Davenport warns Madison County fund balance is shrinking, lays out $12M borrowing option to protect reserves

Davenport financial advisers told the Madison County Board of Supervisors on Tuesday that the county's fund balance is trending downward and presented two borrowing scenarios to fund next-year capital needs.

The presentation, delivered by Kyle Locks of Davenport, framed the immediate issue as protecting the county's fund balance while moving forward on roughly $11.9 million of identified capital needs in fiscal 2026–2027. "Fund balance is arguably the most important financial measure that we look at," Locks said during the briefing, adding that current trends show a decline in fundamentals.

Davenport showed a five-year capital plan that totaled roughly $22.5 million across county and school projects, with about $12 million concentrated in the two-year window the firm described as critical for budgeting. Its two scenarios were: borrow for the full basket of projects (about $11.9 million) or borrow only for vehicles and equipment (about $5.5 million). Using conservative assumptions — a notional 5% interim interest rate in the firm's model and a later permanent terming — the firm said interim financing would have a smaller, more manageable short-term budget impact than funding projects entirely from cash.

The firm recommended a flexible interim-financing structure (competitive bank-market term loan/commercial-paper-style approach) that would let the county draw funds over two to three years and later "term out" the financing on a shorter permanent schedule (Davenport modeled a roughly 7‑year permanent repayment once projects were placed). Locks said that approach spreads costs across years when projects are actually executed and reduces immediate drawdown of fund balance.

Davenport pointed to several mechanisms that could reduce net borrowing costs if available: reinvesting borrowed proceeds in the state-run SNAP program while funds are spent (which could offset some interest cost), and packaging projects to secure better pricing in a competitive bank bid. "There is a SNAP program run by the state that, in appropriate circumstances, allows borrowed proceeds to be reinvested to help cover interest cost while money is being spent down," Locks said.

Supervisors pressed on implementation details. Supervisor Jewett asked whether repayment schedules would match useful life; Locks said repayment terms should be aligned to underlying asset lives (for example, longer terms for school buses or building work and shorter terms for vehicles). The board also discussed whether to pursue voter-backed measures for very large, long-lived projects; Davenport and staff said such ballot measures are typically reserved for major school or building projects and are not common for fleets or routine equipment.

Board members raised process questions: whether the county should borrow before it needs cash, how interim borrowing would be invested while held, and whether a bond or commercial loan market approach made more sense. Davenport recommended a competitive bank bid for flexibility and speed, saying a bundled bank financing historically yields better results for a mix of equipment, vehicles and smaller building projects than ad-hoc leases from multiple vendors.

What happened and why it matters: Davenport's analysis gives the board a calibrated path to complete near-term capital projects without sharply eroding the county's policy-directed fund balance. The firm’s interim-financing recommendation is designed to preserve liquidity and avoid using one-time fund balance to pay for recurring needs or to deplete reserves below policy levels.

Next steps: County staff and Davenport will refine the project list and cost allocations, test final financing pricing, and return with a recommended structure. The board asked staff to provide a more detailed breakdown of the $12 million basket for fiscal '26 so supervisors can prioritize specific projects before any borrowing is authorized.

Ending: The presentation closed with Davenport offering to return with more detailed amortization schedules and to run sensitivity scenarios once supervisors narrow project priorities. No formal financing action was taken at the meeting; the board directed staff to continue work with Davenport on project prioritization and financing options.