11-20-2002 Regular Meeting and Public Hearing

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Mar OS 03 12:03p • • P•7 FIRST NATIONAL BANK OF BELLAIRE Craig s. Wooten President March 4, 2003 William L. Helm Horizon Residential, Inc. 2525 South Shore Blvd. Suite 407 League City, Texas 77573 Dear Mr. Helm, 5501 Bissonnet Box 40 Bellaire, Texas 77402 tel 713-666-2511 fax 713-666-7199 www. f nbbellaire.corn Previously I have tried to assist you in obtaining a maintenance insurance bond as required by La Porte's new Planning & Zoning ordinances. Through my contact with Travelers Insurance, I was told that they were not interested in bidding on such an open- ended obligation. Alternatively you have requested information on our ability to issue a letter of credit in lieu of a long- term maintenance bond. Based on my 30 years experience and further discussion with our major correspondent bank, we have not heard of a letter of credit issued in this manner. It would've extremely difficult for a bank to underwrite a letter of credit for such an extended period of time and for the purpose intended. Most letters of credit are for short duration of 1 to 3 years and for specific performances. The type that is being proposed is for replacement and repair that could be 15 or 20 years away and for problems that may or may not exist. A bank would have a difficult time in determining a borrower's credit worthiness this far in the future. It is also nonsensical to expect a developer to pledge cash or other collateral to secure a letter of credit for this length of time. The security would have to be given at the time the letter of credit was issued when no maintenance would be needed. A requirement of this nature would increase the cost substantially and make the project financially non feasible. Based on the requirements of the letter of credit and it's length, neither our bank or its correspondent bank would have an interest in issuing a letter of credit as proposed by the City of LaPorte. Yours truly, &aft S. Wooten