May 14, 2014 By Patty Yauger pyauger@heraldstandard.Com 5 min read

Fayette County commissioners appear ready to move ahead with the financing of the first phases of preparation and construction for the proposed county Justice and Rehabilitation Center.

While the three officials took no formal action Tuesday to place resolutions on the agenda to approve a recommendation from Mark Lundquist to secure a line of credit to cover costs tied to the initial startup or to consider the hiring of bond counsel for the financial actions, they did direct the financial consultant to finalize his recommendations so that formal action can take place in June.

Lundquist, of SGA Financial Advisory Services Inc., of Harrisburg, was hired in February to aid the commission in determining how the county should fund the new prison and an addition to the Children and Youth Services building.

The firm is being paid $25,000 for the financial services.

During his presentation, Lundquist said that, since February, he has met with representatives of local banks and Pittsburgh area investment banks to review the prison project and discuss how the county might finance the estimated $30 million project.

Of the 12 contacts, Lundquist said 10 firms did express interest in providing funding for the project.

“Their proposals ranged the gamut from going out and securing $35 million to $38 million in bond issues to doing individual bank lines of credit and loans,” he said. “The purpose (for the bank inquiry) is to be sure that we had the best thoughts working for the county in terms of how the financing could be done in the most advantageous way for the county and for the taxpayers.”

Because the county has yet to secure a contractor for the project and actual construction costs are unknown, Lundquist said he does not favor securing a bond issue at the current time, but instead would recommend the county obtain a $10 million home equity line of credit to proceed with land acquisition, development, engineering, studies or other related costs.

“You have already paid certain costs that were advanced from county funds, but once we put the (prison) financing in place, you will be able to legally reimburse the county,” he said when questioned by Commissioners Angela M. Zimmerlink and Vincent Zapotosky.

Long-range funding can be pursued at a later date, said Lundquist.

“Securing the line of credit for the county to fund these (initial) project costs will enable you to continue the development of the costs until you get to a point where you know how much money you will need for the entire project,” he said.

Last year, Zapotosky, along with commission Chairman Al Ambrosini, voted to construct a new prison to replace the current 125-year lockup.

The county has a sales agreement to purchase a 61-acre parcel from Fay Penn Economic Development Council for $1.25 million pending the outcome of a subsurface analysis and soil study.

The property is located on Mount Braddock Road in Dunbar Township.

Zapotosky, meanwhile, said that he supported the two-pronged approach that will allow the project to move ahead through the short-term line of credit and the long-term bond issuance for the repayment.

“The $10 million will carry us through until we are able to put on an exact amount of what we are going to need,” he said.

Fayette County Controller Sean Lally said that he, too, approves the recommendation offered by Lundquist.

“I feel that (Lundquist) has done extensive research on what options most benefit the county,” he said. “The concept of floating one aggregate bond when we do not have a definitive amount is not logical. Incremental financing, like the line of credit, allows the county to only pay interest on the money used, whereas with a bond the interest starts immediately on the entire loan amount.”

The next stage will be to confer with the banks to finalize the line of credit and discuss long-term financing.

In a related matter, the board is also poised to approve the submission of a grant application to the state Department of Economic Development/Commonwealth Finance Agency for $150,000 to defray the costs of the sewerage system for the new lockup.

Art Cappella, county grant writer, said the grant is one of two being sought by the county to fund the estimated $1.2 million sewerage project that will connect to the Dunbar Township Sewage Authority main system and provide service to the new prison and the adjacent lots.

The county plans to subdivide the 61-acre parcel into 8 lots, with one lot dedicated to the prison and the remaining lots for future economic development.

The second grant application, in the amount of $587,289, will be submitted in June to the U.S. Department of Commerce, added Cappella.

Should the county receive the $150,000, it would be required to “match” it in the amount of $22,500. The state and local money would then be used to “match” the federal grant, if it is approved, said Cappella.

When questioned by Zapotosky as to why the county had not made application to the U.S. Department of Agriculture, Cappella said that the agency had declined grant assistance because the project would not provide service to residential areas.

“It is only providing sewage for public government,” said Cappella.

Zapotosky said that the sewage authority may be willing to partner with the county and expand the project to include residential areas.

“We want to do as much as we can to offset our expenses as much as we can,” he said. “We have to explore all options that are available.

“I don’t want to take a short-sighted approach to this.”

Cappella indicated that he would again contact the federal agency to offer other options.

In other action, the commissioners announced that the regular meeting will be held Thursday at 10 a.m. due to the Tuesday, May 20, primary election.