St. Germain board discusses financing options for new fire truck

The Town of St. Germain will soon receive a new, custom-built fire truck, and the town board must now finalize plans on how to pay for it. Supervisors spent much of their meeting on Thursday, August 24 discussing potential financing options.

The truck was ordered last year and is being built by Pierce Manufacturing near Appleton. It will be equipped with a 107-foot heavy-duty aerial ladder and has a life expectancy of roughly 30 years, according to the manufacturer. 

The town is tentatively scheduled to take possession by the end of 2023. The price tag is approximately $1.2 million, but the bottom-line cost has not been confirmed yet. 

“We don’t have all the final stuff,” town chairman Tom Christensen told The Lakeland Times. “I’m waiting for information from the manufacturer and I haven’t received that yet, so we’re kind of in limbo right now. We need the final number and final delivery date … I don’t know if there were any change orders. Production has taken over a year, so I’ve got to think there was maybe a change order we don’t know about yet, or something like that.”

“It’s a ladder-truck,” Christensen said. The new vehicle will replace the fire department’s current ladder-truck, which was built in the 1980s and purchased used by the town. “This has way more capacity than what the old truck has,” the chairman added. He said the fire department “told us what was necessary, and that’s what the town board went with.”

The town board began discussions on financing the truck last September. Eleven months ago, Christensen told supervisors he recommended financing the truck at that point to potentially save the town money. “The thought process would be that the interest rate — in some folks’ minds — is going to continue to go up in the next couple of years,” he said.

Last year, Christensen put the question to the board — “Do we want to borrow the money and put the money into an investment account and start paying it next year with the levy that we do in November, collect in 2023, and potentially save some interest? It’s different than what we normally do,” he said. “Now it’s a question of do you want to hedge against some interest inflation.”

 “I think the interest rate is going to climb steadily next year and the year after,” he said during that meeting. “I don’t see it starting to turn around for at least two — if not three — years. But that’s my prediction. They (the federal government) have spent way too much money for inflation not to keep going. I think in everybody’s lifetime, we’ve seen the scenario that we’re in right now.”

Town treasurer Jeanna Vogel offered a word of caution.

 “It would go against your tax money for next year, so you’re getting a head start on collecting it, but I think the issue that I have — which is more as a taxpayer as opposed to a treasurer — is: am I paying for something that potentially I’m not getting any value out of?” she said. “It might make sense financially if the interest rates continue to rise, but as a taxpayer, am I paying for a fire truck that — if I sell (my property in St. Germain) — is something that I got no value out of?”

The board concurred with Vogel and opted to wait and finance the truck this year.

In last week’s meeting, Christensen reminded the panel of that decision.

 “We could have done that (last year) and saved ourselves some interest, but hindsight is always 20/20,” he said. “In this situation, we would have come out a little ahead.”

As he presented financing options to the board, Christensen noted that “the interest rate now has gone from around 2.3 to 6 per cent, so we’ve adjusted the formula for that.”

The truck will be paid for with a bank loan, which means property owners will see a temporary tax increase for the lifespan of the note. Christensen said. According to the town’s assessor, the average home value in St. Germain is $315,000, so he used that figure in explaining options to the board.

Figuring for a $1,200,000 loan at six percent interest, he created a spreadsheet to illustrate financing choices. If the town were to opt for a four-year loan, the average homeowner would pay an extra $150.94 per year and the town would pay $167,581.33 in interest. If the loan were for an eight-year term, the average homeowner would pay an extra $84.35 per year and interest would balloon out to $328,528.31. Christensen’s spreadsheet also included information for five, six, and seven-year terms.

Christensen said he spoke with some taxpayers at the town’s last levy meeting, “And what I remember from talking with the handful of people that were in the audience, they felt we should pay on the shorter side of it and get it over with to save the interest. I don’t know if that feeling is still the same, with the way inflation has gone this year or not.”

Supervisor Ted Ritter noted the difference in short-and-long-term loans would be negligible to homeowners, but significant to the town in the amount of interest paid.

“A $315,000 home, at four years, the increase would be about $150 a year,” he said. “That’d be about $600. At eight years, it’s about $80 a year. It’s $674. So there’s not a lot of difference.”

“I suggest five years,” Ritter said. “I don’t know why.”

“And that’s the one I was comfortable with, also,” Christensen concurred. “I thought five years seemed like a reasonable amount.”

 “For eight dollars per $100,000 house to go to the four-year option, you’re saving almost $40,000 in interest. I would be OK with four years,” supervisor Brian Cooper noted.

“I guess I’d like to see the four years for the difference in the savings,” said supervisor Jim Swenson. “We’re probably going to have more vehicles, and it shows that yeah, there are levy increases, but there is a need for more vehicles; not just at the fire department.”

Cooper said the potential need for vehicles could come from either the town-owned golf course or the department of public works.

Clerk June Vogel pointed out neither the price of the truck nor its delivery date have been confirmed as final. “So, we take out a loan for 1.2 million, what happens when the fire truck comes in at 1.35?” she asked.

“We’re $150,000 short,” Christensen answered. “That’s what happens.” 

“And we can’t adjust the levy,” Vogel added. “We’d have to find it in the budget or take out a second loan.”

Without final details, the board could not commit to a plan.

“To stay ahead of the levy, I’d like to get it finalized in the next month,” treasurer Vogel said.

Christensen said the topic will appear on the town board’s next meeting agenda.