Estimated cost of new Milford police station decreases; funding options debated

MILFORD — City Council again discussed funding for a new police station Tuesday.

During the first portion of a three-day retreat, which will be completed in January, Milford’s Finance Director Lou Vitola explained to the council that the initial estimate for the cost of constructing a new police station has been brought down from $18.9 million to somewhere between $13.8 million and $16 million.

He said Becker Morgan Group, the construction firm that calculated the initial estimate, was doing so based on the assumption that Milford would be using prevailing wage requirements.

Milford would not be bound by these wage requirements set by the state, so Becker Morgan was able to cut its estimate of the city’s labor costs for the project by roughly half.

“Lou, you’ve made my day,” said Mayor Archie Campbell.

“That (new number) really makes me happy,” he said, “because I thought there was a lot of padding in there, when it went up to $18 million or $19 million.”

The council also discussed possible financing options for the new building.

Mr. Vitola said the city’s “formal recommendation” is to “continue to keep all options open.”

Still, he said he is leaning toward borrowing the money from the U.S. Department of Agriculture’s Rural Development program.

The arrangement would result in the city paying more in interest than a public debt offering, he said, but would allow it to spread those payments over a longer period, which would minimize the additional burden on taxpayers.

“The one option I did scratch is a private sale, a private placement directly with a commercial bank,” he said. “The maximum fixed component of the rate is 10 years. They can amortize over 25 years, but they can only fix over 10, so we’re faced with an inordinate amount of interest rate risk at year 10.”

Mr. Vitola floated the idea of pushing back funding via cash financing to further minimize the short-term impact on taxpayers.

“Staff is investigating ways of cash financing using a combination of eligible reserves, interim financing using interfund loans, interim financing with a commercial bank and the use of a Council resolution signaling intent to reimburse project expenses with a future loan,” he said in a letter to council.

“It’s feasible not to issue debt until early 2022,” Mr. Vitola said.

“Any combination of cash and interim financing will serve the dual purposes of reducing the tax increase hurdle and delaying the implementation of the tax increase associated with the Police Facility,” he said.

Mr. Vitola said this “will afford time for the digestion of any tax increase required to support the (fiscal year 2022) General Fund operating budget.”

He said it would allow the city ”to delay a property tax increase until we actually experience a debt service payment.”

Mr. Vitola said interest rates are likely to go up, which would increase the financing costs associated with the project.

“The risk is very acceptable compared to pushing the tax increase back,” Vice Mayor Jason James said. “It doesn’t expose the taxpayer to any unreasonable risk.”