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Borough council discussed lease money during private session

 

Middletown Borough Council discussed the proposed expenditure of money the borough has received from leasing the town’s water and systems in an executive session during a meeting on Monday, July 20, councilors said.

Councilors emerged from the nearly two-hour executive session to vote 5-1 – in public – on a motion that any further spending of proceeds from the lease with United Water – called a “concession’’ – be subject to council approval.

The motion was made by Councilor Ben Kapenstein, who after the meeting told reporters that it was not his intent to discuss the issue behind closed doors.

“That was not my plan at all,” Kapenstein said. “I had a different plan when I came here tonight. It changed.”

Asked if the issue could have been discussed in public, Kapenstein said, “Sure. I’m discussing it right now, or I would have just said, ‘No comment.’ I have no problem discussing it in public.”

The borough received $43 million from leasing the water and sewer systems to United Water. Most of that money has already been committed to paying off borough debt and to fund public works projects like replacing water and sewer lines under Main Street.

Council’s closed-door discussion – based on comments from councilors who were there – had to do with $3.8 million of the remaining concession proceeds that has been transferred from the borough’s water and sewer authority to the Middletown Industrial and Commercial Development Authority.

The money could be used to support projects like the planned downtown street scape improvements and the opening of a craft brewery/distillery/brew pub in the Elks Building.

The Pennsylvania Sunshine Act includes six specific exceptions that allow council and other public agencies to hold discussions behind closed doors. Based on the act, these exceptions are:

• Personnel – discussing matters involving the employment or performance of specific officers and/or employees of the agency. • Meetings involving collective bargaining, labor relations and arbitration.
• To consider the purchase or lease of real property.
• To meet with an attorney or other professional advisor regarding litigation or issues where an identifiable complaint is expected to be filed.
• To discuss agency business which, if discussed in public, would lead to the disclosure of information protected by law, including ongoing investigations.
• Discussions of academic admissions or standing by the governing bodies of state-owned, state-aided, or state-related colleges or universities.

Councilor Anne Einhorn, who also attended the executive session, said she cannot recall who brought up the matter of the concession money once councilors were behind closed doors.

However, she does not recall the discussion as having anything to do with any specific borough employee or officer. “It was taxpayer money we were talking about,” Einhorn said, adding that she personally saw no reason why the discussion could not have been held in public.

Melissa Melewsky, media law counsel for the Pennsylvania NewsMedia Association, said that based upon information provided to her by the Press And Journal the discussion might have had to do with “administrative action.”

In an e-mail to the Press And Journal, Melewsky said that the Sunshine Act defines administrative action as “the execution of policies relating to persons or things as previously authorized or required by official action of the agency adopted at an open meeting of the agency. The term does not, however, include the deliberation of agency business.”

Discussion related to administrative action is an exception to the Sunshine Act, but it is not an executive session exception, Melewsky said.

Melewsky acknowledged that she as well as anyone else not privy to the closed-door session is at “a huge disadvantage because we don’t know what was discussed.”

The Press And Journal sent an e-mail to borough Solicitor Adam Santucci requesting comment on how discussion of the concession money qualified as an executive session exception. Santucci did not respond.

Councilors also discussed pending litigation during the same closed-door session. Santucci afterward confirmed for the Press And Journal that he discussed with council a lawsuit the borough has filed in Dauphin County Court seeking to overturn a decision by an arbitrator to reinstate Dennis Morris, a Middletown police officer whom the borough fired in 2014.

 

Last Updated on Tuesday, 28 July 2015 15:39

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TATTERED FLAG: Brewery-distillery to present Middletown project to public on July 28

flagguys7 29 15Press And Journal Photo by Jim Lewis -- Tattered Flag partners Ben Ramsey (left) and Matt Fritz spoke to The Press And Journal on Friday.

The question of whether Middletown should lease most of Middletown's Elks Building  to Tattered Flag Brewery & Still Works is quickly coming to a head.

After months of negotiations outside public view, a proposed deal that would lease about 13,000 square feet of the Elks to Tattered Flag is expected to be brought before the Middletown Industrial and Commercial Development Authority during the authority's meeting at 7:30 p.m. on Tuesday, July 28 in the council chambers of Middletown's borough hall.

Tattered Flag, a partnership of four men, wants to open a combination craft brewery/distillery/brew-pub restaurant in the 104-year-old Elks Building. The company seeks to occupy the entire building except for that portion of the Elks devoted to the theater.

Tattered Flag representatives will be at Tuesday's meeting, according to Matt Fritz and Ben Ramsey, two of the four partners.
The company wants to hold a "question and answer" session about the project with residents who come to the meeting, Ramsey said.

Tattered Flag also hopes to be on local radio station 105.7 FM sometime Monday, July 27 to talk about the Elks Building project in Middletown. Details of the radio appearance have not yet been firmed up. When known, the time of the radio appearance will be posted on the Middletown Residents United Facebook page, Ramsey said.

As currently envisioned, the authority would provide the up-front funding needed to prepare the Elks Building for Tattered Flag. The authority would then recoup that investment back from Tattered Flag through a long-term lease, authority Chairman Matt Tunnell has said.

Details of the lease started to unfold Friday, July 24 after Middletown Borough Councilor Ben Kapenstein and Mayor James H. Curry III decided to conduct a poll on the Middletown Residents United Facebook page asking residents whether or not they favor the authority providing a $1.5 million loan to Tattered Flag for the business to occupy the Elks Building.

Kapenstein told the Press And Journal on Friday that $400,000 of that would be used by Tattered Flag to finance purchase of the Elks Building from the authority. The remaining $1.1 million would be used by Tattered Flag to retrofit the building.

Ramsey did not want to discuss specific details of the lease deal in advance of Tuesday's meeting.

"Acquiring the building is one of the things we are talking about," however Tattered Flag has no intention of occupying or running the Elks Theater, Ramsey said.

He and Fritz both grew up in Perry County, and they remember as boys going to $1 movies in the Elks Theatre with their parents.

"Everybody has got a story about the Elks Theatre," Ramsey said. "The theater would be separate" and would be "independent" from the Tattered Flag operation in the building.

Kapenstein's concern – shared by Curry – is whether the borough should be loaning $1.5 million to a business that the two officials characterize as unproven.

"They have no experience running a brewery," Kapenstein said. "It sounds like they are legitimate businessmen, but this (Tattered Flag) hasn't been tested anywhere."

"We are taking on the risk," Kapenstein said, adding that if Tattered Flag does not succeed in the Elks, it is doubtful to Kapenstein that the borough will ever be able to recoup its $1.5 million investment.

Ramsey said that Tattered Flag has two brewers with a combined 20 years of experience who are now working for the company, and who would be part of the Elks Building project.

One of the brewers "works for a very well-known competitor" whom Ramsey declined to identify.

"We have a strong product that has been worked on for a long period of time and that we have been developing,'' Ramsey said. "This property (the Elks) is really one of the last pieces of the puzzle."

Tattered Flag cannot operate the distillery until it obtains approval from the federal government, and that cannot be finalized until after the company has an agreement toward leasing or purchasing a property, Fritz said.

As for brewing operations, "we have seven beers already," Ramsey said. "We can produce a new beer every week or two that is completely unique to the other beers" that Tattered Flag already has brewed. Tattered Flag hopes to present some of its beer at beer festivals in August, he said.

The company does not need a liquor license to sell its own product, Ramsey said. Tattered Flag will need a brewery license, a distillery license and a brew-pub license, Fritz said. As with the federal approval, these applications have gone as far as they can go without the company having an agreement on a property, Fritz said.

The Elks Building operation would be "an attraction," Fritz said, with three main components:

• one area would be designed exclusively to attract students from nearby Penn State Harrisburg to downtown Middletown;

• there will be "opportunities for passionate experts" and novices alike to get "as close to the brewing and distilling process as they will ever get a chance to be," Ramsey said;

• and Tattered Flag would be "the capital area's first truly co-branded, co-located craft brewery and craft distillery. You can't find that anywhere else," Fritz said.

If Tattered Flag can get approval from the borough, it would take another four to six months to renovate and equip the space before the venture can be open and fully operational in the Elks Building, Ramsey said.

Technically, the $1.5 million is not borough tax dollars but is part of the $43 million payment that the borough received in January from United Water in return for the borough leasing its water and sewer systems to United Water for 50 years.

Council's opinion of the Tattered Flag project may be crucial. Council approved a motion by a 5-1 vote on July 20 that said that any decision to spend any of the money from the lease – formally known as a "concession'' – be subject to council's approval, an effort led by Kapenstein.

In March, $3.8 million in proceeds from the lease deal was transferred to the ICDA by the borough's water and sewer authority. The water and sewer authority was preparing to dissolve itself, because under the lease deal it is United Water – and no longer the authority – that is responsible for operating the water and sewer systems.    

The $1.5 million that the ICDA would use to fund improvements to the Elks Building related to the Tattered Flag deal is part of the $3.8 million pot.

To Kapenstein, council's July 20 vote means that even if the ICDA approves the lease deal with Tattered Flag on Tuesday, the $1.5 cannot be spent unless council votes to approve the deal. That decision would most likely come before the council during its next meeting on Monday, Aug. 3.

The decision by Kapenstein and Curry to put the poll on Facebook has prompted Tattered Flag to do on a public relations offensive of its own regarding the proposed Elks deal.

Tattered Flag, in its own statement posted on the Middletown Residents United Facebook page on Friday, responded to the poll, "It seems like there are a lot of people who just need more information."

"Tattered Flag simply does not require $1.5 million to bring our business to Middletown, PA.," the company's statement said. "The majority of these dollars will need to be spent for any business to be able to occupy the space, just to make it safe and functional."

"Although $1.5 million has become a point of discussion, the reality is that less than 25 percent of those dollars will be used to retrofit the building for our specific use,'' the statement continued. "In an effort to minimize costs, we are actively pursuing additional quotes, and we expect those quotes, within 48 hours, to lower that number below 20 percent. We would also like to point out that, as the numbers currently stand, a large part of the total debt will come from our willingness to take on the debt incurred by the ICDA when they acquired the building."

"Although we have never opened a brewery before, Tattered Flag is the most recent venture of four long-time friends who have enjoyed significant success in both business and life,"  the statement said. It then refers people to Tattered Flag's Web site for more information –  www.tatteredflagbsw.com.

Kapenstein told the Press And Journal he does not oppose the Tattered Flag deal, and that he and the mayor are not trying to derail it.

However, Kapenstein said he would feel much more comfortable about the deal if Tattered Flag was not asking the borough for so much money.

Kapenstein said that Tattered Flag is facing an Aug. 4 deadline to produce some kind of a deal to receive a federally-guaranteed loan from the Small Business Administration. "I don't like rushing this" to meet Tattered Flag's deadline on the loan, Kapenstein said.

Fritz acknowledged that Tattered Flag has an Aug. 4 deadline to come up with "a binding agreement" toward having a property to house its venture.

Kapenstein also takes issue with Tattered Flag's contention that it would cost $1.1 million to retrofit the Elks Building to make it suitable for any business to come in.

"I don't think we are in a million-dollar range for someone else to come in," he said. "A lot of that is retrofit to be suitable for a brewery. I think its a Cadillac retrofit as opposed to a Chevy."

However, Ramsey noted that the Elks Building in its current condition has been determined to be "unsafe for human occupancy."

"For the town of Middletown to have a business go in and occupy" space in the Elks Building "it is going to cost money to get it right," he said. "The amount of money that we need to occupy that building, versus the money that is needed for that building to be occupied by anybody, is the biggest thing that we intend to talk about on Tuesday and clear up. When you have all that information in front of you, I think there is going to be a lot of people who are excited."

Kapenstein said his purpose in putting up the poll on Facebook is to find out how borough residents – his constituents – feel about the Tattered Flag deal. If residents feel comfortable with the deal, and the risk the borough is incurring in loaning the $1.5 million to Tattered Flag, then Kapenstein will support the deal.

"It's really going to rely on what the people think," he said. "The people should decide this. They are the ones who are going to live with it one way or the other. If they are for it, I will be for it. That's my job."

Kapenstein is just one of nine votes on council when it comes to the Tattered Flag deal.

On Friday, the Press And Journal reached out to all eight other councilors about the Tattered Flag deal. Only three others could be reached – councilors Mike Bowman, Scott Sites, and Anne Einhorn.

Bowman said that at this point he needs to know more about the deal before he can say whether he favors it or not.

However, Bowman was the only councilor to vote against Monday's motion requiring any spending of money from the lease agreement be subject to council's approval – Bowman seems comfortable with allowing the ICDA to make the call on Tattered Flag.

Einhorn - who voted in favor of giving council say over how the concession money is spent - said she also needs to know more about the proposal before making a decision on Tattered Flag. She plans to attend Tuesday's ICDA meeting.

Sites, who was not at the July 20 meeting, said that bringing the Tattered Flag brewery to the Elks "would be great for the town."

He supports the borough providing some amount of up-front funding to make the project happen, "within reason,'' he said. "What 'reason' is, I'd have to sit down and see the whole picture," Sites said.

Sites said it would be hard for him to agree that the borough provide more than $250,000 in up-front funding to Tattered Flag. That money should not include the purchase of brewery-specific equipment, as it is unlikely that that equipment would be of any value to the borough in recouping its investment if Tattered Flag fails.

Moreover, Sites said that the restaurant industry is one of the most challenging when it comes to obtaining private financing. If that is case, Sites questions whether the borough should be in the business of financing a private restaurant operation.

These reservations aside, Sites said he does not have a definitive position on the Tattered Flag deal at this point. Like Bowman and Einhorn, he wants to know more.

Last Updated on Friday, 24 July 2015 20:07

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DELAYED: Work on new Route 230 bridge pushed back

 

Work to replace the bridge on Route 230 that crosses Swatara Creek to connect Middletown with Londonderry Twp. will not start until late fall at the earliest.

Bids from contractors were to be opened in August, but that timetable has been pushed back by the Pennsylvania Department of Transportation, PennDOT spokesman Greg Penny told the Press And Journal.

For the full story, CLICK HERE to subscribe to the Press And Journal.

 

Last Updated on Tuesday, 21 July 2015 16:22

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Retreat owners hear new requirements

 

jimdiamond7 22 15webPress And Journal Photo by Eric Wise -- Attorney Jim Diamond, standing, addresses the crowd and Londonderry Twp. officials about federal mandates regarding Susquehanna River island properties in floodways.

Owning an island retreat in Londonderry Twp. has grown complicated.

Officials from the Federal Emergency Management Agency have taken a keen interest in the township’s flood-prone properties, and the township will have to enforce unpopular laws to stay on the agency’s good side.

More than 250 property owners within Londonderry’s floodplain – mostly owners of the township’s 487 island properties – crowded the social hall of Londonderry Fire Company on Thursday, July 16 to find out what the FEMA scrutiny of island properties will mean.

For the full story, CLICK HERE to subscribe to the Press And Journal.

 

Last Updated on Tuesday, 21 July 2015 15:44

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HOLDING THE PURSE STRINGS: Council moves to control former water and sewer authority funds

ICDAMiddletown Borough Council has moved to assert its authority over $8 million tied to the lease of the water and sewer systems to United Water.

Specifically at issue is $3.8 million that on March 30 the borough’s water and sewer authority transferred to the Middletown Industrial and Commercial Development Authority.

In a motion introduced by Councilor Ben Kapenstein – following a nearly two-hour closed-door executive session – council agreed by a 5-1 vote on Monday, July 20 that any spending of this money by the ICDA would first have to be approved by council.


“We want to put a belt and suspenders on the whole thing,” Kapenstein said after the meeting. “We don’t want any of that money spent without coming to the elected officials first.”


Councilor Michael Bowman was the lone dissenting vote. Councilors Vicki Malone, Scott Sites and Suzanne Sullivan were absent. Among those voting for the motion was Council President Chris McNamara, who is also a member of the ICDA.


The situation seems to have its root in an apparent lack of communication and coordination between council, the water and sewer authority and the ICDA.


An agreement approved by council and the water and sewer authority last September to lease the water and sewer systems to United Water led to a $43 million payout from United Water that was made to the borough to retire debt and fund various projects, including the ongoing replacement of water and sewer lines.


Technically, the lease deal between United Water and the borough is known as a “concession.”


Under that agreement, the water and sewer authority is supposed to eventually dissolve itself. However, that has not happened yet because the authority is still responsible for ongoing permitting issues that cannot yet be transferred to United Water.


During its March 30 meeting, the water and sewer authority voted to transfer all its fixed assets to the borough and transfer approximately $8 million to the ICDA.


ICDA Chairman Matt Tunnell said that $4.3 million of the money transferred from the water and sewer authority was accumulated from bills and fees that had been paid by customers to the water and sewer authority during the period from when the lease agreement was approved in September to when the lease deal went into effect and United Water took over water and sewer operations on Jan. 1.
The remaining $3.8 million was tied to various projects that were to be funded through the $43 million payout, including the Main Street project.


Tunnell said the ICDA transferred back to the water and sewer authority the $4.3 million amount derived from the payment of water rates and fees by customers. Under law, this money would have to be transferred from the water and sewer authority to the borough in the event that the water and sewer authority dissolves, Tunnell said.


However, Tunnell said the ICDA considered – and still considers – the transfer of the $3.8 million for projects to be “an appropriate transfer.” At the same time, Tunnell said that none of the $3.8 million that the ICDA has received from the water and sewer authority has been spent or committed.


“My intention is (for the ICDA) not to spend any of that money without the full disclosure and transparency on where that money came from and how we got it,” Tunnell said.


On June 15 – nearly three months after the water and sewer authority had approved transferring the $8 million to the ICDA – Councilor Robert Louer introduced a motion that council approve the transfer. The motion failed. However, the vote to reject the transfer “didn’t matter” because the money had already been transferred, Kapenstein said after the July 20 meeting.


Kapenstein said that council is now going to “try” and get the $3.8 million transferred back from the ICDA to the water and sewer authority. Assuming the water and sewer authority eventually dissolves, that money would then be transferred to the borough, Kapenstein said.


“It is in the taxpayers’ best interest to have everything come through the elected officials, not these separate boards,” Kapenstein said, referring to the ICDA. “They should not have the authority to vote on funds by themselves.”


“We can work in conjunction with them to do these projects,” Kapenstein said, referring to projects such as the downtown streetscape and re-development of the Elks Building, which is owned by the ICDA. “If they (the ICDA) need money for a project, they come and ask us for a specific amount. We either say ‘yes’ or ‘no,’ and that’s the end of it. I don’t think they should have a blank check.”
Mayor James H. Curry III, who stood by Kapenstein as he spoke to reporters about the vote following the July 20 meeting, agreed, saying, “I don’t think that a board (the ICDA) comprised of non-elected officials should have the authority to make $4 million worth of decisions.”


“Those decisions should come from those individuals who were elected by the populace,’’ Curry said. “We can work in conjunction with those separate bodies to make the decisions, but to give them carte blanche to spend the money would be financially irresponsible.”


Tunnell told the Press And Journal that he is not aware of any request from council or from the borough that the ICDA transfer the $3.8 million back to the water and sewer authority.


“This is a very fresh issue,” Tunnell said. “This is a huge opportunity, I think, for the community” he added, referring to the potential use of the $3.8 million.


Tunnell noted that in 2014 the council and the ICDA worked out an arrangement where an $3 million bank line of credit was made available to the ICDA – but any drawdown of the money by the authority would have to be approved by council before the money could be spent.


Tunnell suggested that a similar arrangement could be put in place to guide use of the $3.8 million – and perhaps should have – before matters came to a head on July 20.


“We already did sign off on that kind of approach already,” Tunnell said, referring to the line of credit. “I guess we missed a step with this $3.8 million. The ICDA did the responsible thing and held that money and allowed this process to play out before any of those dollars were allocated for any project.”


Two projects that up until now have been shepherded largely by the ICDA include the downtown street scape improvements and redevelopment of the Elks Building.


The ICDA plans to rebid the downtown street scape project to get new bids that are within the project’s budget. As for the Elks, the ICDA has been negotiating with Tattered Flag, a company that wants to open a craft brewery and still operation and a brew pub in the building.


Tunnell has said that the concept is for the ICDA to fund the up-front renovations that will be needed for Tattered Flag to move in. Tattered Flag would then repay this money to the ICDA under terms of a long-term lease.


Tunnell said council’s July 20 action regarding the $3.8 million will “clearly” have “an impact” on projects such as the downtown street scape and Tattered Flag – however “I don’t know what that impact is going to be,” he added.


“I think this can be a very workable arrangement,” Tunnell said. “But some of these projects are underway or partially negotiated. It’s going to take some accommodation in terms of meeting schedules to get some of these things accomplished.”


Dan Miller: 717-944-4628, or This email address is being protected from spambots. You need JavaScript enabled to view it.


 

Last Updated on Thursday, 23 July 2015 15:25

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