Board approves foundation loan.

Terms for a $6 million loan to the financially strapped Florida Bar Foundation have been approved by the Bar Board of Governors.

The board at its July 25 meeting in Palm Beach approved the loan terms recommended by its Investment Committee, which include that the loan can be secured by the Foundation's IOTA revenues.

The agreement allows the Foundation to request an initial $3 million draw anytime after August 15, and a second equal payment one year later. The loan must be repaid in full within seven years after the initial disbursement.

"We took a vote [in March] under [former] President [Eugene] Pettis' leadership to conceptually approve this loan to the Foundation, which is critical to their survival," Bar President Greg Coleman told the board. "I can tell you that there have been daily conversations and phone calls and negotiations and renegotiations and restructuring with Gov. [Ian] Comisky [chair of the Bar's Investment Committee] and [Foundation President] John Patterson.

"They have worked tirelessly to come up with a document that should be acceptable to our board."

Coleman noted that some board members had queried whether the loan would be secured, and he said the agreement allows the Bar to request that the Foundation's future IOTA revenues be used to repay the loan, if necessary.

Comisky said the Bar's investment advisor, who also advises the Foundation : on its reserve funds, is predicting an improved economy would lead to an increase in interest rates, which in turn would easily enable the Foundation to repay the loan.

"Our investment advisor believes--and he's positioned our portfolio with the view--that interest rates have to go up, and the only question is whether it's the fourth quarter of this year or next year," Comisky said, adding this outlook is widespread in the investment community.

Interest rates are critical for the Foundation because its major source of income is its Interest on Trust Accounts program. With bank interest rates at near zero, the Foundation has seen annual IOTA income go from $72.6 million in FY 2007-08 to $5.3 million this year. Despite cutting grants to legal aid programs and trimming other expenditures, the Foundation has run through nearly all of its reserves and--even with the Bar loan--faces more cuts.

Foundation officials have said that even a slight uptick in interest rates would have a disproportionately beneficial effect on Foundation finances. Currently, interest on IOTA accounts averages...