Is $2.8M federal loan worth taking for Shamokin?
SHAMOKIN - City council has much to consider in deciding whether or not to accept a $2.8 million federal loan to restore the American Legion Building.
On one hand, the loan would allow for a major reinvestment in the 89-year-old landmark building: replacing a leaky roof, restoring the facade and the marble lobby, adding an elevator and other retrofitting to allow full handicap access.
It's a difficult loan to come by, city officials have said, and represents in theory an effort of "urban renewal" in a sleepy downtown.
On the other hand, terms of the loan would nearly double the city's existing debt.
The U.S. Department of Agriculture has approved the city's application for a Community Facilities Loan totaling $2,827,990 at 3.5 percent annual interest on a 40-year term.
It requires twice-yearly payments of $66,741, totaling $133,482 annually. When the loan matures, $5,339,280 - nearly twice the original amount - would be repaid. It also requires a $200,000 match from the city.
Brenda Scandle, city treasurer, said Shamokin already makes semi-annual debt payments of $68,184.62, which could rise next year even without the loan. Combined with the loan under consideration, the annual debt payments could potentially jump from $136,369.24 to $269,851.24.
If no loan, will it close?
City council hasn't yet accepted the offer. City Clerk Steve Bartos was authorized by council to seek local banks to issue the loan, with the USDA offering a guarantee.
If city council decides not to take the loan, Bartos says it could spell the end for the building.
"If the city decides it won't redo the building, that's OK, too. The point was to give them an option instead of closing a building," Bartos said.
Close the American Legion Building?
"The building is going to have to be closed if we don't," he said, citing continual leaks and aging electrical wiring in some areas. "You close it and it's one more blighted building that has to be knocked down."
Bill Milbrand, the councilman in charge of parks and recreation, doesn't see it that way.
He points to a series of fixes completed last year on the suggestion of the city's insurer, Selective Insurance Group. Two panel boxes were replaced, lighting was upgraded, fire extinguishers were inspected and replaced and emergency exits and stairwells were cleared and cleaned.
"All of a sudden, the insurance company is going to shut the building down?" he said.
What remains to be added is a fire alarm system, which Milbrand agrees is a must. He doesn't think it needs a fire suppression system, however, as suggested by Selective.
"The building's not going to shut down. That's not going to happen," Milbrand said.
Then and now
The American Legion Building was built as a war memorial for the area's military personnel. Community support for its construction was strong enough that many in Shamokin and Coal Township contributed a day's pay to the fund.
A parade of some 5,000 people, including 800 uniformed soldiers, marked its grand opening on Armistice Day in 1924, two years after construction began.
Over the years, the building was home to several storefronts on its first floor, including Wolfe's Department Store. Today, that storefront is the Shamokin-Coal Township Public Library. The building is also still home to Legion Post 73, Shamokin-Coal Township Heritage Museum and Anthracite Model Railroad Club. The Shamokin Youth Basketball League has for years used the third-floor gymnasium, which long ago served as the Legion ballroom and played host to school proms and dances.
A new tenant for the building's basement opened its doors this Labor Day weekend. Club Echo/Echo Lounge is up and running. It will be a lounge weekdays and an entertainment venue weekends, and specifically caters to the under-21 crowd. There were two dance parties this weekend and a comedy event tonight.
City council has already taken steps to make the loan payments. For the 2013 tax levy, members voted to raise the recreation tax from 3 mills to 7.208 mills, the extra shifted from the debt service tax made possible due to bond refinancing.
The move didn't increase taxes, which remain at 44.918 mills, but did establish a funding source to repay the proposed debt.
"The USDA would not have funded this package if they didn't approve that," Bartos said of the tax shift. "You have to show where money's going to come from in a dedicated source."
City property owners currently pay $44.92 on each $1,000 of assessed value of their properties. The recreation tax is assessed on the real estate tax bills issued to city property owners each March. So, too, is the debt service tax.
The city collects approximately $24,000 from each mill of taxes. An estimated $172,992 would be collected in the recreation tax annually, if neither the tax rate nor the collection rate were to change.
That's enough to cover the $133,482 due annually for the loan. However, the recreation tax has been used since its inception in 2008 to help operate the Lawton W. Shroyer Memorial Swimming Pool. It's used for playground expenses, too.
Also, Scandle said she will recommend raising the debt service by 1.25 mills in 2014 in order to maintain the real estate tax rate of 44.918 mills. That means shifting millage from other areas or raising taxes, she said.
Bartos, building tenants and other interested parties first began discussing an effort to upgrade the building some 22 months ago. When they looked into financing from USDA, they discussed a loan/grant combination and continued to hold out hope for just that, Bartos said. USDA decided differently, offering a loan but not a grant.
Garth Hall, who was among those interested parties, raised the financing issue with city council at its August meeting. He supports restoration efforts, but said he was concerned by the cost of the loan.
"Where will we get the $134,000 to pay (annually) for the loan over 40 years?" he said.
Councilman R. Craig Rhoades assured him during the meeting that, "yes," the recreation tax would generate enough revenue to cover the payments.
Bartos said recently he is confident the tax revenue is enough to support the loan. It's enough to support the pool and another grant obligation, too, he said. There's also Community Development Block Grant money available.
This project is one of "urban renewal," Bartos said. And it's one that could dictate the future of the downtown.
"At some point you have to draw a line in the sand and make a decision about what you do and don't want to do. When your buildings are falling down around you, what's the answer?" he said.
Roger Alleman is a Shamokin resident and commander of the local American Legion post, of which he's been a member for 44 years. He's been in and out of the building countless times. Over the years, tenants made their own fixes when needed.
The proposed project is the first major building-wide renovation he can remember. The building needs to be rewired, he said, and have plumbing upgrades.
Alleman supports the merits of the renovations, too, but said he doesn't believe they should occur if it results in an overwhelming burden on the city's finances.
"My question is, can they actually afford a loan? I hope they can," Alleman said.
The decision belongs to council, he said.
"You guys have to make the smart choice and whatever it is, I can live with it," he said. "If it goes through, great, but I don't want to hear the crying if they can't pay the bills."
Milbrand says he recognizes the value of investing in the Legion building, but that it may make more sense fiscally to hold back on the loan proposal and pursue grants in the coming years.
"I'm very concerned about going into that debt service," Milbrand said, the USDA guarantee notwithstanding. "If the city defaults, it's not going to come without some sort of penalty."
He said the city will be hard-pressed to find the funds to meet the required $200,000 match, especially as other grant funding sources like CDBG continue to shrink. And, he said, Shamokin remains on the hook for repayment of an estimated $400,000 to Housing and Urban Development.
"Our hardest thing in the city is collecting taxes. How can we be assured we have the tax money coming in to the recreation fund?" Milbrand said. "I am definitely against this loan."
'The right thing'
Thais Gardy, library director, didn't want to speak to the potential costs of the project. She did say, however, that the benefits would be substantial.
It would enhance access for senior citizens and the handicapped throughout the building, including the library's second floor. It could lead the way toward restoring some buzz to the downtown, she said.
"The whole thing is to invest in the City of Shamokin and try to bring it back to what it used to be. It's a good thing," she said.
Bartos said administrators and staff of the state Department of Conservation and Natural Resources are coming to Shamokin in October to look over some of the projects in the city.
The Legion building restoration is being considered. Development of a community garden is under way. A grant to expand and enhance Claude Kehler Community Park is pending, and substantial upgrades have already occurred there. Historic restoration of the Shamokin Creek Channel has been approved and financed, with engineering work continuing. State funds have been approved for a partial restoration of the "99 steps," for which the city must share the financial burden.
"We want to show the changes that are occurring in the city. (Their visit is) a testament that we're doing the right thing," Bartos said.