Request for Luzerne County guarantee on infrastructure borrowing not well received

Several Luzerne County Council members expressed trepidation last week over a requested county guarantee for borrowing needed to secure an estimated $55 million for local infrastructure projects.

Under state legislation approved last year, the county redevelopment authority will execute the borrowing to obtain the $55 million and receive $3 million from the casino gambling-funded Local Share Account annually to pay off the loan.

Because the redevelopment authority has no ability to impose taxes or other revenue-generating measures, it is asking the county to guarantee the borrowing repayments in the unexpected event casino funding falls short.

Councilman Gregory Wolovich Jr. said casino revenue is not a sure thing in the future because online gambling has become a “huge thing.” He also envisioned a possibility of increased competition if the state someday decided to award licensing for casinos in more counties.

“It’s basically taking a big gamble on gambling money,” Wolovich said, referring to the county guarantee. “It’s a very scary proposal.”

Concurring with Wolovich, Councilman Kevin Lescavage also noted the online gambling increase and possibility for anything to happen in the industry.

“We can’t ever say never, and that’s what has me nervous about the whole thing,” Lescavage said.

Lescavage said he would not consider a guarantee until the matter is reviewed by Randy Robertson, who is set to start work as the new county manager the week of June 13.

“He has a master’s degree in strategic planning. Maybe he can work in conjunction with you to look that far into the future,” Lescavage told the authority representatives.

Councilman Brian Thornton said he researched casinos and discovered many have closed down across the country.

He did not initially realize the new state legislation mandates the redevelopment authority to undertake up-front borrowing in order to receive the $3 million in gambling revenue.

Before that clarification was provided, Thornton proposed waiting each year to see if the $3 million comes through and, if it does, awarding it to infrastructure projects within that cap. That approach would eliminate the expense of borrowing and any risk, Thornton said.

Thornton said he would not provide a guarantee that could require funding from county taxpayers down the road.

“I’m not prepared to do that,” he said.

He equated the borrowing approach to a kid in a candy store, saying he spent all the money in his pocket on candy when he was little because it was his parents’ money.

“We seem to somehow think that this is the best way to tackle these infrastructure projects by borrowing the money up front because we can’t wait to get it every year at no interest and no cost,” Thornton said.

The premise of the new legislation was that up-front borrowing would jumpstart large-scale infrastructure projects that are needed but were deferred by the county and municipalities due to a lack of funds, state Sen. John Yudichak, I-Swoyersville, has 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 he and many others are confident the $3 million is solid because casino earmarks for county projects have been averaging $12 million annually. The remainder of the funds would continue to go to municipalities for a range of community purposes, 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 as originally intended.

Councilman Stephen J. Urban criticized the format of the state legislation.

“I don’t think it’s fair to us and the county taxpayers to put us on the hook for 25 years for up to $3 million a year,” Urban said.

It’s unclear if the proposal will proceed to a vote at a future council meeting.

A redevelopment authority board majority recently selected Fidelity Bank from five financial entities that responded to a request-for-proposals to provide a loan. Fidelity Bank is partnering with FNCB on the proposed transaction.

Authority representatives said other financial entities that responded to the proposal will also have a similar question about whether a county guarantee is provided.

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 have said.

The authority board recently retained Penn’s Northeast to create an online portal that would accept applications for the new funding. 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.

When advocating a no-borrow approach not permissible under the legislation, Thornton also said he believes the annual $3 million should first be invested on paving all county-owned roads and bridges.

“We all know how bad our roads are in this county. That could go a long way,” Thornton said.

However, the legislation leaves the decision on which infrastructure projects should be funded up to the redevelopment authority, with final award approval by the Commonwealth Finance Authority. 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.