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Munhall OKs loan, but may not need it

Thursday, Feb. 20, 2014, 5:01 a.m.
 

Munhall council unanimously accepted a bid proposal for a tax anticipation note loan from a private lender on Wednesday, although there's a chance the borough may not need to borrow the money.

Council agreed to accept the $500,000 offer at 5.25 percent interest over six months as presented by Munhall resident Joe Leonello and Frank Leonello of Homestead-based Franjo Construction, and their associate Christian Stein of Arch Masonry Inc.

Council president Dan Lloyd abstained from the vote on grounds that he has done business with one of the lenders.

The borough solicited for a private loan because it could not secure a traditional tax anticipation note loan from a bank.

Missing audits from 2011 and 2012, incomplete payroll information and other financial inconsistencies were cited as factors.

Interim borough manager Harry Faulk read three other offers:

• Payden RE Investments LLC proposed a $500,000 loan with 26 percent annual interest.

• Waterfront Business Associations LLC proposed up to $600,000 with 15 percent interest over 12 months, 20 percent over eight months or 24 percent over four months or less.

• Tarpon Bay Capital asked to purchase past-due property taxes and did not disclose a loan amount or interest rate.

“It's rather obvious to me that there was only one proposal that we could even consider,” Lloyd said.

He reminded the large number of residents at Wednesday's meeting that council wanted to borrow the money only as a last resort. Plan A was to offer residents a 1 percent discount on property taxes paid before March 1 in order to overcome the temporary cash flow problem.

“We were down to $15,000 in our checking account on Jan. 15 and the levity of the situation is that our payroll and benefits, without paying any other bills, runs us $290,000 a month,” Lloyd said. “Imagine the panic we were in trying to make sure we had a Plan A and a Plan B and a Plan C together.”

According to finance committee chairman Rick Brennan, the tax discount plan has been a success and Munhall already has received more than $580,000 in property taxes.

Lloyd said that means the borough might not need to borrow any money.

“At the rate our tax dollars are coming in, it looks like we may not have to take the loan at all,” he said. “If we took the loan out and kept it for six months, (interest and charges) would cost us around $24,000. If we don't need to borrow this money, we won't. But certainly we want to be in a position to get the money if we're short.”

The vote came after Faulk read the four loan bids submitted to the borough, which for all intents and purposes is a “cure” to the potential violation of Pennsylvania's Sunshine Act that occurred when the finance committee opened and discussed the bids during a closed-door session last week.

Although Solicitor Greg Evashavik maintained the committee did nothing wrong, finance committee chairman Rick Brennan disagreed and accepted full responsibility.

“I think it was an obvious Sunshine Act violation,” he said. “I think that it was a terrible, terrible thing that we did, not inviting the public to the meeting.”

Brennan said all future finance committee meetings will be open to the public and Lloyd said the regime that took over council with the November election plans to be forthcoming with all information.

“We plan to be as open and transparent as we ever have been,” Lloyd said. “We have nothing to hide.”

Mayor Ray Bodnar is optimistic that the borough is on solid financial ground.

“Munhall is and will be in good shape as soon as we get over this bump or two,” Bodnar said. “Despite what you may hear, Munhall did not crash and go to hell.”

Tim Karan is a staff writer for Trib Total Media. He can be reached at 412-664-9161 ext. 1970, or tkaran@tribweb.com.

 

 
 


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