Howard County wanted to leverage the private sector’s efficiency and expertise in government buildings to ensure funding for capital repair and replacement was locked in long-term.
As part of the long-term contractual arrangement, the Edgemoor team guaranteed both the operating costs and the capital refurbishment costs for the full 30-year operating term. This approach not only provided Howard County with cost certainty, but also created a structure that will guarantee that the building will be handed back to Howard County in excellent condition at the end of 30 years.
With external market forces putting pressure on the budget—such as trade tariffs inflating the market price of steel and initiating volatility in the cost of materials—the project required careful and strategic management of budgetary risks to deliver a compliant, fixed-cost bid that met Howard County's imposed affordability ceiling, which was set prior to the implementation of the tariffs. Additionally, proposers were also required to hold their pricing for at least 180 days from the bid date.
The Edgemoor team improved the efficiency of its courthouse design to reduce costs and collaborated with its numerous subcontractors to secure unique long-term price guarantees for various trades to mitigate pricing volatility during the commercial and financial closing period.
To effectively transfer delivery risk to the private sector and incentivize its adherence to the contract schedule, the County wanted to tie its milestone payment to the project's occupancy readiness date, at which time the construction would be complete, and the operations phase would commence. The balance of the private financing (net of the County’s milestone payment) would then carry forward for the 30-year operating term, ensuring the selected project company had “skin in the game” and remained properly incentivized to perform.
Edgemoor efficiently accommodated the County's contract and payment structure through a hybrid financing model which incorporated a creative organization of bank, bond, and equity financing. The County's milestone payment strategy, combined with Edgemoor's financing approach,allowed the County to incentivize the project company to deliver the project on schedule and appropriately transfer risk to the private sector during operations, while still optimizing the amount of long-term taxable interest the County would be required to carry through its annual availability payments.
“This team provided an elegant and well-thought-out site plan that incorporated an iconic and aspirational design with an honorable and stately building. Their design for our future courthouse will prove to be an architectural landmark that expresses the values and traditions of Howard County's justice system.”
Allan H. Kittleman, former Howard County Executive
Edgemoor is a leading vertically-integrated developer and asset manager of buildings and infrastructure and offers tailored comprehensive development solutions to a broad range of clients.