Thursday, March 19, 1998
Half of emergency loan repaid
ASUCLA: Students’ association will have to borrow money
again
By Michael Weiner
Daily Bruin Contributor
ASUCLA paid back half of the $800,000 it owes the university on
an emergency line of credit and plans to pay back the rest of the
money soon.
However, the association will have to re-borrow the second
$400,000 some time this summer, said ASUCLA Chief Financial Officer
Rich Delia.
He said that the association will pay back the remaining
$400,000 soon. "We intend to pay that other $400,000 within the
next six months," Delia said.
The loan is constructed such that whenever ASUCLA’s bank balance
rises over $1 million, the association must pay back some of the
loan. When its balance falls below that amount, it can re-borrow
money from the university.
ASUCLA Executive Director Patricia Eastman would rather that the
loan was constructed such that ASUCLA would not have to re-borrow
money. Then the association would pay back the entire line of
credit when it became financially sound. Under this scenario,
ASUCLA’s balance would not dip below $1 million, even during
seasonal lows.
"That certainly would have been my preference on how to
structure the loan," she said.
But Assistant Vice Chancellor Sue Santon, who handles ASUCLA’s
line of credit for the university, said that the loan is for an
emergency basis only. Thus, ASUCLA should pay back the loan
whenever it has the money.
"The intent was that when cash balances were in place that
ASUCLA should be paying back the university," Santon said. "It
imposes some discipline on the relationship."
She also said that the emergency line of credit is meant only so
that the association can meet payroll and pay its bills.
"It was established for a very specific reason," Santon
said.
The emergency line of credit was originally given to ASUCLA in
June 1996. It is distinct from the long-term loan which the
university lent to the association to help it return to financial
stability.
ASUCLA made the transaction because its current bank balance is
over $1 million. According to the association’s agreement with the
university, it must pay back part of the loan if it has a cash
reserve of at least $1 million.
ASUCLA will have to borrow that money from the university again
during the summer because its balance will probably dip below $1
million.
Eastman said that because the association’s business is seasonal
and slows considerably during the summer when few people are on
campus, the organization’s cash resources will almost definitely
fall below $1 million this summer.
In addition, ASUCLA asked the university for a distinct
mechanism regarding how the association can re-borrow the money it
needs. Until recently, ASUCLA management did not know how much
notice it needed to give the university, how the money would be
delivered to the association and what documentation the university
needs to allocate the funds.
"We’ve had difficulty, the three times we’ve needed to borrow,
having a mechanism to borrow the money," Eastman said.
ASUCLA is now in the process of receiving that mechanism,
Eastman said. The association will have to notify the university
one to two weeks in advance of its need for the money and will have
to provide a bank statement which illustrates its financial
situation.