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Luzerne County government has $6.5 million in the bank not earmarked for anything, but officials said they have to let it just sit there for now.
				And even if this funding is unlocked for county use, it&rsquo;s still unclear if there will be restrictions on how it can be spent, officials said.
				Discussed during last week&rsquo;s county community development 2021 budget presentation, the potential nest egg is ensnared in a convoluted disagreement over regulatory interpretations dating back years.
				The money must remain in reserve in case the U.S. Department of Housing and Urban Development, or HUD, follows through with a penalty threatened in 2014, county Community Development Director Andrew Reilly told council.
				In April 2014, HUD had issued a determination the former Hotel Sterling revitalization project in downtown Wilkes-Barre should not have received $6 million in community development funds because the project did not create jobs. Instead, the landmark structure was condemned and demolished in 2013.
				The county contested this determination, arguing planned development at the site eventually should create jobs and that HUD regulations don&rsquo;t specify a time limit for the job creation.
				HUD continues to monitor the situation but has not issued a final order cutting the county funding by a total $6 million over several years, Reilly said.
				If that order happens, the county would have to use the $6 million to compensate for the cuts because municipalities and numerous nonprofits rely on the county&rsquo;s community development funding to provide a myriad of work and programs, including blight reduction,food banks and domestic violence assistance, Reilly said.
				&ldquo;It could have a devastating effect on the community otherwise,&rdquo; Reilly said of reductions for outside entities.
				County Councilman Walter Griffith asked if there&rsquo;s a deadline for HUD to make a final decision so the $6.5 million doesn&rsquo;t have to remain in limbo.
				Reilly said he does not know. HUD periodically sends a letter to the county indicating it stands by its decision, and the county replies that it disagrees with the interpretation and is confident a job-creation project ultimately will occur at the site, he said.
				&ldquo;We are sort of at a stalemate here with regard to that issue,&rdquo; Reilly said.
				Griffith asked if it would make sense to send HUD a letter seeking a final determination.
				Reilly said the HUD response would be the same and could trigger the cut in county community development funding.
				County Manager C. David Pedri said HUD&rsquo;s delay in imposing a penalty is helping the county by buying time for a project to be completed at the former Hotel Sterling site at the corner of West Market and North River streets.
				H & N Investments LLC has proposed construction of a hotel at the site that would include some luxury condominiums and conference space, according to published reports.
				Advancement of that project would bolster the county&rsquo;s job-creation argument and the opportunity for the county to keep the $6.5 million for something else, Pedri said.
				Reilly said he regularly sends status reports to HUD on the planned hotel project. While the coronavirus pandemic may have slowed progress, those involved in the project indicated it is &ldquo;moving forward,&rdquo; Reilly said. The development group received positive results from a recent subsurface investigation of the site and may be getting ready to take out a construction loan, he said. Last year the state awarded a $2 million grant from its Redevelopment Assistance Capital Program for the project.
				&ldquo;That could be why they&rsquo;re not forcing the issue,&rdquo; Reilly said of HUD. &ldquo;They may be waiting to see if there is development on the site and if it will create jobs.&rdquo;
				Griffith said he agreed with the administration&rsquo;s decision to not &ldquo;push it,&rdquo; saying losing millions of dollars &ldquo;won&rsquo;t help anyone&rdquo; at the county level.
				Councilwoman LeeAnn McDermott asked how the money could be spent if it remains intact and cleared for county use.
				Reilly said a county legal review is underway to determine the answer.
				Community development funding typically must be used for eligible infrastructure or social service projects largely benefiting low and moderate income areas, he said.
				However, some or all of the $6.5 million may be eligible for county general fund operating expenses or infrastructure needs because it has gone through cycles of being loaned out and repaid with interest and may no longer retain its &ldquo;identity&rdquo; as federal community development funding, Reilly said.
				The funding originated from a revitalization program for distressed urban areas that the federal government stopped funding decades ago. County officials used leftover money from this program and other sources to create a business loan program in 1982 that had provided more than 669 loans to economic development agencies and for-profit businesses. That loan program must be phased out due to newer HUD caps on pools of unused funds, Reilly said.

Luzerne County has $6.5 million in limbo