ALLEGANY COUNTY BOARD OF LEGISLATORS

COMMITTEE OF THE WHOLE

January 11, 2012

** NOT APPROVED **

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LEGISLATORS PRESENT: Chairman C. Crandall, G. Benson, D. Burdick, D. Cady, P. Curran, D. Fanton, K. Graves, M. Healy, T. Hopkins, A. McGraw, T. O’Grady, D. Pullen, F. Sinclair, N. Ungermann; Absent: K. LaForge

OTHERS PRESENT: M. Alger, R. Anderson, M. Balling (LaBella), M. Burke, K. Dirlam, R. Ewell (IDA Board Member), A. Finnemore, J. Foels, C. Hedstrom, J. Hopkins, J. Margeson, T. Miner, K. Monroe, P. Reagan, B. Riehle, T. Ross, M. Schaffron (LaBella), J. Smith (Municipal Solutions), D. Spitzer (Counsel for IDA), C. Whitfield, R. Whitney

CALL TO ORDER: Chairman Curtis Crandall called the meeting to order at 2:00 p.m. and led in the Pledge of Allegiance to the Flag.

Chairman Crandall noted that the purpose of the meeting was to discuss development at the Crossroads Development Area (intersection of I-86 and SR19). He gave a brief recap on the project, beginning in the 1970s when State Route 17 (later to be designated at I-86) was constructed across the Southern Tier. There have been discussions and efforts made toward development at the intersection of that route with State Route 19, but it hasn’t been viable and things weren’t put into place until now. One of the reasons has to do with state legislation sponsored by former Senator Patricia McGee to free up some funds to use for development purposes. These funds were originally designated by the state for legal costs related to the County’s designation as a possible site for low-level radioactive waste disposal back in the 1980s. The legislation required that use of the funds for development needed to be fairly specific, and the project designated was the Crossroads area. A Crossroads Development Advisory Committee was formed, and many people in this room served on that committee to move this forward. From there, work was done through the Industrial Development Agency and an engineering firm, and funds were spent from that initial “seed” money for preliminary engineering. Another key element that’s in place is the intermunicipal agreement with the Town of Friendship for water. Now we’re in a position where we’re able to move forward, but there are some components that need to kick in first and questions to be answered. Is it financially possible? Can the investment be justified, and is there enough investment to pay that back? Will the taxpayers feel that the Board acted responsibly? Is it legally viable, and will we be working within Municipal Law? Then there’s the political question, a question each Legislator will have to ask when we understand the financial and legal aspects.

Daniel Spitzer, Attorney for the IDA, has been working closely with County Attorney Thomas Miner, and he addressed the legal and structural aspects of the project. Mr. Spitzer referred to a study done in 2004, and what makes sense for development of the Crossroads area from a marketing point of view is the hospitality industry and related commercial activity, restaurants in particular, along with a conference center. They wanted to have as much of a solid deal as possible. They wanted to be sure they had control over specific pieces of land. They wanted to make sure they were dealing with developers with experience in raising funds for difficult projects. They want individuals who are willing to invest in the County in order to minimize the risk that the underlying agency would be taking. Properties were identified around State Route 19 and County Route 20. One was the “S” curve, identified for industrial use, possibly doing something with a local dairy. Focus is on bringing jobs and sales tax revenue into the County. The IDA has been looking at developers of hotels, most recently through the EB5 Program, which deals with investment for job creation. They’ve identified two subject parcels for hotel and related commercial development: the former Truck Stop and the VanDyke property behind it. The IDA negotiated on behalf of the County and obtained a signed purchase contract with the VanDykes, and there is a signed purchase contract for the Truck Stop parcel with the developer. The total 28 acres provides a good base to build a sufficient commercial network to make this work. At one point, there was talk of both a water and sewer line. There is no sewer line presently included in the project, because it doesn’t make economic sense at this point compared to an on-site sewage facility. Other potential users have been identified for the water system, and interest has already been expressed, which will provide a financial base to help pay for the line.

The County is being asked to adopt a resolution to accomplish several things: 1) To enter into a bond/purchase agreement wherein the IDA would issue a bond, and the County would purchase a bond of up to $3.5 million. The amount is flexible, because they are hoping to get grants to help and are also trying to keep costs down, but the maximum is $3.5 million. The contract between the County and the Town of Friendship provides for the Town of Friendship to manage the water system and provide the service, including collection services with a surcharge to cover their costs and a fee that goes to the debt service. The debt service is not paid by a tax levy, but as part of the operation and maintenance charges. The goal is to borrow that money from the County to build the system, but recognizing potential risk, the bond/purchase agreement will be carefully structured so that bids will not be released for construction and there won’t be a pull-down of funds until it has been certified to the County that there are sufficient users to pay for the bond. 2) To grant an easement to the IDA for the use of County Road 20 for the waterline and future utilities such as a sewer line and electric lines. 3) Authorizing a lease to the IDA from the County of the property at the “S” curve. The lease would pay to the County 75 percent of any revenues received from developing the property, and 25 percent would go to the IDA, after bonds are paid back. The County is being asked to put up the “seed,” but the IDA believes that this seed will grow significant revenue for the County and result in the development of jobs.

An overview of the financial aspects of the project was given by Jeff Smith, from Municipal Solutions. Mr. Smith noted that the ability to bring this whole project together plays on what the Legislature has done over the past eight years to bring the County to the financial position where they have the surplus fund balance to be able to extend a loan like this. The timing works on both sides. One of the problems encountered in establishing the new water district has been that for a conventional water district, especially a county water district, the amount you have to have before seeking comptroller approval is $3 per year per user. The financing was stalled. This proposal includes the extension of a loan from the County at two percent interest, which is a little higher than a ten-year treasury yield. Right now, the County can make about .4 percent on their investment. It’s a win-win situation, and this is a legitimate investment for the County. The IDA’s ultimate goal is that they’ll be able to find other financing sources when they have the facilities built. They will keep this project qualified for the New York State Environmental Facilities Corporation financing and any federal financing that comes along, eventually allowing them to flip this loan out so that the County isn’t on the hook for the entire 30-year period. In order to get the planning and construction done, the IDA is proposing a five-year period when they’ll be able to amortize the cost of the interest, if needed, and have time to bring in other funding that becomes available. This is a favorable time to go forward, because the bidding environment is so good right now. Basically, it’s an authorized County investment. They made the bonds callable at any time with a 15-day notice, and they continue to work on having a structure so they can eventually take this out in long-term financing, but they need the core to build on. The goal is to get the project in the ground and get construction started. Once we get the start, people will see there’s a future in the area, and hopefully more things will come.

IDA Director John Foels addressed the “pipe, project, and property” of the plan. The charge given to the IDA by the Chairman of the Board was to have all three in place prior to coming before the Legislature. As far as the project is concerned, a Rochester firm, going by Allegany Square, LLC, has a binding purchase offer with the current owner of the former Truck Stop. They’re doing their due diligence now, and they expect a fast closing. The developer has said that no matter what we do with the Crossroads, that property has to be fixed or it will be a detriment to anything else we try to do. The developer plans to level it. That’s an 11-acre parcel. The developer sees their role as a travel-related project. We have the traffic and the visitors; we need fuel, convenience, fast food, lodging, and other things such as banquet facilities. They knew they could squeeze it in on the eleven acres, but wanted to be more comfortable, so Mr. Foels began negotiations for the VanDyke property, which concluded yesterday. That parcel is about 18 acres with access to County Road 20, leaving the developer area to expand. The IDA will probably be involved with more than one key developer, as others have inquired about the opportunity. The focus of the developers will be to take care of that northwest quadrant of the intersection first, because of the nature of the property. The last item is the pipe. Mike Schaffron, from LaBella, has done a great job over the years in planning this so that the IDA will have a package put together when they talk with developers. They’re in position now to move forward leading to this discussion at the legislative level. They want to get this started this year. The developer wants to be in the ground by the end of the year. There’s a timing issue, and developers won’t stick around if there’s a problem with timing. As mentioned before, there is an element of risk, and they will try to minimize that as much as they can.

Questions and Comments:

In response to a question from Legislator Cady, Mr. Foels confirmed that we’re not committed to start the waterline until there’s a firm contract with a developer. He estimated the upfront cost at $600,000.

Chairman Crandall asked if the lease on that property with the developer ties up all of the property, or if another developer could be involved at the same time. Mr. Spitzer replied that it could be the latter, and he discussed preferred developer status and the possibility of several developers developing complementary facilities. There could be development all along that waterline. It’s all open, but the County would have no commitments beyond the upfront cost. Chairman Crandall noted that we’ve concentrated on the end user, but there are good possibilities for development and needs in between from Friendship to Route 19. That’s the reason for inclusion in this resolution of the lease of the “S” curve.

Legislator Cady noted that the upfront cost seems high, but if this falls through and it’s put off to the future, he asked if a lot of that upfront cost would still be useful. Mr. Spitzer replied that it would. The plans would still be valid and things could be upgraded. There will be a mortgage on the pipe, so the County would end up with the waterline, and there’s a similar arrangement with the VanDyke property. In terms of upfront costs that would have to be duplicated, it would only be his and Mr. Smith’s fees, the legal and financial costs. Some of the interest and revenue would obviously be lost. But in terms of the physical work, a lot of things are already done, such as the water testing, archaeology approval, and the SEQR.

Legislator Pullen asked who would make the final decision on release of County dollars. Mr. Spitzer replied that the County is the dispersing agent. The key point is the requirement that the IDA must certify to the County that there are a sufficient number of users adequate to pay off the bond before the construction contract is let. Mr. Pullen asked for confirmation that if this goes to the Board and is approved there, the money isn’t in play yet. There’s still the ultimate sign-off, and it’s up to the Treasurer to see that it meets all the requirements. Mr. Spitzer confirmed that was correct.

Chairman Crandall questioned a comment made that the bond is “callable 15 days.” Mr. Smith explained that if we’re successful in placing this, and what he’s looking at is eventually through the Environmental Facilities Corporation’s non-subsidized loan program and using their triple A bond rating, there has to be a mechanism where we can pay off these bonds. That’s why the call provision was put in there. Within 15 days notice, they can contact the Treasurer and let her know they’re making arrangements to go to other financing, and the County will be made whole.

County Attorney Thomas Miner advised that this bond is a little different than the County giving a bond. We have the power to tax, so when we give a bond, there’s greater security that the bond holder is going to be paid. In this situation, every effort is going to be made by the IDA to try to get the best possible developers, but the risk is that even the best efforts won’t be sufficient to pay that bond. Our only recourse is to go back against, not the IDA itself, but the infrastructure project assets.

Legislator Ungermann expressed concern about a future easement for a sewer line. Mr. Miner explained that this easement gives the IDA the right to do the waterline, a sewer line, and other utilities as needed.

Chairman Crandall explained the process for a resolution to be considered at the Board meeting on January 23. He and the County Attorney felt it would be best to have the resolution be sponsored by individual Legislators rather than Ways and Means. Mr. Miner distributed copies of the proposed resolution, noting that to make sure the County’s interests are protected, there may need to be more refinement of documents by himself, Mr. Spitzer, and other outside counsel. Mr. Miner noted that there will be one other resolution to assign the County’s rights in the agreement with the Town of Friendship to the IDA so they can exercise the County’s rights related to the waterline.

Legislator Burdick asked if the bond is strictly for water supply for this area. Chairman Crandall explained that it covers some property acquisition related to that project as well, but it is specific to this project. The development property next to the Truck Stop is included. It all has to do with this water project from Friendship to State Route 19. Mr. Miner noted that the bond refers to it as the infrastructure project, but the infrastructure project is broader than simply the waterline. It’s also the cost that the IDA has incurred in acquiring the property next to the Truck Stop. It’s more than just putting the line in the ground, but it is limited to issues related to the infrastructure.

Legislator Cady questioned if the bond includes reimbursement of the upfront costs. Mr. Spitzer stated that it does include the upfront engineering, legal, and acquisition costs. Mr. Miner noted that the hope is that it won’t cost the $3.5 million, but that once they go to bid, it will be less, even with soft costs. Plus, they’re also looking for outside sources of funding; they’ve already procured some, so the amount actually borrowed may be less.

Legislator Pullen remarked that plans in the past have seemed speculative, but this is much more sound and prudent. We’re not the developers. The water infrastructure won’t be started until the IDA certifies there’s enough development to pay back putting it in. Private enterprise will be doing the rest of it. There’s risk, but it’s time to decide to make something happen.

A motion was made by Legislator Healy, seconded by Legislator Sinclair and carried unanimously following a roll call vote, to sponsor a resolution 1) approving the purchase of certain obligations issued by the Allegany County Industrial Development Agency to finance a certain infrastructure project for the Allegany County Industrial Development Agency, 2) authorizing the lease of a piece of County property to the Allegany County Industrial Development Agency for use in the Crossroads Project, and 3) authorizing the grant of an easement in County Route 20 from the County to the Allegany County Industrial Development Agency for water, sewer and other utility lines. The resolution will be sponsored by all Legislators listed individually. The County Attorney has prepared the resolution for consideration at the Board meeting on January 23.

ADJOURNMENT: A motion was made by Legislator Cady, seconded by Legislator Graves and carried to adjourn the meeting at 3:20 p.m.

Respectfully submitted,

Adele Finnemore, Deputy Clerk of the Board