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sr-091410-9aCity Council Meeting: September 14, 2010 Agenda Item: ~~ To: Mayor and City Council From: Carol Swindell, Director of Finance Subject: Public Hearing and Adoption of Resolution Approving, Authorizing and Directing Execution of a Joint Exercise of Powers Agreement with the California Municipal Finance Authority ("CMFA") and Approval of Issuance of Revenue Bonds by the CMFA to Benefit Crossroads School for the Arts and Sciences ("Crossroads"). Recommended Action Staff recommends that the City Council: 1. Hold a public hearing under the requirements of the Tax and Equity Fiscal Responsibility Act ("TEFRA") and the Internal Revenue Code of 1986, as amended; and, 2. Adopt a resolution approving, authorizing and directing the City Manager to execute a Joint Exercise of Powers Agreement with the CMFA and approving the issuance of the Bonds by the CMFA for the benefit of Crossroads. Executive Summary In order for Crossroads to issue tax-exempt bonds, the City of Santa Monica must hold a public hearing and approve the issuance of the bonds. In order for CMFA to have the authority to serve as the issuer of the bonds on behalf of Crossroads School for the Arts and Sciences, the City of Santa Monica must become a member of CMFA. Discussion Crossroads is proposing that CMFA issue on its behalf $14 million of tax-exempt revenue bonds to refinance existing indebtedness on facilities located in the City of Santa Monica and to finance the acquisition and improvement of properties located at 1715 Olympic Boulevard, 1728-32 21st Street, and 1734 21st Street in Santa Monica. As required by law, this public hearing has been public noticed for fourteen days. 1 The CMFA was formed to assist local governments, non-profit organizations and businesses with the issuance of taxable and tax-exempt bonds aimed at improving the standard of living of California. The CMFA is a public entity, separate and apart from each member, and the debts and obligations of the CMFA do not constitute debts, liabilities or obligations of the members. The Bonds to be issued by the CMFA on behalf of Crossroads will be.the sole responsibility of Crossroads, and the City will have no financial, legal, moral obligation, liability or responsibility for the repayment of the bonds. All financing documents with respect to the issuance of the Bonds will contain clear disclaimers that the bonds are not obligations of the City or the State of California, but are to be paid for solely from funds provided by Crossroads. There are no costs associated with membership in the CMFA and the City will in no way become exposed to any financial liability by reason of its membership in the CMFA. In addition, participation by the City in the CMFA will not impact the City's appropriations limits and will not constitute any type of indebtedness by the City.. Outside of holding the TEFRA hearing, adopting the required resolution and executing the Joint Exercise of Powers Agreement of the CMFA, no other participation or activity of the City or the City Council with respect to the issuance of the Bonds will be required. The Joint Exercise of Powers Agreement expressly provides that any member may withdraw from such agreement upon written notice to the Board of Directors of the CMFA. In the case of the proposed bond financing for Crossroads, the City following its execution of the Joint Exercise of Powers Agreement, could, at any time following the issuance of the Bonds, withdraw from the CMFA by providing written notice to the Board of Directors of the CMFA. The City's financial advisor and the CMFA's bond counsel have prepared written opinions indicating that the City of Santa Monica would not have any financial liability for 2 the tax exempt revenue bonds, nor would any possible subsequent difficulties concerning payment of annual debt service on the revenue bonds adversely impact the City's credit ratings. Financial Impacts & Budget Actions Approving the issuance of bonds by CMFA on behalf of Crossroads and execution of a Joint Powers Agreement with CMFA has no financial or budgetary impact. CMFA will reimburse the City for staff costs associated with the public hearing and execution of Joint Powers Agreement by granting the City 25% of the issuance costs associated with the bond issuance expected to be approximately $8,500. Prepared by: Candace Tysdal, Financial Operations Manager Approved: Forwarded to Council: ~~s~ Carol Swindell ~ ~ Rod Gould Chief Financial Officer ~ City Manager Attachment: A. Resolution of the City Council of the City of Santa Monica Approving, Authorizing, and Directing Execution of a Joint Exercise of Powers Agreement Relating to the California Municipal Finance Authority and Approving the Issuance of Revenue Bonds by the California Municipal Finance Authority to Benefit Crossroads School for the Arts and Scien ces 3 Reference Resolution No. 10526 (CCS) and Contract No. 9278 (CCS).