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WILKES-BARRE — It’s not easy to find, but in the flood of documents released by Wilkes-Barre Area School District on Tuesday in response to requests from the state Auditor General’s office there is a brief letter mentioning “leasehold income” from the property bought for a new consolidated high school.

The bottom line: When the district bought 77 acres in Plains Township, they gained income from part of that property that had already been leased to Stell Enterprises. Stell is the chief contractor hired to handle site preparation.

The letter in question is dated Feb. 27, 2018. It is addressed to district solicitor Ray Wendolowski and signed by Attorney David Swisher, chief operating officer of Pagnotti Enterprises Inc. The letter gives preliminary company approval to the district’s plan to buy the property for the new high school.

Swisher talks of a “recent meeting” at which the two sides discussed whether “Pagnotti Enterprises, Inc., and its affiliate Loree Associates, would accept the sum of $4.25 million” from Wilkes-Barre Area School District for the site framed on two sides by Maffett Street and the North Cross Valley Expressway. Swisher refers to the site as the “Prospect” property.”

“As you know,” Swisher wrote, “When you first approached me about the Prospect in 2015, I made clear that we considered the property a prime landholding because of its substantial mineable coal reserve, its leasehold income and its development value as one of the last remaining large unimproved tracts located in the heart of the Wyoming Valley.”

The letter goes on to say Swisher would recommend to the company’s board of directors that it accept the $4.25 million offer if it were officially made. The Feb. 27 date means it was sent seven weeks after the Jan. 8, 2018 board meeting at which the board settled on building at the Pagnotti site.

While the cost of acquiring mineral rights has been hotly contested by critics from the Save Our Schools organization, the “leasehold” income gained by the district has never come up at board meetings.

Asked about it, Wendolowski said the Pagnotti company had two sources of income from the site before the district bought it: payments for a billboard on the location by Lamar Advantage GP Co., and rent payments from Stell Enterprises for a piece of the property next to their lot, which abuts the northeast corner of the Pagnotti property. Wendolowski said that when the district bought the land, income from those two sources came with it.

The Lamar billboard is part of a larger deal covering multiple billboards on other Pagnotti properties as well, Wendolowski said. The district gets about $19,000 a year from Pagnotti because a separate arrangement hasn’t been worked out with Lamar.

Wendolowski provided a copy of the lease between Stell and Loree Associates. Loree is one of several Pagnotti-related companies. According to state Bureau of Corporation records, it has the same address on Public Square in Wilkes-Barre as Pagnotti Enterprises, Inc., and lists Louis Pagnotti as the lone officer.

According to the Agreement of Sale, also provided by Wendolowski and dated May 9, 2018, 72 acres of the property bought by the district were technically owned by Loree, while the other five were owned by Pagnotti Enterprises.

The lease with Stell began Nov. 1, 2016 and is automatically renewed annually unless terminated with 60 days written notice by either party. Stell is leasing about 2 acres of land at an annual cost of $2,400. The land is to be used “solely as a storage area for materials and equipment used by the lessee in its excavation and paving business.” The lease explicitly bars disposal of material on the property, or use by a third party.

On March 27 of this year the school board awarded 11 contracts to lowest responsible bidders for the construction of the new high school on the Pagnotti site. Total cost was $88.2 million.

Of that, the contract for sitework went to Stell Enterprises for a total just short of $12 million, which means Stell successfully bid for work on property that is almost literally in its back yard, while paying $2,400 annually in rent to the district that awarded the contract.

Wendolowski said there is no conflict in that because the lease existed before the district bought the land, and Stell won the contract by making the lowest offer in a competitive bidding process. He noted that, if being adjacent to the site helped Stell keep their bid lower than others by, that worked to the district’s advantage by keeping total costs down.

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By Mark Guydish

[email protected]

Reach Mark Guydish at 570-991-6112 or on Twitter @TLMarkGuydish