Members of the Board of Supervisors of the East County Water Control District in Lehigh Acres were notified at their regular monthly meeting on January 26 that three banks had denied their request for loans. However, the reasons for the banks’ denials were not provided. The Citizen has obtained information explaining the banks’ reasons for the denials to the District.

Bank of America (BoA) stated that “based on your 2008 financials, operating revenues (including benefit assessments) do not cover operating expenses and existing debt service.”

“In order to provide financing, the bank typically likes to see that current operating revenues are covering current operating expenses including debt service,” according to information sent to the District.

This bank underwrote the $1,575,000 series 2005 B promissory note and the $1.5 million line of credit.

In its reply, Branch Banking and Trust said that “we are not able to issue an additional $6.5 MM to the $3.69 MM that we currently have with the District. We would need to see significant changes in the District’s financials going forward.”

Wachovia (now a Wells Fargo Bank) declined to submit a loan packet.

The District overspent its revenues in FY 2007-08 by more than $500,000. The deficit was paid from unrestricted reserves. For several years overspending has decreased the reserves, records show.

In the past the District received several million dollars in back taxes. As taxes are now current with FY 2008, no further funds from this source will be

added to reserves.

More than $1 million was taken in from the sale of excess dirt from canal banks. Due to the economic situation, there is no current market for fill dirt.

The contractor was sued but the judgment of $214,201 appears to be uncollectible as no debtor assets have been discovered.

The District has spending plans of $6.5 million, which will cost with interest almost $10 million. Projects include construction of Harns Marsh, Yellowtail

water structures; five miscellaneous structures; 25 culvert replacements; and a District Headquarters and maintenance building complex.

For FY 2008-2009 tax revenue will be $3,923,220 for budget purposes. With the lack of significant non-tax revenue there will be a several million dollar

shortfall for construction projects.

In the last three years the district assessment rate currently at $89.80 per acre has been increased 25 percent.

BoA said that “one way to consider setting the reserve level would be to consider maximum annual debt service plus a percent of operating expenditures.

In addition, the bank is going to want assurance, through loan covenants, that assessments will be set going forward in an amount sufficient to cover debt service and operating expenditures.”

Branch Banking wanted to know, “Does the District anticipate increasing rates (taxes) due to the new debt service payments that are associated with this new borrowing request, if so by how much?”

The position of the District as expressed in the “Request for Loan Proposal” is different from the requirements of the banks. It stated: “We will not accept proposals with reserve requirements, revenue restrictions, bank balance requirements or primary banking relationship requirements as a condition for the loan. We will not accept proposals that require the bank’s approval to issue additional debt.”

Given the lack of non-tax revenue, the issue the Board will have to deal with if they continue with their spending plans is how much to raise taxes to cover the costs. The agenda for this meeting was not published on its web site.

The next monthly meeting will be on Monday, Feb. 23 at 6:30 p.m. at District Headquarters on Construction Lane off of Lee Blvd. The public is encouraged to attend the meeting.