SR-410-006 (3)November 12, 1999
VIA TELECOPY (310-576-1539)
Ms. Barbara Stinchfield
Director of Community and Cultural Services
1685 Main Street
Santa Monica, California 90407
Re: Approval for California Statewide Communities Development
Authority-American Youth Hostels, Inc. and the Los Angeles
Council of American Youth Hostels, Inc. Project
Dear Ms. Stinchfield:
We have enclosed a form of the Notice of Public Hearing and the resolution of the City
Council of the City of Santa Monica, California (the "Local Government Participant") with respect
to a financing to be accomplished through the California Statewide Communities Development
Authority (the "CSCDA"). In addition, set forth below is a brief summary of the basis for the
power of the CSCDA to accomplish the financing, as well as the action required to be
undertaken by the Local Government Participant, as a program participant of the CSCDA, in
order for the financing to proceed. The CSCDA structures its financings so that neither the
CSCDA nor the Local Government Participant will be subject to pecuniary liability.
Pursuant to the Joint Powers Act, comprising of Article 1, Article 2 and Article 3 of
Chapter 5 of Division 7 of Title 1(commencing with Section 6500) of the Government Code of
the State of California, a number of California cities and counties, including the Local
Government Participant ("Program Participants"), have entered into a joint exercise of powers
agreement (the "Joint Powers Agreement") under which the CSCDA was organized.
The CSCDA is authorized by the Joint Powers Agreement to issue bonds, notes or other
evidences of indebtedness, or certificates of participation in leases or other financing
agreements, in order to promote economic development. The CSCDA is also authorized, by a
resolution adopted March 21, 1991, to issue bonds, notes or other evidences of indebtedness,
or certificates of participation in leases or other agreements to finance or refinance facilities
owned and operated by organizations described in Section 501(c)(3) of the Internal Revenue
Code of 1986 and which are determined by the CSCDA to satisfy the criteria set forth in the
resolution. In 1991, the California Superior Court entered a judgment validating the resolution
(and therefore the CSCDA's authority to act as an issuer in Section 501(c)(3) financings).
Pursuant to the Joint Powers Agreement, the CSCDA will not approve a financing unless
the governing body of the Program Participant in whose jurisdiction the project is located or is to
be located approves the project and the financing of the project.
Furthermore, Section 147(f) of the Internal Revenue Code of 1986 requires that the
proposed financing be approved by a governmental unit having jurisdiction over the area in
which the project to be financed is located or is to be located. A financing will be treated as
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having been approved by a governmental unit if it is approved "by the applicable elected
representative of such governmental unit after a public hearing following reasonable public
notice."
This does not affect the credit of the Local Government Participant and the Local
Government Participant is under no obligation to pay for the debt service for the project.
The foregoing will be satisfied if the City Council of the Local Government Participant
holds a public hearing on December 7, 1999, or a date specified by the City (after at least 14
days prior published notice) and approves the project and the financing. Again, although the
Local Government Participant would be approving the financing for the purposes of federal tax
law and the Joint Powers Agreement, the Local Government Participant would not have
pecuniary liability with respect to the financing.
We can arrange for the Notice of Public Hearing to be published in a/oca/ newspaper of
the City or if you arrange for the publication, p/ease forward an affidavit of publication of the
notice to us. In addition, after the reso/ution has been adopted by the City Council, we will need
a signed copy of the reso/ution for the c/osing transcript.
After the resolution has been adopted, please forward a signed copy to us. Thank you
for your help. Please call if you have any questions or need anything further.
Very truly yours,
JWW/jkj
Enclosure
James W. Winn
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