Seven years ago, Luzerne County commissioners used $700,500 in borrowed funds that could have been spent on other capital projects to buy a former Hazleton bank building for a southern annex that never materialized.
Now County Council must pick one of two options:
• Sell the property to recoup at least some of this money for the county’s capital projects fund or a sorely needed cash reserve.
• Deed the property to Hazleton for giving up its lien on another downtown, county-owned building — the Broad Street Exchange. This choice wouldn’t help the capital fund or reserve because any proceeds from selling the exchange building must go back into the county community development loan fund.
County Chief Solicitor C. David Pedri said the issue came up because Hazleton officials have asked the county to initiate former paperwork deeding the former bank to the city. County officials also recently announced plans to sell both Hazleton buildings as part of an initiative to unload unused, county-owned properties.
Pedri said city officials mistakenly believed a transfer of the bank property to the city already had been formally approved by county commissioners.
Prior commissioners voted in November 2011 to authorize officials to execute a conditional sales agreement to convey the property to the city, but Pedri said negotiations between the county and city ceased with the switch to home rule government a month later.
No written agreement
County Council is free to decide what happens to the bank property, Pedri said.
“No written agreement for the sale of property was ever entered into and no such sale or ‘swap’ was ever recorded,” Pedri wrote in a memo to council.
Hazleton officials originally wanted to use the former bank building for a police station but are now discussing a possible art center involving the Hazleton Art League, which is located several blocks away in a smaller property, also on Broad Street.
Pedri also said he has concerns about applying a community development lien to the city’s acquisition of the bank property because no community development funds were involved in the county’s purchase of the former bank.
And while the city lien is being valued at $290,000, clarification is warranted, Pedri said.
The county took ownership of the Broad Street Exchange so it wouldn’t lose a $1.8 million community development loan on the property, which was headed for a back-tax auction.
If the building is sold, the county and city will each receive a proportional share of the proceeds toward their liens, according to a 2009 agreement. For example, the county would receive $504,300 and the city would receive $95,700 if the building is sold for $600,000, Pedri said.
The exchange property, which once housed a department store, is almost fully occupied with tenants, including Luzerne County Community College.
Former commissioners Todd Vonderheid and Greg Skrepenak decided to purchase the former bank building after evacuating a rented southern annex in September 2005 on a suspicion of toxic mold that was later deemed unfounded.
Commissioners announced their plans to search for a new Hazleton annex around the time of the evacuation. That December, Val-Mar Holdings bought the former Security Savings bank building a few blocks away on Broad Street for $330,000.
Val-Mar was owned in part by Frank DeGaetano, a former county planning commission member who had donated $850 to Skrepenak’s election campaign and also did business with the county through his Valley Testing and Balancing Inc.
In July 2006, Skrepenak and Vonderheid publicly announced their selection of the Val-Mar building for the new annex, voting to lease the place for $2.58 million over 10 years, or $21,487 per month, with utilities and some initial renovation included.
Skrepenak had denied any inside track or political involvement in the decision, but commissioners switched to plans to buy the building after public outcry over the lease amount. They voted in May 2007 to purchase the property for $605,000 through eminent domain, but a court panel later ordered the county to pay $700,000.
The property was never converted into an annex because the next administration didn’t want to spend an estimated $1 million on renovation. It was listed for sale for an appraised $625,000, but there were no takers.
Pedri said the county is in the process of obtaining fresh appraisals on both county-owned properties in Hazleton as part of the plans to advertise the properties for sale.