Sussex County approves MOU in sports center loan proposal

GEORGETOWN – Majority rules.

Sussex County’s council majority is opting to stay in the game as the potential $1.5 million loaner in a private-public partnership for the construction a multi-faceted sports complex on the outskirts of Georgetown.

Noting the devil is in the details, council by a 4-1 vote Dec. 5 authorized Sussex County Administrator Todd Lawson to draft a memorandum of understanding with the Sussex Sports Center Foundation.

The potential partnership could be the first step in a county-based parks and recreation initiative.

The MOU is a precursor to finalized details and terms of the agreement that will come back before county council for final approval.

“We are at an MOU level right now,” said M. Lawson, noting there is “very little commitment on county’s part at this point. But it does mean we are moving forward. But the real terms of this arrangement will be spelled out in a contract that will be drafted and presented to you at a future date for another vote.”

On Sept. 26, Sussex Sports Center Foundation members Joe Schell and Bobby Horsey approached the county for a $1.5 million grant in support of the estimated $4 million project.

Located north of the CHEER Community Center on land donated by Mr. Schell of the Schell business family, the sports complex would feature eight Bermuda grass fields, 3.1 miles of walking trails, eight pickleball courts and ancillary facilities including bathrooms.

At a follow-up presentation Nov. 14, county council, at the suggestion of councilman George Cole, felt more comfortable with a loan agreement as opposed to an outright grant.

“The foundation, I would say they would prefer a grant, but certainly they would be willing to accept a loan, especially with terms that we are describing here. The benefit of a loan of course is it provides more security for the county,” said Mr. Lawson. “In talking to members of council this does add a level of security that they did not believe they had with a straight-forward grant. This is a significant amount of money that the county is being asked to fund for this proposal.”

Under proposed terms, after the SSCF spends an initial $1.5 million, county loan money would be available in $100,000 increments through documented invoices. The loan would be for 40 years at zero percent interest with $37,500 annual payments.

There would be no loan payments:

  • the first five years;
  • any year when the Sussex Sports Center Foundation has an operating loss, which would extend loan terms another year;
  • when the foundation’s contingency fund is below $400,000.

“Said another way, if there are no losses and the contingency fund is fully funded at the $400,000 level then they would be required to make a loan payment,” said Mr. Lawson.

Council members piped in with questions.

“If they are not turning ‘quote-unquote’ profits to be able to pay for this, there is no ‘quote-unquote’ penalty, it is just extended? And that is indefinite?” asked county councilman Rob Arlett.

“That is correct,” said Mr. Lawson.

“For 100 years, in theory?” inquired Mr. Arlett.

“In theory, yes,” replied Mr. Lawson.

Mr. Cole asked if it is conceivable the foundation might not need the county’s $1.5 million to complete their project.

“The way that we are framing the proposal today, the intent is they would access all of the funds,” Mr. Lawson said. “If in fact something happens that they don’t need to access all of the funds, that is on them. They are not going to get a blank check for $1.5 million. They are going to be reimbursed as they start to spend their money down after they have spent $1.5 million of their own.”

Under the proposal, the county will place a lien on the property. The loan would be forgiven if the county purchases the property for $1.

“Under what conditions or terms would you see whereas we needed to exercise the lien and take back the property?” said Mr. Arlett. “I am asking on behalf of the Sussex County residents who would be on the hook for $1.5 million. And based on what was just presented whereas somebody could not make payments for 100 years, under what conditions or terms would we take it back?”

Sussex County Attorney Everett Moore Jr. said the actual contract specifically would have the terms of the note and mortgage, which would include “triggers on payments, mismanagement, all of those things. That would come back before council for approval.”

“Mr. Arlett, to your concerns about in theory they could continue to add a year and this loan ‘quote/unquote’ would go indefinitely, that would be spelled out in the contract,” said Mr. Lawson. “To your fear we would not want that to happen obviously and we would put that in a framework within the contract so that it doesn’t.”

Sussex County Finance Director Gina Jennings, in response to Mr. Cole’s concern about possible mismanagement, said the agreement calls for two members from the county – possibly a member of council, county administrator or finance director – on the foundation board.

“Hopefully, there would be no mismanagement,” said Ms. Jennings, noting as a non-profit the foundation is the only entity the county could go after. “My recommendation – we are putting a lien on the property – is that we would then take over the property and find another organization to take over for recreation.”

In presentations, the SSCF had itemized a $550,00 contingency fund. That seemed a too high, so it was lowered to $400,000, Ms. Jennings said.

“I agree it is a new project,” said Ms. Jennings. “You don’t know where your cost overruns are going to be. But as far as the terms, I don’t think a $550,000 contingency is fair to us when they need to start paying it back. So, I lowered it to $400,000.”

Councilman Irwin “I.G.” Burton asked if county loan funding would be earmarked for capital construction or possible contingency.

“Again, in drafting the contract, that would be stated that it is only to be used for actual construction, not for the contingency,” said Moore.

Mr. Lawson added that one of the built-in safeguards is that invoices must be for capital construction. “That is how we are trying to frame this to make sure that the money is not sitting in a savings,” Mr. Lawson said.

Councilman Samuel Wilson Jr. opposed the MOU proposal. “I think we ought to look at this a little deeper than what we are doing,” Mr. Wilson said. “We’re sitting here asleep, it seems to me.”

Under the agreement, Sussex County would have the option to assume ownership of the property and facility after five years and each year thereafter.

Mr. Arlett supported the MOU with reservation and concern.

“Does this county council want to get involved in the public parks and recreation business? That is the bottom line,” said Mr. Arlett, noting that the county is often criticized for reacting and not planning. “We just react. I’ve heard that comment. If this is what we are doing here then maybe we ought to take a step back and put together a working group with a time limit, four months, six months, of all the stakeholders … and really get the real feel. I am wondering: Are we making another mistake of reacting to an ‘ask,’ versus responding and thinking and planning for the long term here?”

“The other question is private/public partnership,” said Mr. Burton. “We’ve got to look at that. We’ve got to say, ‘Is this a good way to do this?’ We’ve have never done that, right? The devil is in the details and the detail is in the MOU. We should look at it as a private-public partnership funding as much as it is a parks and rec deal.”

The foundation’s plan is to submit plans by the end of this year with construction starting in February or March of 2018. Seeding of fields would be done next June and July. The tentative opening of the facility would be spring 2019.

Revenue would come from some tournaments as well as requests by clubs such as soccer and pickleball organizations for specific field/court reservations for practice/games.

Intersection improvements

In conjunction with the sports center project is an effort to ease the traffic congestion bottleneck at the Rt. 9/Sand Hill Road/Airport Road intersection.

The foundation is in negotiations to purchase two parcels and donate them to the Delaware Department of Transportation.

DelDOT has applied to the federal government for a $7.5 million Transportation Investment Generating Economic Recovery grant for the intersection upgrade.

DelDOT Sec. Jennifer Cohan told council during a Nov. 5 presentation on U.S. 113 projects that there is optimism that Delaware will be a leading candidate for TIGER grant funding to be announced in April 2018.

Mr. Lawson added that intersection upgrade would directly benefit the county as it is the main entrance to the Delaware Coastal Airport.

News Editor Glenn Rolfe can be reached at grolfe@newszap.com

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