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DeJoy Addresses Public Concerns On Proposed Plant Purchase

By Dennis Phillips

dphillips@post-journal.com

During the Jamestown City Council’s workshop meeting this week, several members of the public voiced their displeasure in the proposed acquisition of the city’s wastewater treatment plant by the Jamestown Local Development Corporation.

Vince DeJoy, city development director and JLDC executive director, told The Post-Journal he wanted to clarify some of the statements that were made by the public during the council meeting.

The first point DeJoy wanted to make clear was the statement that the JLDC has lost money in recent years, which he says is not an accurate statement. He said because the JLDC is a nonprofit agency, it is not the organization’s mission or goal to generate revenues.

“The purpose of the corporation is not to make profit or financial gain. Profits cannot be distributed to board members, administrators or officers. We are not setup to make a financial gain or profit. The notion that the JLDC has lost money eight out of nine years is misleading. We function to manage funds to lend out to development projects,” he said. “On the revenue side of the coin, interest derived from the loans goes toward the administrative stipend to pay the staff of (the Jamestown Urban Development Agency). We gain no money on funds on deposit. They are down to 1 percent or less on interest-bearing accounts. That part of the revenue is diminished.”

DeJoy said another question proposed by those not in favor of the proposal is what will happen to the JLDC’s lending funds held in trust. DeJoy said all the funds the JLDC manages belong to the city.

“The JLDC manages those lending funds. They wouldn’t play any role in the monetization or the role the JLDC uses as a mechanism to finance the monetization,” he said. “Basically, it is a different silo of funds. Those funds wouldn’t be in play for selling of bonds to purchase the wastewater treatment plant by the JLDC from the city.”

When the proposal was first announced by Jamestown Mayor Sam Teresi Dec. 4, Kenneth Bond, a senior partner of Squire, Patton and Boggs, said the process of selling the waste water plant to the JLDC would be what is referred to as “the monetization of assets.” He said it is a “modern, legal and efficient way” to take the equity out of assets.

“It is not unlike if you were to go get a mortgage on your house,” Bond said. “You have an asset that has value, and you take out some debt, and the house acts as collateral or security for the mortgage. If you sell the house and you need to use the mortgage money for something else, you don’t have a place to live. So, monetization simply transfers the ownership of the asset to an entity related to the city, but in the transfer, the entity pays for the asset in its appraised value.”

Teresi proposed that the city sell the wastewater treatment plant, located in the town of Poland, to the JLDC in an effort to create a capital infrastructure and equipment program fund. He said the proposed list for the capital infrastructure and equipment fund programs, which isn’t finalized, includes replacing sanitary sewer lines and slip lining; upgrading the wastewater treatment plant; replacing or reconstructing water mains; continued energy or structural improvement programs for city facilities; enhanced storm water management improvement programs; Public Works and Parks departments equipment replacement fund; a debt service and sewer rate stabilization fund; and a future property tax reserve with additional property tax and rate relief. The wastewater treatment plant property is assessed for between $15 million to $20 million.

Teresi said the proposal would have the JLDC taking out bonds to purchase the plant outright from the city of Jamestown, and the city would then then pay to lease the plant for use until the bonding was fully paid off. At that time, the property would revert back to city ownership. The payments for the lease-to-own agreement would come from wastewater rates collected from throughout the wastewater service area, which includes areas outside of the city.

Teresi said by using the JLDC to generate the funds it would include 100 percent of the properties in the city. Through traditional borrowing through bonds, only 60 percent of the city would be paying for the initiative because 40 percent of the city is tax exempt, Teresi said.

The funds would also be generated through revenues from those outside of the city who are connected to the wastewater treatment plant facility. This would include customers in Poland, the village of Falconer, certain parts of the town of Ellicott and a few customers in Kiantone, Teresi said.

The reason Teresi is proposing to use the JLDC to purchase the plant is because the city is in no position financially to borrow the money through a bond like they would typically for large equipment purchases and infrastructure projects. Because the city is at 100 percent of the constitutional tax limit, city officials have no way to raise the necessary funds through property taxes to pay back the loans.

Under the proposal, the Board of Public Utilities and the JLDC would enter into a use and administration agreement in which the Jamestown Board of Public Utilities would operate the plant on behalf of the JLDC. Likewise, the existing city and BPU labor agreements would remain status quo.

Jamestown City Council will have a draft resolution on the proposal they could possibly vote on Monday and the JLDC board has scheduled a meeting at 4:30 p.m. Tuesday.

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