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City hears options to extend interim loan and pursue USDA funding for middle-school project
Summary
PFM Financial Advisors briefed the city on the middle-school project: a $26M interim note maturing April 1, 2026, a guaranteed-max-price contract of about $29.4M, and a remaining USDA commitment of roughly $7M; staff recommended extending the interim note up to one year while pursuing USDA reimbursement or separate interim financing for the remaining portion.
City financial advisers told the Board of Mayor and Aldermen on March 9 that Millington’s middle-school construction requires coordination of interim financing and USDA loan commitments as the project approaches closeout.
Lauren Lowe of PFM Financial Advisors reviewed the financing history and current options. She said the project carries a guaranteed maximum-price contract of about $29.4 million and that the city previously closed a $26 million interim note that covered construction-period capitalized interest, prior engineering costs and a project fund. That note matures April 1, 2026. USDA’s commitment to the project remains available for a larger total amount (transcribed in the packet at roughly $33 million) but USDA will not advance full loan proceeds during construction; instead the borrower uses its funds or interim financing and is reimbursed at project closeout.
Lowe described three practical steps: seek a one-year extension of the existing 2024 interim note (the current lender, Rural Water Authority, has agreed in principle to extend to March 10, 2027); pursue interim financing for the approximately $7 million remaining in USDA commitment so work can continue without issuing a second permanent note; and continue coordination with USDA to convert interim financing to USDA permanent loan proceeds on project completion to avoid carrying two permanent notes simultaneously. PFM and legal counsel are working on extension paperwork and ongoing conversations with USDA and possible interim providers.
Board members asked clarifying questions about dollars already expended (Lowe estimated $9–10 million spent to date), the mechanics of reimbursement, and the timeline for conversion to USDA permanent financing. Lowe said the city may be able to avoid carrying two long-term notes if USDA is able to fund and replace the interim note after project completion, but the timing depends on project progress and USDA review/closeout procedures.
Next steps identified at the meeting included staff and PFM pursuing the one-year extension, continuing dialogue with USDA and potential interim lenders, and returning to the board with updates on the financing plan and any formal actions required to close or refinance the note.
