SR-03-17-2015-9AID
Report
City of ' Council
Santa Moniea
Agenda Item: 1))
To: Mayor and City Council
From: Gigi Decavalles- Hughes, Director of Finance
Subject: Public Hearing and Adoption of Resolution Approving the California
Municipal Finance Authority ( "CMFA ") to Issue Revenue Bonds for the
Benefit of 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;
2) Receive Public Comment; and
3) Adopt the attached resolution approving the issuance of the Bonds by the
California Municipal Finance Authority (CMFA) for the benefit of Crossroads.
Executive Summary
TEFRA requirements state that the Council must hold a public hearing and adopt a
resolution approving the issuance of the California Municipal Finance Authority (CMFA)
Revenue Bonds for the Crossroads School for Arts and Sciences in an aggregate
principal amount not to exceed $32 million for the purpose of financing and refinancing
the acquisition, construction, improvement and equipping of educational facilities and
related properties. The TEFRA public hearing and Council approval of issuance of the
bonds are required to have all or a portion of the bonds to qualify as tax exempt. 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.
Discussion
The CMFA proposes to issue up to $32 million of tax - exempt revenue bonds for the
purposes of making a loan to The Crossroads School for Arts and Sciences, a nonprofit
public benefit corporation described in Section 501(c)(3) of the Code, to (1) refund the
California Municipal Finance Authority Revenue Bonds (The Crossroads School for Arts
and Sciences) Series 2010. The proceeds of this bond were used to finance or
refinance the acquisition, construction, renovation, improvement and equipping of
educational facilities and related properties owned or leased by the Borrower located at
1715 Olympic Boulevard (and generally along Olympic Boulevard between 17th and
18th Street), 1728 21st Street, 1730 21st Street, 1732 21st Street, 1734 21st Street,
1748 21st Street and 1753 21st Street (and generally along 21st Street between
Olympic Boulevard and Michigan Avenue), all in the City of Santa Monica; and
proposes to (2) finance or refinance the acquisition, construction, renovation,
improvement and equipping of educational facilities and related properties located at
1701 21st Street, 1704 22nd Street, 1728 22nd Street, 1728 21st Street, 1730 21st
Street, 1732 21st Street, 1713 -15 20th Street, 1729 and 1731 20th Street, all in the City
of Santa Monica. The Project is owned and operated by the Borrower.
As required by law, this public hearing has been publically noticed for fourteen days.
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 City is a member of CFMA through a joint
exercise of powers agreement executed on September 14, 2010 per Council approval.
The Bonds to be I 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
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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
The Board of Directors of the California Foundation for Stronger Communities, a
California non - profit public benefit corporation (the "Foundation "), acts as the Board of
Directors for the CMFA. Through its conduit issuance activities, the CMFA shares a
portion of the issuance fees it receives with its member communities and donates a
portion of these issuance fees to the Foundation for the support of local charities. With
respect to the City of Santa Monica, staff expects that the CMFA will grant a portion of
the issuance fee attributable to the City to its General Fund. Such grant may be used
for any lawful purpose of the City, and will assist in covering any cost the City has
incurred in relation to this TEFRA hearing. The Borrower will be the beneficiary of the
CMFA's charitable donation through a 25% reduction in issuance fees.
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, the City's participation in the CMFA will not impact its appropriations limits and
will not constitute any type of indebtedness by the City. Outside of holding the TEFRA
hearing and adopting the required resolution, no other participation or activity of the City
or the City Council with respect to the issuance of the Bonds will be required.
The City's financial advisor has prepared a written opinion stating that the City of Santa
Monica would not have any financial liability for Bonds, nor would any possible
subsequent difficulties concerning payment of annual debt service on the Bonds
adversely impact the City's credit ratings.
Staff anticipates that the CMFA will grant a portion of the issuance fee to the City. Such
grant may be used for any lawful purpose of the City. That amount is unknown at this
time; however, staff expects the amount received will not be material, and thus no
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budget changes are necessary. However, staff anticipates that the amount will cover
any cost incurred by the City in relation to this TEFRA hearing. Approving the issuance
of bonds by CMFA on behalf of Crossroads has no other financial, legal or budgetary
impact.
Financial Impacts & Budget Actions
There is no immediate financial impact or budget action necessary as a result of the
recommended action.
Prepared by: David R. Carr, Assistant City Treasurer /Acting Business & Revenue
Operations Manager
Approved:
Gigi Decavalles ghes
Director of Finance
Attachment:
Forwarded to Council:
Elaine M. Polachek
Interim City Manager
Resolution of the City Council of the City of Santa Monica Approving the Issuance of
Revenue Bonds by the California Municipal Finance Authority to Benefit Crossroads
School for the Arts and Sciences
CI
Reference:
Amended Contract No. 9553
(CCS)