for bank financing to fund new volunteer fire station

The Gloucester County Board of Supervisors on March 26 reviewed bank proposals and affordability models for a planned volunteer fire and rescue facility and directed staff to return with refined bank scenarios.

Miss Callaway, the county’s deputy administrator/CFO, told the board that procurement has shortlisted four contractors and that construction bids will be solicited in April with awards expected between May and August. Outside financial adviser Ted Cole of Davenport said the RFP sought pricing for up to $20,000,000 to cover a project estimate of $17,500,000 plus an 8% contingency, yielding a uniform delivered amount of $18,900,000 for the modeled scenarios.

Cole laid out two broad lender scenarios and repayment structures and stressed why banks differ on prepayment rules and how long rates can be locked. “We asked for rates for a 20 and 25 year term…we receive proposals from 5 different banks,” Cole said, summarizing the competitive responses and noting variation on call provisions and how long a borrower can prepay without penalty.

Davenport’s model showed that, under the board’s working assumptions, the county will need additional near-term revenues to service the new debt. The analysis assumes a $1,000,000 upfront transfer from the fire department in FY27 to help cover early debt service; without that transfer the gap would be larger. Cole said staff modeled both a principal-and-interest start immediately scenario and an alternative with one year of interest-only to ease front-end affordability.

Advisors recommended bank financing on a 20-year term with one year of interest-only as a workable option because it allows earlier rate locks and, with some lenders, prepayment flexibility. Cole noted that some banks (Atlantic Union, Chesapeake were cited) proposed immediate prepayment ability with no penalty while others would impose multi-year lockouts.

Supervisors pressed for additional scenarios. Dr. Lemming asked whether a construction-to-perm (drawdown) structure or a longer interest-only period was available and how interest income on an immediately funded $20,000,000 draw would affect the model; Davenport said those factors can be modeled and that they would not conservatively assume upfront interest earnings.

Board members generally favored pursuing bank proposals that include prepayment flexibility and asked staff to: (1) request updated bank proposals timed to the procurement schedule in May; (2) include variations for two- or three-year interest-only periods; and (3) provide the draft deal documents the banks will see so proposals are based on consistent terms. The board did not take a formal vote on a single financing path but signaled consensus to move forward with those next steps.

The board’s next budget work sessions and the timing of contractor bids will determine when the county needs to lock a rate; staff said if bids are returned in late May they expect to be able to complete financing steps in the 60–90 day windows banks typically require. The county also discussed the tradeoff with a public bond sale, noting higher issuance costs and longer prepayment lockouts in the bond market.

The county will continue refining scenarios and return to the board with updated bank proposals and final deal documentation before any closing.