LEONARDTOWN — The Hollywood Volunteer Rescue Squad will get its $3 million county construction loan in a single payment after St. Mary’s County commissioners set aside their finance staff’s advice Tuesday and approved a lump sum instead of payments tied to construction progress.
The money will pay to renovate the squad’s existing building and add a new wing. Work appears to be starting already. One commissioner said photos sent during the meeting showed trees coming down at the site.
The decision matters beyond Hollywood because a third of the money comes from tax-exempt bond proceeds. That is a first for the county’s fire and rescue loans, and it is why staff and the county attorney’s office asked for tighter controls.
The terms
Of the $3 million, $2 million comes from a general fund appropriation and $1 million from the county’s general obligation bond sale. Together, that works out to a weighted average interest rate of 1.66%, finance staff told the board. The squad’s annual payment will be about $226,000.
For scale, the squad reported $463,182 in revenue and $356,969 in expenses for the year ending June 2025, according to its federal tax filings. It reported about $2.14 million in assets.
Why staff wanted payments in stages
In July, commissioners made an exception to the county’s fire and rescue loan policy for the Hollywood project. Finance staff then built the loan to pay out in draws, with the squad or its contractor receiving money as work was done. The squad asked for a lump sum.
Staff recommended against it. Their reasons: better protection for county money, less risk of cost overruns and less chance that the bond money, sitting in a bank account, would earn more interest than federal tax rules allow.
The county has made five construction loans to volunteer companies in the past two decades, and all were paid as lump sums, a deputy county attorney said. They ranged from just under $200,000 to Ridge in 2004 to $1.75 million to the Second District department in May 2020.
This loan is larger, and it includes bond money. The county’s $61.5 million bond issue is tax-exempt, the attorney said, so none of it can be invested to earn more than the 3.97% rate the county is paying. If that happens, the worst case is that the IRS treats the issue as an arbitrage bond. That is unlikely, he said. The more probable fix would be repaying the excess interest to the IRS.
Hewitt’s plan
Commissioner Mike Hewitt argued that draws make little sense when the county has no one assigned to inspect the work. He laid out the terms the board adopted:
- The county holds back 5%, or $150,000, until the building gets its use and occupancy permit. The squad receives $2.85 million up front.
- The $1 million in bond money goes into a separate, identified account earning less than 3.97%, with no commingling. The county gets access to the account records.
- The squad spends the bond money first, then the county loan money, then its own funds.
- The squad pays the closing costs, as the Second District department did in 2020.
Hewitt said the contractor has already agreed to a 5% retainage on each payment, and that the squad’s building committee has the construction experience to check whether each payment is warranted. The squad’s representative said the squad inspects the contractor’s invoices and would follow the county’s rules.
Not everyone agreed
At least two commissioners questioned the change. One noted the board had just adopted a policy calling for draws and said the finance staff’s advice should stand. Another said staff recommendations reflect best practices and that the lump sum exposes the county to more risk.
Hewitt answered that the squad has to repay the loan however it receives it. Commissioners approved the motion, amended to call for a lump sum, on a voice vote.
The squad is also seeking an ambulance loan through the Maryland State Firemen’s Association, its representative said. She thanked county finance staff for providing the letters that loan requires.
The vote follows other recent county decisions on volunteer emergency services, including a proposal to add deputy fire chiefs to the volunteer rewards program.
