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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.

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