Latrobe studies grant options
Latrobe City Council heard options for investing a $1 million state grant, including using the money to leverage further grants for capital improvements.
Council has secured $1 million from a proposed $1.75 million requested by Sen. Kim Ward, R-Hempfield, as a part of the state Redevelopment Assistance Capital Program.
The city still has to formally apply for the funds, but has options on how to spend the money, City Manager Alex Graziani said at the June 24 council agenda preparation meeting.
The city has already paid off most of the costs associated with the parking garage with a $3.8 million bond issue.
The city could let the money sit in escrow and earn interest until the bond comes due in 2034, or choose to pay down the bonds quicker, Graziani said.
A third option would be to relieve the parking authority of $1 million in debt so its payment would decrease over time, about $60,000 per year over the next few years.
That way, council could use the money to leverage other matching grant funding.
“One way or the other, the $1 million is going to reduce the parking system's obligation to the debt,” Graziani said. “Either directly through the formal escrow, indirectly through an account with a pledge or just saying ‘we as the taxpayers assume $1 million in debt, you (the parking authority) no longer assume $1 million in debt.' ”
If the money is used to match other grants from private or public funds, it would have to be used for capital improvements, Graziani said. Those are defined as something expected to last 10 years, and not a recurring expense.
Mike McCaig, managing director with Janney Capital Markets investment firm, presented the options to council.
If the money is put into escrow it will earn $68,000 as it is invested through 2034, he said.
To invest it completely removes any flexibility, said Solicitor Jim Kelly.
“The first option makes a binding commitment ... the second option leaves it open-ended,” he said.
Or, the money could be put into an account and drawn down as needed to account for changing interest rates in the future, when council could decide on a different use for the money, he said.
Borrowing interest rates are now much higher than investment interest rates, McCaig said.
The redevelopment assistance program provides grants for acquiring and constructing regional economic, civic and historical improvement projects, according to the state government website. Those seeking a redevelopment assistance grant must have secured 50 percent of the funds for a project.
A decision is not necessary right away, because the formal application for the grant is still being prepared, Graziani said.
“There's a lot of time to continue to discuss and get our act together,” he said.