Sewage authority saddled with payments for plant expansion
FAIRCHANCE – Loan repayments for a sewage treatment plant expansion have left the Fairchance-Georges Joint Sewage Authority short on funds and asking, “Where do we go from here?” And, authority board members say they’re still waiting for Fay-Penn Fiber Inc. to shoulder the cost.
The joint authority has made $3,680 monthly payments to the Pennsylvania Infrastructure Investment Authority (PENNVEST) since Sept. 1, 1999.
“The exact figure owed to the authority today stands at $114,080,” said Joe Angel, authority board president.
To provide sewage service for the fiberboard manufacturer’s proposed plant in the Fayette Business Park, the authority expanded its treatment plant on Big Six Road to nearly double its size, at a cost of $762,000. Authority solicitor Simon John said Fay-Penn Fiber signed a contract with the authority, agreeing to take over payments for the expansion Sept. 1, 1999, the day the first payment was due to PENNVEST.
But no one from the company came forward when the first monthly bill came due, he said.
In the months since the authority had to make that first payment, John noted, the company has neither returned calls nor answered certified letters sent to the firm’s corporate headquarters.
“We have never received a single response,” John said.
Late last year, John said, Lori Omatick, economic development manager with Fay-Penn Economic Development Council, agreed to help by acting as a liaison between the authority and the company. John said he called Omatick’s office in late February to discuss Fay-Penn Fiber’s growing delinquent account but has heard nothing new about the situation.
On Friday, Mike Krajovic, Fay-Penn Economic Development Council executive vice president, said he is aware of the situation.
“The last time we spoke to the principals involved in Fay-Penn Fiber, we did raise this issue. We made it clear to them they should resolve the issue to the satisfaction of the sewage authority,” he said.
In September 1996, officials announced that the company had been in planning with Fay-Penn Economic Development Council to build the fiberboard plant in the Georges Township business park.
In July 1999, Fay-Penn Fiber bought about 70 acres in the park for about $1.8 million.
The company had hoped to break ground sometime during the first half of this year, Krajovic said, adding, “They certainly are not able to advance the plan at the time schedule they originally communicated to us last year.
“My understanding is that the company is experiencing financial difficulties due to the national recession and the event that occurred last Sept. 11. Unfortunately, it has moved the project back.”
Saying he couldn’t speak for the authority or Fay-Penn Fiber, Krajovic said he is hopeful the problems will be resolved.
“I know the authority secured a loan through PENNVEST with hopes to use part of that to expand the sewage system and provide capacity to Fay-Penn Fiber. Fay-Penn Fiber would look to pay the bill, but in fact they are not because they are not generating any business and this plant does not yet exist.”
In a quest to find some way of recouping the delinquent amount due, John said he investigated the Fay-Penn Fiber property. The land was deeded from the Fayette Industrial Fund to Clarion Fiber. Fay-Penn Economic Development Council administers the industrial fund.
As for the property owner, John said he was informed that Clarion Fiber is “one and the same as” Fay-Penn Fiber.
John said that, according to the deed records in the Fayette County Courthouse, Fay-Penn Fiber obtained a $961,169.22 mortgage on the property last June.
“I cannot give an opinion on if what they did was legal, but no bank will give a loan on mortgaged property,” he said.
Authority members said they had been led to believe that the firm was working to float a bond for the site development.
In an interview in September, Krajovic said the company had abandoned its pursuit of a tax-free bond issue through the state to help fund the project, instead shifting its focus to using 100 percent bank financing. The estimated cost to build the plant has ranged from $165 million to $180 million.
Krajovic also said in September that the company had completed all the environmental and site grading, “so the project can begin construction immediately once they give the go-ahead.”
Fay-Penn Fiber plans to employ about 200 people in the manufacture of medium-density fiberboard and some products using that material. The company will turn sawdust, wood chips and other wood waste products into a high-quality fiberboard that, while similar to particleboard, has superior physical characteristics.
Fay-Penn would use wood waste products from area sawmills, which sometimes have to pay to dispose of the materials.
Despite the economic promise of the project, the lack of direct information from Fay-Penn Fiber, delays and outstanding debts on the site have some authority board members abandoning their “wait-and-see” demeanor for an almost grim humor.
“Maybe when this is all over the property will change back to Pheasant Lane for horseback riding again,” said authority member Kevin O’Brien.
Goodwin speculated that the site still could have a future.
“Well, if all else fails, it will make a great campground,” he said.