(4/22) Thurmont's Town Council voted to approve an ordinance that allows the Town to procure bonds through the Local Government Infrastructure Program, issued by the Maryland Department of Housing and Community Development’s Community Development Administration.
The Town applied for this bond in January to fund the Moser Road Substation as well as additional departmental upgrades. Electric Engineer Jay Waller from Preston Waller & Associates presented estimates for the Moser Road Substation project in August and January, where the total quote remained $2,425,000. The quote includes labor, engineering, all parts and materials, contingencies, etc.
The bond, not to exceed $4.2 million, can also help to fund other Town projects such as the Catoctin Heights feeders, estimated at $1.1 million, and $348,000 for a new bucket truck. The total of the three projects, including the Substation, reaches $3.8 million.
"We put a little extra on there so that if something increases by $100,000, we’re not totally shocked by it," Mayor John Kinnaird said at the Jan. 23 meeting. "We’re realizing up front that there can be cost increases between now and when we do the project."
Charles "Charlie" Day, Manager of the Infrastructure Bond Program, joined the meeting to answer questions about repayment of the bonds. He explained that the Council can lower the bond amount if they later find that the estimates are higher than the actual price.
Commissioner Marty Burns asked Day about early repayment and any potential fees for doing so. Day explained that there are "lockout periods," which typically last ten years and during which there are redemption provisions. "It’s because investors want to know when they lend us their money and purchase our bonds that at least for ten years they will receive a guaranteed investment stream," Day said. "Once we get to the ten-year mark, all bets are off and a local government can prepay all or a portion of its outstanding indebtedness." One caveat of the bonds, according to Day, is that the term of the loan cannot outlast the useable life of the project.
According to Day, it’s because of these "lockout periods" that the program can offer a lower interest rate to local governments. He went on to explain that because investors know that they will have the income stream for a minimum of ten years, they are more willing to accept a lower interest rate on their investment.
Thurmont has secured a 20-year loan for the bucket truck and a 25-year loan for the Moser Road Substation. According to Day, these loan terms are longer than what banks will typically offer, making the State program a better option with flat rates.
