Small step forward for big project in Kennett Square06/06/2017 02:34PM ● By Steven Hoffman
Kennett Square Borough Council discussed a formal memorandum of understanding with the Kennett Library on Monday night, ultimately voting to approve it by a margin of 7 to 0, despite the fact that the proposed project was not warmly received by some residents in attendance.
The memorandum of understanding pertains to a proposal to construct a new municipal building, in collaboration with the Kennett Library, that would serve as the home to a new library, a new borough administration building, and a new police station on the borough-owned Weinstein lot at the intersection of State Street and Willow Street. There would also be flexible space in the building that would be utilized for meeting spaces for community groups, as well as a metered parking structure that would accommodate more than 40 vehicles.
While the approval of the memorandum of understanding represents a new milestone in the effort to get a new library in Kennett Square—this is the first time that borough council has formally voted on this project—the facility itself is still a long way from being authorized by either borough council or the library's board of directors.
Borough council's approval of the memorandum of understanding establishes how the two entities will work with each other on the project, and allows the project to advance to the next phase, which includes architectural design work that would provide more realistic costs for the facility.
Both the borough and and the library will need to work out the financial details for their share of the project, which currently has a projected cost of more than $16 million.
In the coming weeks, the library board will also consider approving the memorandum of understanding. Some language in this agreement still needs to be refined, including the portion of the memorandum of understanding that would provide both the borough and the library with the opportunity to abandon the project, and what costs each party would be responsible for as a result.
According to borough officials, the architectural design work could be completed as early as October, which would allow the borough council and library officials to make a decision about whether the project is viable at some point in 2018—perhaps early in the year. But that decision is still in the future as there are many details that need to be resolved.
Borough manager Joseph Scalise provided a brief description of the memorandum of understanding, explaining that it includes details about a wide range of issues—everything from the site information about the Weinstein lot to the creation of a condominium agreement so that the borough and library each own and maintain their portion of the building. The memorandum also addresses issues like the
percent allocations for each entity based on square footages and the underground parking facility. The memorandum outlines how legal fees will be shared, and how the funding is divided as the borough and library seek and receive grants for the project.
At a May 30 special meeting (see sidebar story on Page 2A) about the proposed municipal building, borough officials outlined some of the details about the proposed facility, including the borough's level of participation in the project. At the conclusion of that meeting, the borough's Finance Committee was asked to determine if the borough's participation could be financed without raising taxes.
Council member Wayne Braffman, who serves on the borough's Finance Committee, led the committee's presentation on Monday night. The presentation focused on an “all-in” option where the borough opts to engage fully in the project as it is described in the visioning study, and an option where the borough completely opts out of the project.
The impact of the “opt-out” option on the borough is obviously more straight forward: The borough could expect to spend about $300,000 to pay for maintenance costs on the existing administration building and police station in the next three to five years.
Braffman noted that opting out of the project defers a new borough hall and police station, and both are needed as the current facilities are inadequate. The costs of eventually building those facilities are not known.
If the borough opts out of the project, the library could still decide to construct the facility on the Weinstein lot—or not. The project may not be viable for the library to undertake on its own, which raises the possibility that the library would then consider building on the Ways Lane property that it already owns in neighboring Kennett Township.
Next, Braffman detailed how the borough would finance the “all-in” option. The borough's portion of the construction costs is projected to be $6.2 million.
Kennett Square will be able to apply $314,000 from the value of the borough-owned Weinstein lot as a credit toward its share of the construction costs of the project—that obligation then shifts to the library.
If the borough's portion of the project costs $6.2 million, subtracting the $314,000 from that total means that the borough will need to secure about $5.8 million in funding for its share. Any grants that are received for the project—and borough officials are optimistic that state and county funding could be available—would decrease the amount that the borough would need to finance. If the borough sought to secure the full $5.8 million through a bond issue, with a 3.54 percent interest rate for 30 years, the annual debt-service payment for Kennett Square would be $320,000.
Additionally, Kennett Square owns two properties—the current borough hall on Marshall Street and the police station—that can be sold, with proceeds used to offset the borough's share of the costs of the propoposed facility. Borough officials expect that the sale of the current borough hall and police station will bring in about $1.4 million total. Obviously, those buildings can't be sold until the new facility is completed. According to Braffman, the plan is for the borough to take out a three-year bridge loan in 2019 for the $1.4 million that will be brought in from the sale of the buildings. It will cost about $42,000 each year in interest payments during those three years. Once the buildings are sold, the bridge loan will be repaid.
So how does the borough pay for the project without having to raise taxes? Braffman explained that in 2019, the borough will pay off debt that produces a cost-savings of $300,000 each year. The debt-service payment on the new facility is estimated to be about $320,000. To make up the $20,000 difference, the borough will apply $22,000 from the parking revenues generated from the parking spaces at the new facility.
Braffman emphasized that the borough has taken “reasonable, fair, and conservative” estimates of construction costs, soft costs, interest rates related to the project.
“All these numbers are soft until we go on to the next phase,” Braffman explained.
He concluded his presentation by saying that the Finance Committee believes that the financing can be arranged without raising taxes on borough residents.
Once the Finance Committee report was complete, there was a lengthy question-and-answer session that evolved into an extended public comment session. While several people spoke in favor of the proposed plan, most of the two dozen or so residents who spoke or asked questions seemed to be very skeptical of the proposed plans, specifically the borough's portion of the facility.
Most of the comments focused on the costs of the project, and the potential impact it will have on borough residents in the future.
Borough resident John Thomas cautioned that the borough's expenses, for example the costs of operating the police department, will continue to climb well into the future, and the borough won't have adequate revenues to pay for those costs. He said that there are streets in town that need repairs, which should be a focus.
Some residents questioned the appropriateness of the Weinstein lot for such a large facility when other sites in town might be more appropriate. Others raised issues with why borough officials weren't considering other potential sites. A few residents criticized the borough for not seeking more input from people who live in Kennett Square, and several people suggested that the borough should put the issue on the ballot and let the borough residents decide the project's fate via a referendum.
As the meeting stretched into its fourth hour, council members debated the memorandum of understanding, with several members emphasizing that it is the next, necessary step to fully analyze whether the project is viable. Moving on to the architectural design phase means that real money will be spent, but it does not obligate either the borough or the library to move forward with the project. The library will need to undertake a significant capital campaign.
“We're not making a commitment of spending $6.2 million tonight,” said council member Jamie Mallon. “We need to get some answers to these questions. This is just the next step.”
He added that there will be opportunities for further discussion and input from borough residents before a decision is ultimately made.
“We don't embark on this looking for an exit ramp,” Mallon said, “but there is an exit ramp.”
Council member Geoff Bosley noted that the borough is in a much stronger financial position than it was even a few years ago. He talked about the need for the project, pointing out that there have been discussions about a new library for twenty years, and this this is an opportunity to keep the library in the borough. Additionally, the municipal project also addresses the need for both an administration building and a police station, and the facility will serve the borough for a very long time.
Braffman said that initially he was personally skeptical that the borough would be able to develop a plan to fund the project without having to raise taxes.
Council member Ethan Cramer said that he, too, was initially skeptical about the borough being able to fund the project without burdening taxpayers. He said that he is convinced that the borough needs a police station and a borough administration building, as well as the library, and the proposed project can be undertaken in a way that is financially responsible.
“I think it's good planning on our part to say that we need to replace those two buildings,” Cramer said.
A few minutes later, council unanimously approved the memorandum of understanding.