BUCKHANNON – Buckhannon City Council on Thursday took the first step toward securing interim financing to fund the Stockert Youth & Community Center’s long-awaited multipurpose building.
At council’s Nov. 2 meeting, members approved on first reading an ordinance that would authorize city officials to seek temporary financing to cover costs related to the design, construction, acquisition, equipping and improvements to the SYCC’s expansion project.
The city also approved an engagement letter enlisting Steptoe & Johnson PLLC to serve as the city’s outside bond and note counsel for the interim financing and permanent financing of the SYCC project, which will occur through the U.S. Department of Agriculture.
In December 2022, the city approved an engagement letter with Steptoe & Johnson authorizing the firm to act as outside bond counsel for the permanent project financing through the USDA.
However, at the time, the city hadn’t contemplated that interim financing would be needed.
City finance and administrative director Amberle Jenkins explained interim financing is necessary because the city had not yet received its letter of conditions for the loan from the USDA, which offers long-term financing over a repayment period of 20 to 30 years at a subsidized rate – possibly 3.25 percent.
“The USDA is in what they call a ‘continuing resolution’ through November 17, so they won’t know how much funding is available for them to distribute until then,” Jenkins explained.
Interim financing would involve the city soliciting interim or temporary financing rates from local or regional banks or lending institutions, she said.
Attorney Tom Aman of Steptoe & Johnson, who had already been acting as the outside bond counsel for the USDA financing, presented council with an updated engagement letter.
“At the time of the prior letter, we weren’t sure whether interim financing would be needed … [but now] there will be two separate engagements – the existing engagement for the USDA permanent financing if that ultimately occurs, and then this engagement letter for the interim financing, which you’re pursuing now,” he said.
Aman said both engagement letters contain the same terms.
Mayor Robbie Skinner, who joined the meeting remotely due to attending a conference, said there must be agreements between Steptoe & Johnson and the Buckhannon Building Commission and Steptoe & Johnson and Buckhannon City Council.
“Just for the knowledge of council and the minutes, the Building Commission did positively vote to support their piece this evening of entering into bond counsel with Steptoe & Johnson,” Skinner said.
The city’s Building Commission plays a key role in financing because Buckhannon, as a governmental entity, doesn’t have the authority to borrow money for long-term construction projects like the Stockert addition. A city’s Building Commission, however, is permitted to borrow that money.
“Basically, what we have is two transactions now; we’ve got it broken out into the note, which is being done now, and then the permanent financing, which will ultimately be done with the USDA,” Aman said. “Unfortunately, it’s a duplication of work. I, along with the city council and the Building Commission, have to go through the same process two different times – one for the interim and one for the permanent financing, and so it’s basically two separate fees.”
Council member David McCauley made a motion to engage Steptoe & Johnson and authorize the execution of the appropriate documents, which was seconded by council member Pam Bucklew. The motion passed unanimously.
City attorney Tom O’Neill then introduced Ordinance 465, which would authorize “the temporary financing of the design, acquisition, construction and equipping of improvements and additions” to SYCC.
“Just like when we went through this with the new street garage out at Mud Lick Road, we’ll be conveying the property for the Stockert expansion to the Building Commission,” O’Neill said. “The Building Commission will then be the entity which secures the financing.”
The city will subsequently lease the property from the Building Commission and operate it.
“The city will also be the agent for the Building Commission in terms of the operational aspects of construction, bidding, bid opening, etc., and will have authority to sign certain documents on behalf of the Building Commission,” O’Neill said.
The Building Commission will retain “to the degree that it chooses to, some measure of involvement or oversight,” he added.
Aman, the Steptoe attorney, said the city would pay lease rentals directly to the bond owner, who would, in turn, repay the debt service associated with the bonds.
“The Building Commission’s actions and the city’s action here is authorizing the city to take the lead as far as being the contracting party handling the bidding of the project, the requisitioning of the funds, but the Building Commission will retain a role in oversight if they’d like to be present when things happen,” Aman said.
A public hearing, second reading of the ordinance and possible enactment is set for the Dec. 7 city council meeting, but then both council and the Building Commission would still be required to pass a resolution.
“Once the bids are solicited and obtained for construction financing – the interim financing – there would be a supplemental resolution that both the city and the Building Commission would consider that would approve [what lending agency] offers the most favorable terms for the financing.”
Aman said the ordinance would permit the Building Commission to issue the bonds in an amount “not to exceed $5 million.”
“You’ll recall the somewhat emotional discussions that were previously had regarding the amount, and I think you all decided on the $4 million number, working with Stockert and the Building Commission at that joint meeting,” Aman added. “This does have the $5 million in it, but it’s by way of authorization only, so in the event that these bids come back and council and the Building Commission were to change their mind in some fashion because even if we had to go $1 over $4 million, if the amount was limited to that in these ordinances, we’d have to start the process over again.”
McCauley made a motion to approve Ordinance 465 on first reading, which was seconded by council member Jack Reger prior to passing unanimously.