San Luis board ratifies amended forbearance; court order increases trustee/attorney fund to $200,000

The San Luis Facility Development Corporation on July 31 ratified an amended and restated forbearance agreement that extends the forbearance period for bonds tied to the San Luis Regional Detention and Support Center through April 30, 2027.

"We've been in forbearance since September 2024, and this is a new forbearance to take us out to 04/30/2027," said Kaye McQuill, general counsel to the board, summarizing the agreement as it arrived back from the court in Minnesota.

Why it matters: the agreement reorganizes how incoming revenues are allocated during the forbearance, prioritizing trustee fees and interest before operating costs and partial bond payments, and it affects whether and when city license fees and operator incentive payments flow to the issuer. General counsel told the board the trustee will now establish a $200,000 fund to cover trustee attorneys’ fees and certain issuer costs (including portions of the election and appraisal costs), a change from a previously discussed $100,000 figure.

The agreement acknowledges more than $4,400,000 in unpaid operating costs owed to LaSalle Corrections from prior years and authorizes steps toward a possible sale of the project if required. McQuill said the court-ordered waterfall will: 1) pay trustee fees and trustee attorneys first; 2) pay interest on the bonds up to specified monthly caps beginning Aug. 1, 2025; 3) make payments to LaSalle to cover some losses through a cutoff date; and 4) provide a monthly $15,000 payment to the operating reserve repair contingency account, with remaining net revenues applied to past operating shortfalls until paid in full.

McQuill warned the board that the court’s order restructured some items differently than the parties had negotiated before the hearing: "the wording now is they'll have a fund of $200,000, which will go towards the attorneys for the trustees and ... defraying certain costs for the issuer," she said.

Board members asked staff for clarifications about how long the city license fee had been suspended in practice and how receivables were recorded. Rola Encinas, the city's finance director, told the board the finance office recorded $1,245,000 in accounts receivable as of Sept. 2024 tied to business/license fees that the city has not collected during forbearance. Encinas said auditors recommended cleaning up the general-fund and detention-fund balances and that the issuer would write off roughly $303,100 of those receivables as part of the accounting cleanup.

The board moved, seconded and unanimously ratified Resolution 2025-02, described in the agenda as "an amended and restated agreement with US Bank Trust Company and LaSalle Corrections to extend the forbearance of the bonds until 04/30/2027, repealing conflicting provisions and providing for severability."