Stanton C. Hazelroth, the executive director of the California Infrastructure and Economic Development Bank, or I-Bank, is responding to the July 20 article "Bailout of Napa wine shrine flawed."
The story states that the I-Bank, and by extension California taxpayers, could end up paying large legal fees if Copia defaults on its payments. A very important point to highlight for your readers is that the bond documents clearly state that the bonds are not an obligation of the state of California, and the state is not liable for any payments due pursuant to the bond agreements.
Safeguards remain in place in the form of a reserve fund to ensure that bond payments can be made while Copia attempts to right itself and bond insurance to ensure payments throughout the term of the bonds. Even if the I-Bank were included in a lawsuit involving the Copia financing, the legal fees would not be paid by the taxpayers.
In 1999, the I-Bank board approved $70 million in conduit bond financing for Copia, a start-up 501(c)(3) nonprofit entity. The bonds were backed by insurance from ACA Financial Guaranty Corp.
When Copia came to the I-Bank board requesting the $77 million restructuring last year, Copia was within two months of defaulting on a bond payment that was due pursuant to the original financing. There was no perceivable benefit in allowing a swift default.
The refinancing request met all of the I-Bank's current program policies and procedures for a refunding of prior bonds. Copia was an eligible applicant, the refunding met the public interest criteria, and the bonds were protected by an insurer assigned an "A" rating by the rating agencies. The I-Bank board approved the refunding bonds to allow Copia the opportunity to implement a new strategic plan and to continue to contribute to the economic vitality of the Napa area.
Since 1996, the I-Bank has financed more than $4.5 billion in federally authorized, tax-exempt nonprofit economic development projects and more than $210 million in federally authorized, tax-exempt industrial development bonds to fund economic development projects across California. Not a penny has been spent from the state's general fund, there have been no previous defaults, and the I-Bank has never been sued for any of its bond projects. With the pressing need for infrastructure and economic development in California today, it's a record of which we can all be proud.
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