Luzerne County Council must decide on infrastructure loan guarantee

Luzerne County Council must decide if the county will guarantee payment of infrastructure borrowing in the unexpected scenario that casino funding falls short.

Set for discussion at Tuesday’s council work session, the request stems from a new program authorized by state legislators last year to fund large-scale infrastructure projects within the county.

This program carves out $3 million for the infrastructure pot annually from the average $12 million gambling-funded Local Share Account earmarked in the county each year.

The county Redevelopment Authority will receive the funds — $75 million over 25 years — with the understanding it will secure a borrowing package so 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 remaining pledged casino funds to cover interest payments and other borrowing costs.

An authority board majority recently selected Fidelity Bank from five financial entities that responded to a request-for-proposals to provide a loan.

Fidelity wants to know if a government entity will guarantee repayment in the worst-case scenario that gambling does not generate the $3 million annually, authority representatives said during a meeting last week.

The state won’t agree to cover any shortfalls, said Attorney Brian Koscelansky, the authority’s outside legal counsel on the matter.

An authority guarantee is not possible because it has no other revenue-generating funding streams or ability to impose taxes, officials said.

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

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

Koscelansky said Fidelity Bank would have to determine whether it is still comfortable proceeding without a guarantee, which is why a county council decision is necessary.

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

Koscelansky said all financial entities that responded to the authority’s request for lenders raised the same concern about whether a guarantee will be provided.

“Really that same credit issue would apply for any of the submissions that came in,” he told the authority.

If council declines to provide the guarantee and Fidelity and others conclude they cannot participate without it, the authority will “basically have to start over again and look to see if there’s another financing vehicle to fund those projects,” Koscelansky told the authority.

Authority Executive Director Andrew Reilly said it is highly unlikely the casino revenue would fail to come through, but bank underwriters must consider all possibilities.

The annual $3 million casino allocation for the county infrastructure is first in line to be paid, which means it has top priority over other allocations in the event of a gambling revenue decline,” said State Sen. John Yudichak, I-Swoyersville.

Yudichak said he and many others are confident the $3 million is solid because casino earmarks for county projects have been averaging $12 million annually.

Before the new infrastructure program took effect this year, the entire pot funded a range of community purposes annually, such as the purchase of municipal equipment and vehicles, officials say. While the county’s Local Share Account has addressed many pressing public needs, some have criticized its failure to address more big-ticket regional projects.

The new infrastructure fund will address county-owned and municipal road and bridge needs, Yudichak said. In some cases, the funding may be matched with new federal infrastructure funds to accelerate work that would normally take decades to come to fruition, he said.

Yudichak said no predeterminations have been made on which projects will be funded. The county redevelopment authority will make the selections after it opens up applications, with final award approval required by the Commonwealth Finance Authority, he said. This state entity already approves other county Local Share Account awards.

County council appoints the five citizens serving on the Redevelopment Authority board, with the seats currently filled by Nina DeCosmo, Scott Linde, John Pekarovsky, Stephen E. Phillips and Mark Rabo.

The state legislation authorizing creation of the county infrastructure fund also allows the money to be used for public utilities and flood control projects, officials have said.

Penn’s Northeast will create an online portal to accept applications for the funding, 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 board members to receive and review submissions.

County council’s Tuesday work session follows a 6 p.m. voting meeting at the county courthouse on River Street in Wilkes-Barre, with instructions for a remote attendance option posted under council’s online meetings link at Matters discussed at work sessions require approval at a subsequent voting meeting to take effect.

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