County may face cash flow problem: Bond insurer is reluctant to back $18 million for the county due to its fiscal status, budget official says.

Luzerne County's borrowing of $18 million to get through 2009 has been stalled by reluctance of a bond insurer to back the deal, which means the county could be facing a cash flow problem, county Budget/Finance Chief Tom Pribula said during Monday's commissioner work session.

County officials met with Financial Security Assurance Inc., the primary insurer of government bonds, about two weeks ago, and the company expressed concerns about the county's fiscal status, Pribula said.

Specifically, FSA is concerned that the county will continue borrowing and refinancing instead of implementing corrective measures to bring spending in line with revenue, Pribula said.

He said the company wants guarantees in writing, but commissioners can't provide that until they adopt the 2010 budget on Nov. 25.

Representatives of FSA, which became a subsidiary of Assured Guaranty Ltd. in July, also were worried the county will take a financial hit from lawsuits stemming from the judicial corruption scandal, Pribula said.

Interest rates are traditionally lower when borrowing is insured because bond buyers have a guarantee that they will be paid, Pribula said.

The county has posted the bond package as unrated and uninsured to see if a decent interest rate is available by selling them as is, Pribula said.

As a back-up plan to get cash, the county may proceed with the short-term borrowing of another $10 million that was planned to compensate for revenue held up by the state budget crisis, Pribula said.

Once the final budget is adopted, county officials could return to FSA to get try to get insurance with proof that the county has weaned itself off borrowing, Pribula said.

In his third-quarter financial report, Pribula said county spending was 18 percent below budget as of Sept. 30, primarily due to juvenile placement reductions and a delay in paying the $8 million employee pension fund subsidy.

Revenue is 12 percent short for the third quarter because of the bond problem and lagging state funding, Pribula said.

In other business Monday, commissioners said they plan to vote to publicly advertise for real estate brokerage services to sell county property.

Mericle Commercial Real Estate Services' contract to sell county real estate expires Dec. 21. Commissioners voted last month to table the sale of Valley Crest Nursing Home property until the next broker is selected.

The Mericle company would have received a 6 percent commission, but only if the property was sold. That commission would have amounted to at least $344,460 on the Valley Crest property because base bids will start at $5.741 million, which is the fair market value, county officials said.

Commissioners also plan to vote on a projected labor agreement governing the hiring of union and non-union workers on county construction projects.

Also up for approval is a $500,000 community development loan to NEPA Burgers Inc. for construction of a Sonic drive-in restaurant at Humboldt Station North in Hazleton.

Wednesday's meeting is at 10 a.m. in the commissioners' meeting room at the courthouse.

Assess fees to rise

The Luzerne County assessor's office announced Monday that fees for assessment appeals have increased.

The processing fee for residential appeals will increase to $25 from $5.

The fee for multi-family residential unit appeals will go to $50 from $35.

Appeal fees for small commercial/industrial structures will increase to $50 from $30.

Land-only appeals for residential structures will increase to $25 from $5, while commercial land appeals will increase to $50 from $30.

County Assessment Director Tony Alu said the fees haven't been raised in more than a decade, and increases are needed to cover the county's postage and processing costs.

Residential appeals are $25 in several neighboring counties, he said.

As a back-up plan, county may proceed with the short-term borrowing of another $10 million.