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Developer seeks two year renewal on letter of credit

Published March 26. 2013 05:03PM

The sluggish economy was cited as the reason developer Rick Bjorkman approached the Mahoning township supervisors to ask if he could obtain a two year renewal on his letter of credit for the Sunny Hill Farms development instead of the year that the township typically accepts on development projects.

"I'm asking for a two year extension so I don't have to return to the bank each year to get the letter of credit which could cost me between $4,000 and $6,000 each year," said Bjorkman. According to Secretary Natalie Haggerty the current letter of credit expires on June 1st, but she pointed out the development agreement expires at the end of the month.

Supervisor Frank Ruch questioned if it was possible for supervisors to grant a two year letter of credit. Township solicitor Tom Nanovic said it was legal to accept a multiple year letter of credit, but he added that some conditions should be satisfied to ensure the letter will be proper.

"You need to make sure it is for an amount large enough to cover the project," Nanovic said. He told supervisors his concern would be to verify with the engineer to make sure the margin in the letter is large enough to cover costs as they could rise over the two year period. According to Nanovic, this is done by following the requirement to add a 10 percent increase to the letter for each year it needs to cover. "For two years, there should be a 20 percent additional amount in the letter to account for possible cost increases over the period."

Nanovic also said the township should verify with its inspection officials the project's various permits are still current such as the NPDS permit. He said the permits need to be current in order for Bjorkman to continue the development. When asked, Bjorkman said he was not sure if all his permits were still valid but that he would check into it to make sure they were.

Before continuing with the approval, Nanovic suggested the board consult with the township engineer and conservation district to verify the permits for the development are still active. He told the supervisors that even though the development agreement technically expires at the end of the month as long as there is a valid letter of credit in place (which lasts until the beginning of June), the questions have time to be resolved and the development agreement can be renewed next month if everything is still active.

At the conclusion of the discussion though, the supervisors agreed to request a letter from the bank verifying their consent to providing the letter of credit to Bjorkman and they left the extension request on the table until their concerns were addressed.

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