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Chester County Press

Kennett Square officials discuss revolving loan fund

03/08/2016 03:42PM ● By Steven Hoffman

Kennett Square Borough Council had a lengthy discussion about the administration of its revolving loan fund at the March 7 council meeting.

Nine years ago, the borough worked with restaurateur Jack McFadden to secure an economic development grant from the state. The grant of approximately $500,000 was to be used to refurbish the former Kennett Cafe site at 120 East State Street, where McFadden planned to open an upscale restaurant. McFadden did extensive renovation work on the building, but the restaurant never actually opened at the site. The building is currently under an agreement of sale, and the potential new owner is exploring the possibility of opening a restaurant in the building. The rules of the state grant required the developer to repay the money to the borough, and Kennett Square officials would then have those funds to spend on other economic development projects.

“As we get the money back, we have to find something to do with it,” explained borough manager Joseph Scalise.

Borough officials, including representatives from Historic Kennett Square, discussed forming a loan review committee to evaluate how the funds will be distributed for other economic development projects. The committee would review the applications that are submitted for funding and make its recommendations to borough council, which would still make the final decision about how the funds could be used.

Mary Hutchins, the executive director of Historic Kennett Square, has been researching how other Pennsylvania municipalities have handled similar revolving loan funds. As of right now, the committee could be made up of eight people that could include representatives from the borough's administrative team, borough council, Historic Kennett Square, and the community.

Council members had a number of concerns, starting with whether the loan review committee would be formed under Historic Kennett Square or whether it would be a new borough committee that would answer to borough council.

Council member Wayne Braffman said that he strongly supports housing the committee in Historic Kennett Square because that adds a layer of protection against potential conflicts for borough council members. He said that Kennett Square Borough officials shouldn't be put in a position where conflicts of interest could arise.

Council member Ethan Cramer agreed that conflicts of interest should be a primary concern, and should be avoided from the start.

Council member Latoya Myers expressed her concerns that the people appointed to the committee would not have the necessary expertise to make the decisions that it would be tasked with.

Council member Jamie Mallon agreed, noting that the council doesn't have experience in setting interest rates, which is just one of the things that the committee would need to do.

“There are people who do this professionally,” Myers pointed out.

Hutchins said that the board of directors of Historic Kennett Square had questions about how the committee would function. They would like to see a memorandum of understanding to be drawn up to specify the exact role of the committee.

“Obviously, there is a lot of work to be done before this becomes a reality,” council president Dan Maffei said.

Braffman made a presentation about the borough's handling of bulk water sales to water haulers. He explained that a borough resident had raised concerns about the practice, and officials wanted to do a cost-benefit analysis to make sure that it was worth the borough's efforts. The Finance Committee worked on the issue.

In 2015, Braffman said, the bulk water sales added about $24,000 to the borough's coffers.

How does that compare to how much it costs the borough to supply that water? Braffman said that it costs the borough about $1.50 per 1,000 gallons if the water comes from a borough well, and about $3.50 per 1,000 gallons if the water is purchased from the Chester Water Authority.

Braffman said that there were also concerns about truck traffic that comes into town to haul the water. He noted that the borough has a policy on the books discouraging truck traffic in town, so the impact of the truck traffic has to be factored in, too. Braffman said that after completing the cost-benefit analysis, even taking into account worst-case scenarios, the revenues far surpassed the costs, even when factoring in the costs of street repairs that could be attributed to the increased truck traffic.

“We have a net gain of $12,000,” he said.

Council member Geoff Bosley said that he was of the opinion that the bulk water sales is worth it because it is a way for the borough to generate revenues that don't come from taxes on residents.

Regarding the truck traffic, Bosley noted that some of the trucks may have been passing through the borough anyway.

There were also concerns raised that the bulk water haulers were paying less than borough residents for their water. But that is true only for the first 5,000 gallons of water, Braffman said.

“Ultimately the haulers are paying much more than residents,” he explained.

Braffman raised the possibility of implementing an additional $25 monthly fee on the bulk water haulers. Borough council would need to amend its fee schedule, and council could consider this at a future meeting.

In her report about Historic Kennett Square, Hutchins told borough council that work on the economic development study for the Kennett Square area is continuing. The next public meeting to discuss the economic development study is slated for Thursday, April 7. This workshop meeting will begin at 7 p.m. at the American Legion Building.

Borough council approved the special event applications for Healthy Kids Day on April 30 and the Cinco de Mayo celebration on May 1.

Kennett Square Borough Council will meet again on Monday, March 21 at 7 p.m.

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