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WILKES-BARRE — At least three firms are behind the proposal to provide quick cash for Wilkes-Barre Area School Board’s construction projects, Solicitor Ray Wendolowski confirmed Tuesday.

And one of the men involved — David Repka of Bison Financial in St. Petersburg, Florida — said if state reimbursement for the project isn’t secured, the proposal will die.

“State reimbursement is the number one issue being researched right now,” Repka said, stressing the whole plan — investors putting money up front for renovation or construction — is still in the “very early stages” with many details to be worked out.

But, Repka added, “if there are reimbursements that get cut using the structure we propose, we’re going to be out of the picture.”

Bison Financial is one of at least three firms involved in the proposal. Wendolowski said that, in a teleconference arranged by local businessman Bob Sypniewski last week, he spoke with Repka, Jim Shaw of Baltimore-based The Shaw Group and Haverford Attorney Robby Poet.

On Monday another firm entered the picture, Wendolowski said, when Sypniewski arranged for representatives from Municipal Acquisitions, based in Washington, D.C., to attend a school board “informational session” that had already been schedule with the board’s “design team,” four local firms working on the district’s three aging high schools.

Last Friday Wendolowski said his attempts to arrange such a meeting failed, but this week he said Sypniewski had called him late Friday to tell him Municipal Acquisitions would show up.

Facets of plan

In a phone interview Tuesday, Repka clarified some facets of the plan.

For starters, he said the investors are not proposing a specific project. “It is a (financial) structure to give the school district what they want,” he said. “I think that’s really the key. Our investors are agnostic as to the solution, as long as it is a solution the school district and the people want.”

After months of meetings and studies the board voted in June to consolidate Meyers and Coughlin high schools, with most members expressing reluctance — they cited data from district financial analyzers contending the district can’t afford to maintain three high schools even if they are all fully renovated.

Supporters wanting to keep the three-high school system began organizing, and from that effort Sypniewski emerged, telling the board he has investors who can pay the money up front — up to $300 million, he said at one point. Some have embraced that as a chance to save Meyers, or at least to keep three neighborhood high schools open.

Repka said that’s a potential outcome, but not a goal. “Our focus is executing on a plan that the school board has agreed to,” he said. “We’re not advocating any one specific solution.”

Sypniewski has also said the district, not the investors, would own the building or buildings, but Repka said that would occur after 30 years, not immediately. He did say the district would own the land any building sits on.

For the investors, the goal would be to lease the land from the district, and lease the building to the district, for 30 years. After that, ownership of the building would revert to the district, Repka said.

30-year lease

The deal could be structured as a 30-year “capital lease,” akin to issuing a bond as far as the district’s credit is concerned, or as an “operating lease,” which would have a preliminary lease period of 10 or 20 years with an option to renew to the full 30 years.

An operating lease can be “off book,” having less potential impact on credit, but increases risk to the investors, Repka said, because if the district didn’t renew it “our investors end up owning the facility, which is not the goal.”

Advantages for the district begin with a faster closing time when compared to floating a bond. “We could close in 45 to 60 days,” Repka said. “That’s a huge differential between what we’re able to bring as opposed to a bond.”

And that advantage can ripple through the whole project, cutting construction time and costs, Repka added. “We’re able to work faster because things are done on an all-cash basis.”

Wendolowski said that at the Monday meeting Municipal Acquisitions “made a presentation, and my main concern is in having a legal framework that is sustainable under state law. … We asked their team to look into this and get back to us. There was no discussion of dollars and cents.”

Investors’ control

Sypniewski has said the investors would take control of the project, hiring architects and contractors. Repka said some preliminary research into local companies has begun.

On its website, Municipal Acquisitions bills itself as a “real estate company exclusively investing in opportunities in the public sector real estate market … investing more than $215 million in past two years.”

The online portfolio lists projects for two institutions of higher education: Broward College in Florida and Rowan University in New Jersey.

The Florida Project actually involved Broward and Florida International University: a shared campus facility with 93,000 square feet of classroom laboratories and other space at a cost of $34.1 million.

But the website also notes Municipal Acquisitions won a crack at the project through a competitive process created by a 2013 Florida “Public Private Partnership statute.”

Research of laws

Pennsylvania has no law explicitly outlining how such a partnership would work here. Wendolowski and Pennsylvania Association of School Business Officials Executive Director Jay Himes have both said the law doesn’t explicitly bar such partnerships for school districts, but that without legal clearance the plan could face significant challenges.

In particularly both Wendolowski and Himes cited Pennsylvania’ Prevailing Wage law, requiring contractors on such projects to certify they are paying state-set wages. Repka said that’s one of the issues being researched by investors.

Himes also voiced concerns the transaction could require state approval as district debt regardless of how it is financed, and that if the district helps design specification for any building, it could be required to bid the project out even if the investors put up the money, thwarting the plan to have the investors control all the contracting.

Wendolowski said the state “separations act” — requiring districts to bid work for different parts of a contract such and plumbing and electrical separately — also could be an issue.

Repka said researching those problems and finding solutions hinges partly on the district deciding on what, exactly, it wants to build.

State reimbursement

But for the district, the linchpin has become state reimbursement. Typically, districts issue a bond, file extensive paperwork under the state’s “PlanCon” system, bid out contracts and pay for the work, eventually receiving reimbursement. In this case district officials have estimate a potential reimbursement of up to $20 million or so on a project estimated at $100 million.

If the investors put up the money and take control of the project, that money likely is lost, Himes said.

But the state does provide reimbursement if a district leases a building, as well. Himes noted that such reimbursement is very rare, with no one in the Department of Education recalling the last time it happened — an observation also made by Repka.

Wendolowski said he made it clear during the teleconference last week that he would be hard pressed to recommend the School Board accept any deal that eliminates the district’s chances at state reimbursement.

On Tuesday, Repka said reimbursement eligibility is a linchpin for the investors as well.

Repka
https://www.timesleader.com/wp-content/uploads/2015/08/web1_repka-david.jpg.optimal.jpgRepka

Wendolowski
https://www.timesleader.com/wp-content/uploads/2015/08/web1_Wendolowski-Ray1.jpg.optimal.jpgWendolowski

Sypniewski
https://www.timesleader.com/wp-content/uploads/2015/08/web1_Sypniewski-Bob1.jpg.optimal.jpgSypniewski

By Mark Guydish

[email protected]

Closed meeting

Why was Monday’s “informational meeting” between Wilkes-Barre Area School Board members and potential investors not public?

School Board Solicitor Ray Wendolowski said case law has made it clear such meetings are legal as long as no deliberations are conducted. He specifically cited cited the December, 2013, Pennsylvania State Supreme Court case known as Smith vs. Richmond Township.

The court ruled that, while the state Sunshine Act clearly requires government meetings to be public when decisions are deliberated or votes taken, the meetings in question were for informational purposes only, and thus could be private.

The court ruled that “merely learning about the salient issues so as to reach an informed resolution at some later time does not in itself constitute deliberation.”

In Smith vs. Richmond Township, the supervisors ultimately voted on the issue in question — a controversial quarry expansion — at a public meeting following public comment.

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