Wendell officials weigh bank loan vs. public bond sale for voter‑approved G.O. borrowing

Davenport & Company presented financing options for the Town of Wendell’s voter‑approved general obligation (G.O.) borrowing, telling the Board of Commissioners that a direct bank loan from Webster Bank would provide a near‑term, lower‑risk way to secure approximately $22.2 million in project funds now while the public bond market remains volatile.

The presentation, delivered by Davenport financial advisor Mr. Collins, laid out two routes: a bank financing (selling the loan to a single lender) and a public bond sale (selling through an underwriter to multiple investors). Davenport showed a Webster Bank proposal with a fixed nominal interest rate of about 4.53% (an all‑in rate of about 4.60% after issuance costs), a par loan amount of $22,400,000 and estimated net proceeds of about $22,200,000 after approximately $215,000 in issuance costs. The public sale scenario was estimated to carry a lower coupon yield (about 4.18% in Davenport’s model) but higher issuance costs and market timing risk; Davenport estimated the two options would break even if market rates changed by roughly 27 basis points between now and the public sale date.

Why it matters: the first borrowing is the initial issuance of a voter‑approved G.O. bond package the town plans to spend on capital projects. Choosing the bank route would lock in a fixed repayment schedule and put cash in hand for projects that begin next fiscal year; choosing the public sale could yield a lower coupon today but requires establishing a bond rating and leaves the town exposed to market moves until the sale date.

Key details from the presentation and discussion

- Webster Bank proposal: 4.53% nominal rate; 4.60% all‑in after issuance costs; par amount shown $22,400,000; estimated net proceeds $22,200,000; conservative issuance costs budgeted at about $215,000. - Public sale estimate: lower coupon in the firm’s model (about 4.18% assuming a low AA rating) but higher issuance costs (Davenport estimated roughly $415,000) and the need to float with market pricing until the sale date (Davenport used July 22 as the illustrative sale date). - Timing and approvals: Davenport identified May 12 as the board meeting at which the town would adopt the required findings resolution; Webster’s acceptance deadline in the proposals was May 13; if the town proceeds with a bank loan the firm said it could close as early as July 17; the Local Government Commission (LGC) reviews and must sign off on the transaction (Davenport noted an LGC review date of July 1 in its timeline for the public sale path). - Prepayment/call features and flexibility: Davenport flagged a “make‑whole” prepayment provision in one bank’s low‑rate option (Truist) that could prevent future refunding savings. Davenport recommended a structure that preserves the town’s ability to refinance or prepay without excessive penalty—one reason the firm favored Webster in its analysis.

Board discussion and next steps

Commissioners asked about the bank RFP process, the universe of banks solicited, and the practical differences between a G.O. bond and installment financing. Davenport said it sent the RFP to an extensive list of banks and that G.O. debt generally yields lower interest rates because it is backed by the issuer’s full faith and credit. Several commissioners said they were comfortable with the certainty and flexibility of a bank loan and with Webster Bank as the preferred lender, though the board did not adopt a formal resolution or vote on the financing method during the meeting.

Davenport and town staff asked the board for direction to avoid preparing both bank‑ and public‑sale documents; staff said a formal decision would be required at the next meeting so the appropriate documents could be drafted. Davenport reiterated the market‑timing tradeoff: take a “bird in the hand” bank lock now or wait and risk rate movement before a July public sale.

What was not decided

The board did not formally approve a specific lender or sign financing documents at this meeting. Davenport and staff requested direction so they could prepare the findings resolution and closing documents in time for the May 12 meeting, and Webster’s written acceptance deadline in the proposal summary was cited as May 13.

Implementation risks and context

Davenport described the municipal market as volatile and noted that small shifts in yields could reverse today’s apparent advantage for either option. The presentation said the town currently does not have a bond rating (which gives it the option to use a direct bank loan); if the town chooses the public bond market it will need to establish a rating and then would be expected to use the public market for future G.O. issuances tied to that referendum.

Next steps

Town staff and Davenport will prepare the required findings resolution and financing documents for the board’s consideration at the May 12 meeting. If the board directs staff to proceed with a bank loan, Davenport indicated the town could close in mid‑July; if the board elects to pursue a public sale, the sale date in Davenport’s timeline is July 22 and the town would need to complete rating work in May–June.