Rehoboth to finance up to $5.5 mllion of beach patrol project
Looking to free up capital improvement monies for the city’s general fund, Rehoboth Beach commissioners voted in favor of financing up to $5.5 million of construction costs for the beach patrol and public restroom project on Baltimore Avenue.
City Finance Director Burt Dukes recommended the change during a commissioner meeting Nov. 15.
Dukes said when the city will have an asset that will last 40 years, it’s appropriate to finance. He said he had spoken with a financier earlier in the day, and while he didn’t know the interest rate, he didn’t think it would get any higher than 4.5%, and may be in the 3.5% range.
The city has $3.55 million in capital outlay in the current fiscal year for construction of the building. It’s a small portion of the bigger picture – the city has a projected $45.3 million worth of capital outlay projects through fiscal year 2029.
Dukes said the financing would be allowed to cover 100% of the project’s engineering and construction management costs, and all future building costs, plus the prior 60 days.
The remaining estimated costs for the project are expected to exceed $4 million, and as of Nov. 14, the city has spent about $603,000 in engineering and management costs, and approximately $493,000 in the prior 60 days, said Dukes.
In terms of interest rates, Dukes said the fewer the years the city agrees to repay, the lower the rate, but the annual payment would be higher.
He provided a few examples – seven years at 3.5% for an annual payment of about $727,000; 10 years at 3.75% for an annual payment of approximately $542,000; 15 years at 4% for an annual payment of $400,400.
For the financing, the city will use First Tryon, which will be charging $30,000 for the service, said City Manager Taylour Tedder.
The city has about $62 million in debt on a capacity limit of $75 million. The approved amount of $5.5 million cuts the remaining debt capacity from $13 million to about $8 million.
Commissioner Suzanne Goode said she’s concerned the city is getting close to its allowable debt limit. In the future, the city should have financing figured out first, she said.
Dukes said Goode’s concern was legitimate, but the city will still have a capacity of $8 million.
Commissioner Craig Their said he would like to see the money that’s not being spent put aside and given back to residents for the increase in taxes that commissioners approved for the current fiscal year. There could be a pretty substantial surplus, he said.
Their asked Tedder to commit to not spending the money before the end of the fiscal year March 31.
Tedder said it was unlikely the city would begin any new projects that would use the money.
Commissioner Patrick Gossett said he’s in favor of the move because it would give the city some great flexibility for upcoming projects.
Gossett also pointed out that while the city has gone to referendum in the past for financing, a change to the city charter in 2007 allows city commissioners to finance up to $6 million without referendum.
In the end, Goode was the only commissioner who voted against the financing. She said she was uncomfortable with doing the whole amount.
As for actual construction, Tedder said second-floor slab pour that was scheduled for Nov. 18, has been moved to Thursday, Nov. 21, because that is when the concrete pump and subcontractor are available. Once the pour is completed and associated shoring is removed, multiple trades will begin work simultaneously on the first floor of the facility, he said.
