Bank says Sun 'n Lake in default

Dozens of residents turned out Wednesday morning for a special meeting of the Sun 'n Lake of Sebring Improvement District Board of Supervisors to discuss a default notice on a $10 million note issued by an attorney of Fifth Third Bank.

Board President Dave Halbig and supervisors Gene Gangemi, Diana Johnson, Frank Guglielmi and Dick Miller gathered to try to diffuse a bad situation.

John McClure, the district's attorney, advised the board that the district had been threatened with litigation and asked that they measure their comments, which are subject to public record.

As of November 2009, the district collected insufficient funds to fully pay the interest and principal. It remits to the bank whatever is collected, McClure said after the meeting.

The district had received a request from Focus Management Group, a consultant for Fifth Third Bank, for certain information so that the bank could evaluate the current status of its bond anticipation note.

This information was requested in a format that the district did not have the capacity to produce quickly, creating administrative costs.

District staff interpreted it as a public records request and, as required by district policy, General Manager Al Grieshaber notified the bank it would have to pay $2,000 in advance for staff overtime and other expenses.

The consultant reportedly took this as an affront, and then recommended the default, and the bank's law firm on Aug. 16 issued the notice. It gave the district until Aug. 23 to immediately pay back the note.

"It appears to me this was kind of a 2-by-4 to get our attention," McClure told the board.

The district cannot pay the loan, as it is secured by district assessments against the improved properties, McClure wrote in a letter to the bank's attorney dated Aug. 24.

The bank threatened to place the district in receivership.

"Frankly, I'm not sure the bank wants to be in control of the Improvement District, and I would be happy to discuss that issue with you in a separate phone call," he wrote.

What was mischaracterized as a public records request should have been handled as part of an internal audit between the district and the bank, he said.

"What we don't want to do is have $2,000 prevent us from working this thing out," said Halbig.

Supervisors voted 5-0 to permit Grieshaber to handle the bank's request as an internal audit.

The bank loaned the district the money to make infrastructure improvements, such as sewer and potable water to 877 lots in its Unit 16 sections A and C.

Grieshaber gave board members and residents an overview of the situation Monday.

"We do not have a general obligation bond with Fifth Third Bank, although they may think we do," said Grieshaber.

He gave a detailed account of how the district paid on the construction loan for $8.6 million, until it was no longer able to pay when the economy took a nosedive.

Property owner Rex Bond said the district must go by what it has signed.

"My concern is, and a lot of people are concerned about, whether folks outside that Unit 16 area are going to have to pay expenses to pay for this thing," said Bond. "My position is any expenses paid must come out of that Unit 16, whether it's by foreclosure or just a gift or whatever it might be..."

Halbig said they were trying to work out an agreement with the bank and that's why it sent in a consultant. He believed that the bank was trying to help the district.

The district, through no fault of its own, has been unable to collect the assessments on the notes because of economic conditions, McClure concluded.

"So now we find ourselves in the position where we all need to work together to make the best we can out of a very bad situation," said McClure.