FGUA secures USDA loan

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Funds will be used to purchase city utility system

By Jeff Bryan

Florida Governmental Utility Authority (FGUA) cleared the most significant hurdle in acquiring the city’s utility systems, after the U.S. Department of Agriculture (USDA) approved its loan application.

“No matter what zip code you live in, infrastructure is a foundation for quality of life and economic opportunity,” said Sydney Gruters, Florida Rural Development state director. “Through strong partnerships, USDA is ensuring that rural communities have the modern, reliable infrastructure they need to prosper.”

But when the FGUA and the city can close on the deal is unknown, according to Steve Spratt, FGUA systems manager/VP. And the reason for the uncertainty is because FGUA and USDA are navigating unchartered waters because this is the first time a loan has been approved to purchase a system, Spratt

explained, because most loans are typically used for capital improvements.

“Again, this is a unique transaction for USDA,” said Spratt, who noted the FGUA was notified of its loan approval May 23. “(The purchase) really does have a lot of benefits for everyone; from stabilizing the utility, the rates; it’s got a lot of win-win benefits all over the place.”

USDA agreed too, according to a news release the agency issued announcing the loan approval. All told, the utility systems FGUA will acquire serves 7,106 users in the city of Dunnellon, Chatmire, Rio Vista, Rainbow Springs and Juliette Falls.

“Currently, the user rates for these systems are among the highest in the area, yet the systems are still financially and operationally stressed, facing infrastructure challenges and near-term regulatory burdens,” the USDA stated in its release. “By funding this utility purchase, user rates will stay at more affordable levels and will allow the (FGUA) to complete system improvements that will help protect the quality of valuable natural resources.”

But because of the uniqueness of the impending transaction, USDA is seeking additional information, which are the reasons for the delays, Spratt explained.

“(The city of) Dunnellon has done everything it’s supposed to do,” Spratt said. “(USDAs) process, basically, is checking all of the boxes and forms for closing. It is a bit unusual, they haven’t funded many, if at all, acquisition loans. They do primarily capital loans.

“Some of their forms and procedures don’t lend to this kind of transaction.”

One of the items necessary is an independent appraisal of the utility system, which is being done. In addition, the USDA is not accustomed to the bond resolution passed by the USDA, which lead to a series of questions.

“They’re used to looking at the value of real estate or a construction project, not a piece of land,” Spratt said. “Now, they’re looking at pieces of land, revenues. We have provided a comp appraisal and they’ve asked a series of questions for clarifications; we’re just waiting for it to be reviewed by the (USDA).”

And once the USDA signs off on the additional paperwork and the bond validation process is approved by a court, FGUA and the city are ready to move forward.

“We’re ready to close as soon as they send closing instructions,” Spratt said, noting the FGUA plans to ask the court to waive the judicial process of having a hearing about the bond validation. Typically, the process takes 30 to 90 days depending on how quickly a court gets to it. “It could save us months of time; it’s waivable under certain circumstances; we’ve had considerable public participation, dozens of hearings with government entities and no opposition.”