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Fiorentino Asks Obama For Help

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By RONNIE BLAIR

rblair@tampatrib.com

Published: March 18, 2009

LAND O' LAKES - Schools Superintendent Heather Fiorentino has turned to President Barack Obama for assistance after Wachovia Bank more than doubled the fee the school district pays for the letter of credit on a school construction bond issue.

Wachovia was one of the banks that received federal rescue funds through the Troubled Asset Relief Program.

Fiorentino said in a letter to Obama that banks that receive the federal help "should not be permitted to exploit bad market conditions in order to make a profit at the expense of local taxpayers."

The school district learned in February that the yearly fee it pays to Wachovia would increase from $367,000 to $950,703.

In addition, Wachovia is requiring the district to maintain a $4.5 million deposit with the bank, which the district says will end up costing it at least $103,050.

Financial adviser Jerry Ford told school board members Monday that, because of the current market conditions, they don't have any other options but to renew the letter of credit with Wachovia.

"They are doing this because their cost has gone up, but also because they can," Ford said.

Fees for letters of credit have skyrocketed and "there is not another alternative out there for you," he said.

Board members reluctantly agreed to renew the letter of credit, but Chairman Frank Parker called it "a bitter pill."

Ken Wheatley, senior vice president of Wachovia Government & Institutional Banking in Tampa, said he understood why school district officials would be upset with the situation, but he said the higher fees are a reflection of the market.

A year ago, the school district restructured two school construction bond issues because of the collapse of the municipal bond insurers and the variable rate markets.

Wachovia, which was bought by Wells Fargo & Co. in late 2008, handled an $88.5 million bond issue for the district, underwriting the bonds, restructuring the interest rate swap and providing the letter-of-credit backing that supported the bonds.

In her letter to Obama, dated March 9, Fiorentino said that Wells Fargo/Wachovia received more than $25 billion in federal bailout money.

"We know that your intent, as well as that of Congress, was to ease the credit markets and not to allow the banks to exploit school districts, which will force them to cut programs, ignore maintenance needs and fire teachers," Fiorentino wrote.

The added cost for the school district comes at a time when Florida faces a substantial shortfall in education funding.

Reporter Ronnie Blair can be reached at (813) 948-4218.

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