Last updated: February 19. 2013 8:25PM - 473 Views

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Luzerne County‚??s community development office has until Dec. 15 to respond to a federal audit that recommends the county put $6 million back into its business loan fund in connection with the Hotel Sterling project, according to a letter sent to the county.

The U.S. Department of Housing and Urban Development (HUD) inspector‚??s office said the fund replenishment was warranted because the county did not ‚??properly evaluate, underwrite, and monitor its loan to CityVest‚?Ě for the Sterling project in downtown Wilkes-Barre, according to the office‚??s highly critical audit.

HUD sought the county response as part of its due process determining what action it will take in response to the inspector‚??s recommendation.

After the county response is submitted, HUD will meet with county representatives and ‚??try to resolve the issues,‚?Ě the agency‚??s regional public affairs officer Lisa Wolfe has said.

Luzerne County Community Development Director Andrew Reilly said he received the letter on Friday afternoon, and county Manager Robert Lawton forwarded a copy to council on Monday.

The letter says the county has 45 days from the Oct. 31 issuance of the report to provide a response, or Dec. 15.

Reilly said he has prepared a draft response and will submit a final version to Lawton by the end of the week or early next week.

Reilly told council he‚??s confident the federal government won‚??t require the county to repay $6 million loaned to CityVest for the Sterling project. He said some of the information and regulations cited in the audit are ‚??not applicable, nonexistent, distorted or mistaken.‚?Ě

He also told council the loan fund has $5 million in non-federal funds that could be counted as reimbursement if necessary.

Some council members have criticized the administration for failing to alert them to the audit before the HUD inspector posted a copy on its website.

Reilly said he didn‚??t want to act until he received official notice of the final audit directly from HUD. Reilly said he received a courtesy copy of the audit from the inspector in early November, but it was addressed to HUD.

‚??Technically, HUD could have asked more questions or made a decision on its own not to proceed. Until this official notification, which I received Friday, we could not move forward,‚?Ě Reilly said.

The nonprofit CityVest spent its $6 million county loan on consultants, enlarging the parcel and tearing down another structure on the 4-acre lot.

The city has condemned the hotel at the corner of River and Market streets, though demolition is at a standstill because the county and CityVest disagree on liability issues. The county and city planned to share the cost of demolition -- $232,729 from the county and $260,000 from the city.

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