Lucerne county council to decide on infrastructure loan guarantee

Luzerne County Council must decide whether the county will guarantee payment of infrastructure loans in the unexpected scenario where casino funding is insufficient.

Scheduled for discussion at Tuesday’s council business session, the request stems from a new program authorized by state lawmakers last year to fund large-scale infrastructure projects in the county.

This program draws $3 million annually for the infrastructure pot from the average gaming-funded local sharing account of $12 million annually earmarked for the county.

The County Redevelopment Authority will receive the funds – $75 million over 25 years – on the understanding that it will secure a loan package so the infrastructure projects can be completed now.

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Under the current plan, the authority is attempting to borrow up to $55 million, leaving a cushion of the casino’s remaining funds pledged to cover interest payments and other borrowing costs.

A majority of boards recently selected Fidelity Bank from among five financial entities that responded to a request for proposals to provide a loan.

Fidelity wants to know if a government entity will guarantee reimbursement in the worst-case scenario where gambling does not generate the $3 million a year, officials said at a meeting last week.

The state will not agree to cover any shortfall, said attorney Brian Koscelansky, the authority’s outside legal counsel.

A guarantee from the authority is not possible because it does not have other sources of revenue-generating funding or the ability to impose taxes, officials said.

As a result, the authority is now approaching the county government, which would likely be among the beneficiaries of the new infrastructure fund through awards for county-owned projects. Governments and municipal authorities will also have the opportunity to apply for infrastructure funding.

It’s unclear what will happen if the county council refuses to provide a guarantee, officials said.

Koscelansky said Fidelity Bank should consider whether it’s still comfortable going without collateral, which is why a county council decision is needed.

A higher interest rate may be an option without a county guarantee, but it would reduce the amount of money that can be borrowed and allocated to infrastructure projects, officials said.

Koscelansky said all financial entities that responded to the authority’s lenders’ request expressed the same concern about whether collateral will be provided.

“Really, this same credit issue would apply to all submissions received,” he told the authority.

If the council refuses to provide the guarantee and Fidelity and others conclude that they cannot participate without it, the authority will have to “basically start over and find out if there is another financing vehicle to finance these projects”, Koscelansky told the authority.

The Authority’s chief executive, Andrew Reilly, said it was very unlikely the casino’s revenue would fail, but bank underwriters should consider all possibilities.

The $3 million annual allocation to casinos for county infrastructure is the first to be paid, meaning it takes top priority over other allocations in the event of a decline in gaming revenue,” said State Senator John Yudichak, I-Swoyersville.

Yudichak said he and many others were confident the $3 million was solid because casino credits for county projects averaged $12 million a year.

Before the new infrastructure program took effect this year, the whole pot funded a range of community goals each year, such as the purchase of municipal equipment and vehicles, officials said. While the county’s local sharing account has met many pressing public needs, some have criticized its inability to meet more expensive regional projects.

The new infrastructure fund will meet the needs of counties and municipalities for roads and bridges, Yudichak said. In some cases, the funding can be matched with new federal infrastructure funds to accelerate work that would normally take decades to materialize, he said.

Yudichak said no predetermination has been made on which projects will be funded. The county redevelopment authority will make the selections after applications open, with final allocation approval required by the Commonwealth Finance Authority, he said. This state entity already approves other county local sharing account rewards.

The County Council appoints the five citizens to serve on the Redevelopment Authority’s board of directors, with the seats currently held by Nina DeCosmo, Scott Linde, John Pekarovsky, Stephen E. Phillips and Mark Rabo.

State legislation authorizing the creation of the county infrastructure fund also allows the money to be used for utility services and flood control projects, officials said.

Penn’s Northeast will create an online portal to accept funding applications, the redevelopment authority board decided last week. The regional economic development organization will receive up to $6,800 to design and implement the process for council members to receive and review submissions.

The county council’s Tuesday business session follows a 6 p.m. voting meeting at the River Street County Courthouse in Wilkes-Barre, with instructions for a remote attendance option posted under the meetings link online at Matters discussed at working sessions must be approved at a subsequent voting meeting to take effect.

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