Only a mild wind from the Wind Creek sale

(Latest posts in a series about Wind Creek Casino and the budget)

We knew it was coming. The City once projected a windfall of $5-6m from the sale of the Sands to Wind Creek. But wise Gadfly followers were quick to say that the sale would be structured in such a way to favor Wind Creek. And so it turned out. The City realized but $317,000.

But the projected windfall was not factored into the 2019 budget except in a kind of “wish list.” And on Tuesday Council moved to begin the approval to do some tidying of the budget now that the sale is complete.

Key thing for us to know is that “Since 2013, Bethlehem’s dug itself out of deficit spending, built its cash reserves and earned an A+ bond rating, [City Business Manager Eric] Evans noted. The city currently has more than the 15 percent S&P wants to see in savings.”

In other words, the City is in pretty good shape financially. Tip o’ the hat!

Many Gadfly followers were hoping for more of a kick for such projects as the pedestrian bridge and the Rose Garden from the Casino Transfer Tax, but “The city found grants and other funding sources for projects like improvements to the Rose Garden, a pedestrian bridge study and security upgrades to City Hall.”

Gadfly is always curious about financial manipulations. Here’s how the deal was structured in Wind Creek’s favor. Sigh.

“The difference between the city’s initial projections of as much as $6.5 million and the actual transfer tax of just over $300,000, boiled down to how the casino deal was structured. It allowed for only the value of the underlying land to be computed in the transfer tax calculation. To enable Las Vegas Sands Corp. to sell 100% of the Sands Bethlehem’s operations to Wind Creek, the minority owners, BethWorks Now LLC, had their stake in the facility transferred into a ground lease. Wind Creek, which owns the structures and improvements on the site, entered into a lease with the ground landlords.”

Don’t you wish you had lawyers so good!

Sara K. Satullo, “Without $5.9M casino sale windfall, Bethlehem looks to rainy day fund for $3.9M of projects.”, September 4, 2019.

Bethlehem officials hoped the sale of the Sands casino would net them a $5.9 million cash windfall to help knock lingering major repairs off the city’s to-do list. But then the casino sale’s complex structuring only left the city with $317,000.

Now, the administration has crafted a plan to still tackle some of the big-ticket items that keep getting kicked down the road by tapping its $15 million rainy day fund and $1.48 million left over from its 911 center consolidation.

On Tuesday evening, Bethlehem City Council’s finance committee heard the pitch to fund $3.98 million of the projects — things like fire trucks and street paving — and then the full council backed the budget transfers on first reading during the regular meeting. Council will vote on the ordinances at its Sept. 17 meeting.

The city typically borrows $5 million every other year to tackle capital repairs, but as costs rise the money doesn’t go as far, said Eric Evans, city business administrator. Some of the projects have lingered on the list since 2007.

Since 2013, Bethlehem’s dug itself out of deficit spending, built its cash reserves and earned an A+ bond rating, Evans noted. The city currently has more than the 15 percent S&P wants to see in savings, so Evans said he feels comfortable tapping the rainy day fund.

The administration wants to get back on a fire department vehicle replacement schedule, make repairs to the Bethlehem Area Public Library columns, fix the floor of the City Hall garage and put in a new Rodgers Street facility for the ground maintenance staff.

There’s some welcome news for downtown residents and merchants: $175,000 for a massive snow blower to clear huge piles of snow. Currently, after narrow roads are plowed of snow the city brings in front-end loaders to put the snow in dump trucks to cart it away. The snowblower will streamline the process, Evans said.

Council identified a Lehigh River pedestrian bridge study and upgrades to West Bethlehem’s Rose Garden as important projects for the potential casino transfer tax.

On Tuesday night, council sought reassurances those projects were still being funded.

The pedestrian bridge study will be grant funded while there’s $105,000 for the Rose Garden — $50,000 from a bond, $50,000 in city recreation fees and $5,000 from the Mount Airy Neighborhood Association, Evans said. There’s a potential $110,000 grant for the Rose Garden as well.

The city plans to postpone spending $200,000 on converting street lights to LED; lighting upgrades on Route 412, $220,000 of drainage work on Fifth Street and $200,000 on an addition to the Easton Avenue firehouse.

Nicole Radzievich, “So, the tax windfall from the Sands casino sale fell short. Here is Bethlehem’s Plan B.” Morning Call, September 4, 2019.

Bethlehem had hoped that a tax windfall from the $1.3 billion sale of the Sands casino would jump-start some long-delayed projects like fire truck replacements and road maintenance.

But now that the real estate transfer tax turned out to be just over $300,000 and not the $6.5 million once projected, Bethlehem Mayor Robert Donchez’s administration on Tuesday released its Plan B.

The plan delays nearly $1.62 million worth of those projects and uses surplus cash to cover nearly $4 million of them. About $2.5 million will come from a surplus the city has accumulated since 2012 and another $1.48 million will come from cash left over from its 911 operations, which consolidated with Northampton County’s operations.

Business Administrator Eric Evans said that by the end of last year, the city had about $15 million in cash, or about 19% of the city’s operating budget, and is expected to finish this year with a modest surplus.

After spending $2.5 million in reserves, the city’s cash on hand is expected to drop to 16% of the operating budget, Evans said. Standard & Poor’s bond rating agency recommends a cash balance of 15% of an operating budget.

Over the next 1½ years, the money is budgeted to go toward two fire trucks, trunking system radios, a snowblower for a front loader, street overlays, a chiller, a garage floor, repairs to the Bethlehem Area Public Library columns and a project at the public works facility on Rodgers Street.

That still leaves about $1.62 million in projects, such as lighting upgrades and more street work, that will be postponed until funding is identified. The city found grants and other funding sources for projects like improvements to the Rose Garden, a pedestrian bridge study and security upgrades to City Hall.

The difference between the city’s initial projections of as much as $6.5 million and the actual transfer tax of just over $300,000, boiled down to how the casino deal was structured. It allowed for only the value of the underlying land to be computed in the transfer tax calculation.

To enable Las Vegas Sands Corp. to sell 100% of the Sands Bethlehem’s operations to Wind Creek, the minority owners, BethWorks Now LLC, had their stake in the facility transferred into a ground lease. Wind Creek, which owns the structures and improvements on the site, entered into a lease with the ground landlords.

Stubborn facts: “Friends of Bryan Callahan contributed $4500 and various developers contributed $4300” to candidate Ritter’s campaign (58)

(58th in a series of posts on candidates for election)

Barbara Diamond enjoys retirement as Lehigh University Director of Foundation Relations by engaging in various activities and organizations hopefully for the betterment of the community. Her particular interests at the moment are preventing gun violence, local government ethics reform, and Bethlehem Democratic Committee work.


Here are some stubborn facts: Friends of Bryan Callahan contributed $4500 and various developers contributed $4300. Over half of Ms. Ritter’s total campaign funds ($14,100) are from developers and a developer-friendly councilman, judging by his voting history, who supported her as an elected official using his campaign funds not his personal money. This magnitude of political contribution in a city council election should concern everyone about the corrosive effect of political influence by special interests.


A wind-fall from Wind Creek

(16th in a series of posts on City Government)

The Sands is changing hands. New Owners Wind Creek coming soon.

To tell the truth, the Sands has been invisible to me.

The Gadfly was aware of the hubbub surrounding its approval and construction. But did not feel especially involved one way or the other in the decision.

And he has not been involved since it opened. Though a regular at ArtsQuest/SteelStacks events, Gadfly has never been to the casino, never been to a show – maybe once or twice to the outlets, never even been caught in a traffic jam in the vicinity.

To tell the truth, Gadfly is hardly aware of the Sands’ existence.

So how should I feel about the fact that so soon after it started, the Sands is getting a new owner?

As I read the news stories yesterday, I could not help but remember CM Callahan’s claim at Council a couple of weeks ago that the Sands brings in more money for the City than the Bethlehem Steel Co did in its heyday.

He made me think that not only is the Sands invisible to me but the “good” it does for the City has been pretty much invisible to me as well – tax dollars that fund public services.

So maybe that’s where his thoughts should go when wondering how he should feel about the entrance of a new owner.

Because some serious money will be generated. One-time, not continuing. But a wind-fall from Wind Creek.

The City stands to gain a yet undetermined but significant amount of money from a “casino transfer tax.”

In fact, the City provisionally included $6m income from the casino transfer tax in the 2019 budget (see p. 278 – 7th column from the left).  Remember that is not a fixed number. It could well be considerably less. But the City will receive one-time income from the casino transfer tax when the sale is consummated.

Read down that 7th column and see what the City tentatively plans to spend that “extra” money on if it gets $6m.

When the exact amount is determined, the City and Council will have another conversation about the exact expenditures. But that list will give you an idea what’s on the radar.

For instance, Gadfly knows there are followers who will be glad to see $40,000 for a pedestrian bridge feasibility study and $50,000 for Rose Garden improvements.

So Gadfly guesses that he should be more aware of and appreciative of the benefit that this developer brings to the City.

Here are some links to bring you up to speed on the Sands/Wind Creek situation. Perhaps you will be amused as he is about speculation that there might be a water park on the old steel property. Now that might get Gadfly to break out some old 60s demonstrator duds and posters and take up a battle station on the Minsi Trail Bridge.

Timeline: “It’s been 10 years since the Sands Bethlehem opened: Here’s a timeline.” Morning Call, January 15, 2019.

Five key takeaways: Nicole Radzievich, “What we know about Sands buyer’s plans for Bethlehem Steel property.” Morning Call, January 16, 2019.

Main story: Nicole Radzievich and Jon Harris, “Sands Bethlehem casino buyer pitches $190 million investment, second hotel on Steel land.” Morning Call, January 15, 2019.

Video interview with new owners: Lehigh Valley Live

Public comment: “What they’re saying about Wind Creek’s plans for Sands Bethlehem casino.” Morning Call, January 15, 2019.

Great budget . . . tight budget . . . lots to be proud of . . . collegial debate . . . good job by City . . . need for economic development . . . no squawking (yet) . . . need for butts in the seats next year (4)

(4th in a series of posts on the Budget)

Nicole Radzievich, “Bethlehem taxes will rise by 3.8 percent.” Morning Call, December 20, 2018.

“Taxes will rise by 3.8 percent, or about an additional $34 for the average homeowner, next year under a $78 million budget Bethlehem City Council unanimously approved Tuesday”.

“The increase will help defray the rising cost of pensions, contracted salary increases and debt payments, according to Mayor Robert Donchez’s administration.”

“Meanwhile, city departments will dial back their spending to 2017 levels and the city will employ 590 workers, a historical low.”

“The workforce was reduced because the city is transferring its 911 operations to Northampton County and changes in the labor contract at the golf course.”

“The city also will save about $750,000 when the operation of its 911 center is turned over to Northampton County by June of next year.”

“Donchez is also looking to invest $24 million over the next couple of years in bigger-ticket projects: repairing more streets, buying two firetrucks and an EMS vehicle and renovating Memorial Pool on Illicks Mill Road.”

As reported earlier, Gadfly and Mr. Haines seemed to be the only spectators at the five budget discussions between the Administration and City Council — a sad fact wryly noted by President Waldron. But perhaps quite understandable. No question such hearings are on the long side and by nature on the dull side too. (But not to Gadfly!) Unless there is some fight. But there was none of that. Discussion, yes. Some back and forth, yes. But all cordial.

So our City budget is going up 3.8%, not so much as several others around us. Gadfly has heard no squawking. Might be too early. And this post might awaken a few. But several hoped-for requests did get in or on a kind of wish list for Casino sale tax dollars – Rose Garden, pedestrian bridge study, Food Co-op, Northside 2027. And Gadfly isn’t aware of a major “want” that didn’t get noticed.

Gadfly glazes over quickly when numbers are thrown about and will try to be more knowledgeable next time around. But he has heard during the current sessions that a good deal of the budget is fixed cost that can’t be tinkered with, so there’s not much discretion involved with a high percentage of the budget. Gadfly would welcome comments by knowledgeable budgeteers.

In a previous post, Gadfly published some clips from the last budget hearing. At final passage December 18 the approval process went quickly. But here are some clips from Council members commenting on the process.

CM Callahan’s is most interesting to Gadfly – explaining the need for the tax increase.

CM Waldron

Administration did well holding the line. Not easy to find fat. Money goes to personnel costs for public safety, pensions, health insurance. What would you cut? Streets, snow, parks, Christmas tree lights? Lots of practical conversations like this. Great budget that shows willingness of all sides to work together on what is ultimately a compromise. Thanks to all.

Mayor Donchez

Makes the announcement of County money coming for the pedestrian bridge study.

CM Reynolds

Lot of investments in there we should be proud of. Thanks to the Mayor, Mr. Evans Mr. Sivac for painful decisions. Good comparison with Allentown. We would never have the kind of Administration/Council shenanigans that occurred there. Collegial debate. But Mr. Donchez would never do what the Allentown mayor did, and same with Council. Again, there’s a lot in here that we should be proud of.

CM Colon and CW Negron

CW Negron notes a “healthy and passionate discussion,” especially on taking the fake tree out of the budget. She makes a strong pitch for the Rose Garden and pedestrian bridge on the “wish list” when Casino money is definite and appears.

CM Callahan

No room to cut anymore except for public safety. Doesn’t take the increase lightly. Only the first time he’s voted for increase. Remembers people struggling in the Kaywin neighborhood in which he grew up. A lot of people still struggling. Always conscious about raising taxes. Lots of people not living a high life style, living on tight budgets. Raising taxes on them is really a hardship. He’s pro-economic development. Only 2 ways to raise taxes. If we don’t have economic development, the only other way is raising taxes. Need to keep city affordable for middle class. Worries if we keep on raising taxes people won’t afford to live here. Thankfully, we are a desirable place to live, worries about effect of taxes. Examples of Benner building bringing in $250,000/yr in taxes and 510 Flats bringing in $260,000 – that’s real money, police officers and firemen, etc. So it’s economic development or raising taxes, and the latter puts the burden on our residents. Not lecturing, but we have to understand what our priorities are. Recognizes the burden to keep cost down that falls on the City and thanks them for it. This is a tight, tight budget. Wishes more people showed up for the budget hearings. Either everybody is ok with raising taxes or there’s a lot of apathy out there. Please understand how hard we work on this. Tax increase basically due to rising costs of pension and healthcare – that’s it, no additional hiring and no fluff. Show up next year and cheer us on.

Stay tuned for the Christmas tree discussion!

The Penultimate Budget Meeting (3)

(3rd in a series of posts on the Budget)

Here’s the proposed 2019 budget

Nicole Radzievich, “What Bethlehem taxpayers can expect from next year’s budget?” Morning Call, December 10, 2018.

Council President Waldron quipped about the full house at Town Hall on the 2 W. Market meetings compared to the 1 spectator at a $78m budget hearing.

So it goes. (Who recognizes that Kurt Vonnegut is still on Gadfly’s mind?)

There were five scheduled meetings of the Administration and City Council to discuss the 2019 budget.  One was snowed out. The last meeting was last night, and the sequence is well reported on in the above article by Nicole. Penultimate tinkering was done last night. The final, official budget will be voted on next Council meeting December 18. Some changes could occur before the vote. Here are some bullet points Gadfly plucked from Nicole’s article

  • $78m budget
  • 3.8% increase
  • + $34 for the average homeowner
  • a non-emergency call center will replace 911 service taken over by the county
  • city work force is down but pension payments rising
  • more road work will be done than in previous years
  • makeover at Memorial Pool
  • improvements to the Rose Garden
  • possible contribution to a feasibility study for a pedestrian bridge
  • uncertain amount but a one-time large tax income from Casino sale on the horizon
  • new fiscal plans for the Golf Course

Ho, hum, some people would say. But Gadfly found his very first experience with budget hearings very interesting. Here are a couple quick notes:

  • the interchanges were not only civil, but light and even humorous
  • no hassles like we hear about, for instance, in Allentown
  • it was good to hear and “recognize” department heads, people before mainly faceless
  • you can learn a lot when ideas are or have to be linked with money
  • neat seeing resident-based requests got into the budget

Gadfly’s antennae (he thinks he has more than one) were especially attuned to this last point. CM Reynolds introduced a request for Rose Garden money. CM Callahan pushed to increase it and to add funds for a pedestrian bridge feasibility study (funds for that seem to be imminently possible from the county and another granting agency as well). Rose Garden money was proposed out of the city budget, and additional money for the Rose Garden plus money for the bridge study were put on the list for consideration when that Casino tax income is definite. All of Council, as far as Gadfly could tell, were supportive of both the Rose Garden improvements and moving forward on study of the pedestrian bridge.

But what do the budget hearings look like? How does the process work?

Gadfly videographer Owen Gallagher took some video. We don’t have video editing software, so the following three clips are not focused on key moments or highlights but simply present the routine linear process (which had many twists and turns) monitored by President Waldron on the Rose Garden insertion into the budget. You can see CM Reynolds introduce the idea, then CM Callahan move to augment the idea. During the process you can see the mayor, especially Public Works head Mike Alkhal, and other Council members interact.

It would take NFL films to make this visually “exciting,” but exciting things are happening nonetheless.

Proponents of the Rose Garden should get a thrill. Looks like $$$$ flowing your way.

Pedestrian bridge is also on the radar.

Here’s your local government operating in perhaps the most important thing they do.

Budget Hearing 12=4=-18 Rose Garden 1
Budget Hearing 12=4=-18 Rose Garden 2
Budget Hearing 12=4=-18 Rose Garden 3

As Gadfly wrote in post #1, there is a feeling among Council that the City is doing a good budget job (A+ credit rating), and that was reflected in final comments last night. Shown here is CM Reynolds’s offering of appreciation to the City, which were followed by equally gracious remarks by President Waldron that unfortunately we didn’t film.

Why . . . Why? (2)

(2nd in a series of post on the Budget)

Steve Melnick has had a career in economic development for over 35 years in several states, with the last 20 years here in Bethlehem and the Lehigh Valley.

Gadfly: The city has uncovered a three million dollar shortfall in the budget. and taxes are proposed to be increased 3.8%. Why, then, did the Redevelopment Authority give away $800,000 to a private developer for unspecified environmental issues? Why wasn’t the state ISRP (Industrial Site Remediation Program) used to provide assistance to the developer so the RDA could have reprogrammed that money for other more public uses. I realize that in the context of a $78,000,000 budget, $800,000 is small potatoes, but it still irritates me that that money wasn’t somehow reprogrammed to help the city close it’s shortfall while our taxes will increase. Incidentally this $800,000 grant was given to the same people who sold a parcel of vacant land to the same Authority for 2.1 million dollars. Does it make sense to buy a piece of land for 2.1 million and give the same people an $800,000 grant? Parking and development in Bethlehem is being hijacked by a few individuals who have little or no regard for the overall public good.


City gets an A+ ! (1)

(1st in a series of posts on the Budget)

Proposed 2019 Budget

What’s the City budget? Any idea?

Ballpark of $75,000,000/yr.

That’s $1000 per Bethlehem resident.

Wow! Gadfly never knew.

Gadfly knows you will say he needs a life, but he is looking forward to 5 budget meetings over the next couple weeks.

The Mayor has proposed the 2019 budget (see the link above), and now Council goes over it closely over the course of these 5 meetings.

It may be about the most important work that Council does.

Gadfly has attended meetings over the last few weeks where Council members have applauded the current A+ credit rating the City enjoys, which, I gather, in fairly recent history was not always so good.

Gadfly will report on the proceedings.

Nicole’s  articles will fill you in on the Mayor’s proposal.

Nicole Radzievich, “Bethlehem could see a tax hike next year.” Morning Call, November 10, 2018. (contains video of the mayor announcing)

Bethlehem Mayor Robert Donchez on Friday called for a 3.8 percent tax increase to balance a $78 million budget. The proposal would cost the average property owner an extra $34 a year, but the city will get enough money to fill a $3 million budget hole. The city’s pension payment is expected to increase by $2.2 million next year. The debt payment will rise by $250,000, and there are contractual raises in employee salaries. Donchez said the proposal will allow the city to maintain its strong balance sheet, which prompted Standard & Poor’s to award it an A+ credit rating, and keep the city safe, clean and a quality place to live.

Council President Adam Waldron said he had not received the budget as of Friday morning, but a small tax increase is expected. “The budget is very challenging because so many costs are fixed. There is little discretionary once you factor in public safety, pensions and health care,” Waldron said. “At each of the five budget hearings, council will do its best to identify anything unnecessary, but overall the administration has made some very positive decisions in the last couple years to get where we are … in regards to our bond rating and personnel head count.”

The tax increase will cover about $1 million of the projected budget hole next year. Bethlehem would make up another $1 million by reducing department budgets to what was spent in 2017. The city also will save about $750,000 when the operation of its 911 center is turned over to Northampton County by June of next year.

The proposed budget in Bethlehem would mean a tax hike of 0.67 mills in the Northampton County part of the city, bringing the total millage to 18.22 mills, and 0.21 mills in the Lehigh County part, bringing the total to 5.71 mills. The owner of a home assessed at $50,000 in Northampton County part would pay a $911 tax bill to the city.

Nicole Radzievich, “Here’s what Bethlehem’s proposed $5 million bond would go toward.” Morning Call, November 10, 2018.

Bethlehem Mayor Robert Donchez has proposed to borrow nearly $5 million to go toward covering some big-ticket projects in the next couple years.

For instance: Memorial Pool, Fire Dept trucks, Roads, Police body cameras.

For example:

Memorial pool

The city is hoping to make some waves with a new flagship pool on Illicks Mill Road. The old one, which was built 61 years ago, has been out-dated and in need of repairs. The city is about to launch a $4.5 million project to reconstruct it with more slides and more modern water play features, hoping to remake it as a destination pool. The pool was closed this year and is expected to be closed most of or all of next year while the construction takes place. (The neighborhood pools remain open.) The city has secured about $1.5 million in state grants for it and earmarked $600,000 brought in from recreation fees.

In the Gadfly house, budget times are narrow times.

Budget is a 4-letter word. “Holy Budget!” can often be heard rattling the windows.

Though there is an A+ rating for the City — and maybe because of it — there will be winners and losers.