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SR 05-28-2019 11A City Council Report City Council Meeting: May 28, 2019 Agenda Item: 11.A 1 of 2 To: Mayor and City Council From: Gigi Decavalles-Hughes, Director, Finance Department, Revenue Subject: Public Hearing and Adoption of a Resolution Approving the California Enterprise Development Authority to Issue Revenue Obligations for the Benefit New Roads School 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 the issuance of the Obligations by the CEDA for the benefit of New Roads School. Executive Summary The California Enterprise Development Authority (CEDA), a joint powers authority of which the City is a member, proposes to issue $16 million of revenue obligations (bonds) for the benefit of New Roads School (Borrower) located at 3131 Olympic Boulevard in Santa Monica. Under the requirements of the Tax and Equity Fiscal Responsibility Act (“TEFRA”) and the Internal Revenue Code of 1986, as amended, the City must hold a public hearing to approve issuance of the bonds by CEDA. Proceeds of the obligations will be used for refinancing outstanding bonds, to fund future capital projects, and to pay for bond issuance costs. This approval does not obligate the City financially in any way, but is the requirement imposed by the Federal government to verify that projects meet a legitimate public purpose in order to have the advantage of exemption from Federal taxes. Discussion New Roads School was established in 1995 and currently serves over 510 students in grades K-12 at the Borrower’s 2.6 acre campus located at 3131 Olympic Boulevard in 2 of 2 Santa Monica. The Borrower is a California nonprofit public benefits corporation and an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the “Code”). Proceeds of the obligations will be used for refinancing outstanding bonds, to fund future capital projects, and to pay for bond issuance costs. In order to satisfy the requirements for the obligations to be issued as tax-exempt, the City as a member of CEDA is required to conduct the TEFRA hearing and approve the issuance of the obligations in accordance with Section 147(f) of the IRS Code. The Bonds to be issued by the CEDA on behalf of the Borrower will be the sole responsibility of the Borrower, and the City will have no financial, legal, or 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 the Borrower. As required by law, a public hearing notice was published in The Santa Monica Daily Press on May 21, 2019; at least 7 days prior to the hearing date. Financial Impacts and Budget Actions Approving the issuance of bonds by CEDA on behalf of the Borrower has no financial, legal or budgetary impact to the City. Prepared By: David Carr, Assistant City Treasurer Approved Forwarded to Council Attachments: A. Finance - Reso - New Roads TEFRA - 05.28.2019 1 City Council Meeting: May 28, 2019 Santa Monica, California RESOLUTION NUMBER _________ (CCS) (City Council Series) A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SANTA MONICA APPROVING THE ISSUANCE BY THE CALIFORNIA ENTERPRISE DEVELOPMENT AUTHORITY OF ITS REVENUE OBLIGATIONS FOR THE BENEFIT OF NEW ROADS SCHOOL AND/OR A RELATED ENTITY IN AN AGGREGATE AMOUNT NOT TO EXCEED $16,000,000 FOR THE PURPOSE OF FINANCING OR REFINANCING TH E COST OF ACQUISITION, DEVELOPMENT, CONSTRUCTION, INSTALLATION, EQUIPPING AND FURNISHING OF CERTAIN FACILITIES, AND OTHER MATTERS RELATING THERETO WHEREAS, New Roads School, a nonprofit public benefit corporation (the “Borrower”), duly organized and exist ing under the laws of the State of California (the “State”), has requested that the California Enterprise Development Authority (the “Authority”) issue, from time to time, pursuant to a plan of finance, its tax -exempt and/or taxable revenue obligations in an aggregate principal amount not to exceed $16,000,000 (the “Obligations”) for the benefit of the Borrower, pursuant to Chapter 5 of Division 7 of Title 1 of the Government Code of the State (commencing with Section 6500) (the “Act”) to (a) finance and refinance a portion of the cost of acquiring, developing, constructing, improving, installing, equipping and furnishing certain educational facilities which constitute portions of the Borrower’s approximately 2.6 acre campus located at 3131 Olympic Boulevard, Santa Monica, California 90404 and bordered by Olympic Boulevard 2 to the south, Nebraska Avenue to the north, Franklin Street to the east and Berkeley Street to the west, including approximately 73,150 square feet of improvements including classrooms, a theater, science labs, offices, outdoor play and sports areas, parking, and related and ancillary facilities (collectively, the “Facilities”), and (b) pay certain costs of issuance in connection with such financing or refinancing; and WHEREAS, the Borrower is an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the “Code”) and will own and operate the Facilities in connection with its philosophy of providing an inspired college preparatory program for students in grades K-12 from which an authentically diverse student population develops personal dedication to learning, a respect to independent thinking and an expanding curiosity about the world and its people; and WHEREAS, the issuance of the Obligations must be approved by the governmental unit on behalf of which the Obligations are issued and a governmental unit having jurisdiction over the territorial limits in which the Facilities are located pursuant to the public approval requirement of Section 147(f) of the Code; and WHEREAS, the Facilities are located within the territorial limits of the City of Santa Monica (the “City”), and the City Council (the “City Council”) is the elected legislative body of the City and is the “applicable elected representat ive” required to approve the issuance of the Obligations under Section 147(f) of the Code; and 3 WHEREAS, the Authority and the Borrower have requested that the City Council approve the issuance of the Obligations and the financing or refinancing of the Fac ilities with the proceeds of the Obligations solely for purposes of complying with Section 147(f) of the Code; and WHEREAS, a public hearing was held by the City Council on this 28 th day of May, 2019, at the meeting which commenced at the hour of 5:30 p.m., City Hall Council Chamber, 1685 Main Street, Santa Monica, California , the City Council of the City of Santa Monica, following duly published notice thereof in a newspaper of general circulation in the City of Santa Monica, and all persons desiring to b e heard have been heard; and WHEREAS, it is intended that this Resolution shall comply with the public approval requirements of Section 147(f) of the Code; provided, however, that this Resolution is neither intended to nor shall it constitute an approval by the City Council of the Facilities for any other purpose, including, but not limited to, compliance with the California Environmental Quality Act (California Public Resources Code, Section 21100, et seq.) (“CEQA”). NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SANTA MONICA DOES RESOLVE AS FOLLOWS: SECTION 1. The City Council hereby finds and determines that all of the recitals are true and correct. The City Council, as the “applicable elected representative” of the governmental unit on behalf of which the Obligations will be issued and having jurisdiction 4 over the area in which the Facilities are located, hereby approves the issuance of the Obligations by the Authority, which Obligations may be tax -exempt and/or taxable as approved by the Authority in its resolution, in an amount not to exceed $16,000,000 to finance or refinance the costs of the Facilities. This resolution shall constitute approval of the issuance of the Obligations within the meaning of Section 147(f) of the Code and shall constitute the approval of the issuance of the Obligations within the meaning of the Act; provided, however, that this Resolution shall not constitute an approval by the City Council of the Facilities for any other purposes, including compliance the reof with CEQA, nor does it constitute an approval of the underlying credit or financial structure of the Obligations. The City Council shall not bear any responsibility for the issuance of the Obligations, the tax-exempt status of the Obligations, the repayment of the Obligations or any other matter related to the Obligations. SECTION 2. All actions heretofore taken by the officers, employees and agents of the City with respect to the approval of the issuance of the Obligations are hereby approved, confirmed and ratified, and the officers and employees of the City and their authorized deputies and agents are hereby authorized and directed, jointly and severally, to do any and all things and to execute and deliver any and all certificates and documents which they or bond counsel may deem necessary or advisable in order to consummate the issuance of the Obligations and otherwise to effectuate the purposes of this Resolution. SECTION 3. The adoption of this Resolution shall not obligate the City or any department thereof to (i) provide any financing for the Facilities; (ii) approve any 5 application or request for or take any other action in connection with any planning approval, permit or other action necessary for the acquisition, rehabilitation or operation of the Facilities; or (iii) make any contribution or advance any funds whatsoever to the Authority. SECTION 4. Th e City Clerk shall certify to the adoption of this Resolution, and thenceforth and thereafter the same shall be in full force and effect. APPROVED AS TO FORM: _________________________ LANE DILG City Attorney REFERENCE: Resolution No. 11173 (CCS)