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Council approves letter of credit for courthouse access road after contentious debate
Summary
Council authorized an irrevocable letter of credit with First National Bank (5.39% rate) to satisfy a developer-agreement requirement for the Hancock County courthouse access road; the measure passed 5–2 amid objections about city role in private development and risk exposure.
Ellsworth City Council approved using an irrevocable letter of credit in favor of the Maine Judiciary to guarantee completion of a short access road required by the Hancock County courthouse development agreement. The vote was 5–2 after an extended debate about the city’s role as developer, exposure to risk and an alternative performance bond route.
Deputy City Manager and finance staff explained the two options negotiated with bond counsel and the state: a traditional performance bond (which would have required an upfront fee estimated at roughly $75,000–$85,000) or a letter of credit from the city’s bank that has no upfront cash cost but creates an enforceable credit line the state can draw if the city fails to meet its obligations. Staff said the state and the city’s bond counsel supported the letter-of-credit approach given project milestones already completed.
Council discussion was sharply divided. Councilor Halloran cautioned that the city should not be in the development business and objected to giving the state the ability to draw on a credit line that the city would then have to repay. "Turning the state loose on $1.5 million that we've signed up to pay back... is dangerous," he said, urging the city to pay the bond fee up front and let bonding companies handle disputes. Councilor Shea also opposed the letter of credit and favored a bond.
Supporters argued the city has completed significant project milestones and that the letter of credit is a standard financing instrument that avoids an immediate $85,000 cash outlay. Manager Pierce framed the measure as necessary to finalize the developer agreement and secure the broader courthouse project, which he described as an investment in the city’s long-term infrastructure and access.
Councilor Smith moved to accept the letter of credit with First National Bank at a stated rate of 5.39% as required by the development agreement; the motion was seconded and passed 5–2.
Staff stressed the letter only becomes relevant if the city fails to complete the work agreed to in the developer agreement; otherwise it remains dormant. The council recorded the motion and vote and will proceed with paperwork to establish the letter of credit.
