GARDEN GROVE : Sanitary District May Seek Loan to Pay Note

With a $5.4-million note coming due in May, the Garden Grove Sanitary District is considering turning to a private bank for help.

A prospective loan from Bank of America would be contingent on the special district raising trash collection rates for residents and business owners.

Residential trash rates, currently $13.20 a month, would increase by about 65 cents, and commercial rates could rise by 3%, according to General Manager Ronald D. Cates.

If approved, the higher fees would generate an additional $27,000 monthly, enough to pay for the proposed five-year, $1.3-million loan, whose interest rate is still being negotiated.

The $1.3 million represents the losses the special district would incur if it gets back only 77% of the funds it has in the now-bankrupt Orange County investment pool. An additional 3% could come in June under a plan being worked out by the county and its creditors, including the district.

Cates said the district needs the $1.3 million to avoid defaulting on the notes and in turn declaring bankruptcy.

At a special meeting Monday, the district’s five-member board delayed action on the loan proposal, saying it wants to weigh alternative financing plans.

“We’re faced with a very tough situation,” said board member Kathryn Barr. “Regardless of what we do, we’ll have to raise rates.”

The special district has requested a “bridge” loan of $5.4 million from the Orange County Sanitation Districts. In addition, city officials had offered to lend the district $5 million, or whatever it needs to pay its debts, on the condition that the district allow the city to take over sewer and trash collection services.

“The rates are going up because five people (the district board members) did not do the right thing,” said Mayor Bruce A. Broadwater, who is leading the effort to take over the district’s functions.