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GEFA drops its letter of credit need

POSTED: November 7, 2011 6:53 p.m.

The letters of credit required from developers for water and sewer infrastructure soon may be extinct in Effingham County.

The Georgia Environmental Finance Authority has released the letters of credit it required as part of water and wastewater financing. Commissioners voted 5-0 to approve the release, with Commissioner Vera Jones recusing herself from the vote.

“GEFA has provided a release to all rights and claims and issues to all letters of credit obtained as a requirement of two of our loans,” County Administrator David Crawley said.

Prior to receiving a release from GEFA, the county was unable to release the letters of credit and still comply with the loan conditions, Crawley explained. Developers who have posted a letter of credit for water and sewer service will no longer have to maintain that letter of credit and are released from that condition of their water and sewer agreements.

GEFA also has released its interest as a third-party beneficiary of any agreement between the county and a developer that required the developer to post a letter of credit as security for payment of water, sewer and reuse fees.

The county had nine standing letters of credit, worth more nearly $7.1 million, with developers, dating from April 2006 to November 2010.

Recent court decisions have rendered agreements requiring letters of credit void. The county’s position is that letters of credit were a GEFA requirement for the loans, and not a board of commissioners policy.

GEFA was a third-party beneficiary in 21 separate letters of credit with developers. As a condition of one loan, the county had to collect a total of $3 million in nonrefundable impact and other fees and/or cumulative letters of credit from developers. With the other active loan, the county had to collect $6.5 million in impact or other fees and/or letters of credit. The letters had to be delivered to GEFA before the contract could be executed.

GEFA Executive Director Kevin Clark said his agency will complete modifications for the county’s two existing loans with GEFA. GEFA will eliminate all existing special conditions and replace them with a requirement that the county transfer into its water and sewer enterprise fund an amount equal to its annual debt service for its GEFA obligations each year.

GEFA also is anticipating the county to provide a detailed cost breakdown and an up-to-date schedule on the Grandview project.

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