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HomeMy WebLinkAboutStaff Report 7801 City of Palo Alto (ID # 7801) City Council Staff Report Report Type: Action Items Meeting Date: 3/20/2017 City of Palo Alto Page 1 Summary Title: TEFRA Hearing for the Channing House to Issue Bonds Title: TEFRA HEARING: Regarding Conduit Financing for the Channing House Project Located at 850 Webster Street, Palo Alto, and Approving the Issuance of Revenue Bonds by the California Municipal Finance Authority for the Purpose of Financing and Refinancing the Acquisition, Construction, Equipping and Furnishing of Improvements to Channing House From: City Manager Lead Department: Administrative Services RECOMMENDATION 1) Conduct a public hearing under the requirements of the Tax Equity and Fiscal Responsibility Act of 1983 (TEFRA) and the Internal Revenue Code of 1986, as amended (Code); and 2) Adopt a resolution (Attachment A) approving the issuance of the bonds by the California Municipal Finance Authority (CMFA) for the benefit of Channing House (Borrower). BACKGROUND Channing House (the “Borrower”), a California nonprofit public benefit corporation and an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986 (the “Code”), has requested that the CMFA participate in the issuance of one or more series of revenue bonds in an aggregate principal amount not to exceed $110,000,000 (the “Bonds”) for the purpose of (i) refunding all or a portion of the outstanding ABAG Finance Authority for Nonprofit Corporations Insured Revenue Bonds (Channing House), Series 2010 (the “Prior Bonds”), the proceeds of which were used to finance and refinance certain costs related to the acquisition, construction, equipping and furnishing of improvements to the Borrower’s continuing care retirement community located generally at and in the vicinity of 850 Webster Street, Palo Alto, California 94301; and (ii) financing the acquisition, construction, equipping and furnishing of improvements at the Borrower’s continuing care retirement community located generally at and in the vicinity of 850 Webster Street, Palo Alto, California 94301 (collectively, the “Project”). City of Palo Alto Page 2 In order for all or a portion of the bonds to qualify as tax-exempt bonds, the City of Palo Alto must conduct a public hearing (TEFRA Hearing), providing the members of the community an opportunity to speak in favor of or against the use of tax-exempt bonds for the financing of the project. Prior to the hearing, reasonable notice must be provided to the members of the community. Following the close of the TEFRA hearing, an “applicable elected representative” of the governmental unit hosting the proposed project must provide its approval of the issuance of the bonds for the financing of the project. DISCUSSION Since the facilities to be financed with the proceeds of the CMFA’s debt are located within the jurisdiction of the City of Palo Alto, the City has been asked to conduct a TEFRA hearing and adopt a resolution (Attachment A) that approves both the issuance of bonds by the CMFA for the benefit of Channing House. As cited in the published notice of February XX, 2017, the public hearing is simply an opportunity for all interested persons to speak or to submit written comments concerning the proposal to issue the debt and the nature or location of the facility to be financed; however, there is no formal obligation on the part of the borrower or the Council to respond to any specific comments made during the hearing or submitted in writing. The bonds are intended to (i) refund all or a portion of the outstanding Prior Bonds in an amount not to exceed $65,0000,000, the proceeds of which were used to finance and refinance certain costs related to the acquisition, construction, equipping and furnishing of improvements to the Borrower’s continuing care retirement community located generally at and in the vicinity of 850 Webster Street, Palo Alto, California 94301; and (ii) finance the acquisition, construction, equipping and furnishing of improvements The Project located generally at and in the vicinity of 850 Webster Street, Palo Alto, California 94301 in an amount not to exceed $45,000,000. The Project is or will be owned and operated by the Borrower. The CMFA is a joint exercise of powers authority that the City became a member of on April 14, 2008. The Joint Exercise of Powers Agreement provides that the CMFA is a public entity, separate and apart from each member executing such agreement. The debts, liabilities and obligations of the CMFA do not constitute debts, liabilities or obligations of the members executing such agreement. The bonds to be issued by the CMFA for the project will be the sole responsibility of the borrower, and the City of Palo Alto will have no financial, legal, moral obligation, liability or responsibility for the project or the repayment of the bonds for the financing of the project. All financing documents with respect to the issuance of the bonds will contain clear disclaimers that the bonds are not obligations of the City of Palo Alto or the State of California but are to be paid for solely from funds provided by the borrower. The City is in no way exposed to any financial liability by reason of its membership in the CMFA. In addition, participation by the City in the CMFA does not impact the City’s appropriations limits and will not constitute any type of indebtedness by the City. Outside of holding the TEFRA City of Palo Alto Page 3 hearing, 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. Based on the benefits of the project to the Palo Alto community and the lack of any financial obligations on the part of the City, staff recommends that Council approve the attached resolution. RESOURCE IMPACT As stated, the City will incur no financial obligation from approval of the recommendations. Channing House is requesting authority to issue up to $110 million in bonds through the CMFA. The City will receive a fee for its services when the bonds are issued. POLICY IMPLICATIONS Actions recommended in this report are consistent with Council’s prior actions in supporting non-profit financings under the TEFRA (e.g., recently approving tax-exempt financing through the California Municipal Finance Authority for the Stevenson House project, Report ID # 5655). ENVIRONMENTAL REVIEW Action on this item does not constitute a project under Section 21065 of the Public Resources Code. Attachments:  Attachment A: TEFRA Resolution for Channing House Attachment A 170209 ms 0140176 Resolution No. _______ Resolution of the City Council of the City of Palo Alto Approving the Issuance of California Municipal Finance Authority Insured Revenue Bonds in an Aggregate Principal Amount Not To Exceed $110,000,000 for the Purpose of Financing and Refinancing the Acquisition, Construction, Equipping and Furnishing of Improvements to Channing House and Certain Other Matters Relating Thereto R E C I T A L S A. Channing House (the “Borrower”), a California nonprofit public benefit corporation and an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986 (the “Code”), has requested that the California Municipal Finance Authority (the “Authority”) participate in the issuance of one or more series of revenue bonds in an aggregate principal amount not to exceed $110,000,000 (the “Bonds”) for the purpose of (i) refunding all or a portion of the outstanding ABAG Finance Authority for Nonprofit Corporations Insured Revenue Bonds (Channing House), Series 2010 (the “Prior Bonds”), the proceeds of which were used to finance and refinance certain costs related to the acquisition, construction, equipping and furnishing of improvements to the Borrower’s continuing care retirement community located generally at and in the vicinity of 850 Webster Street, Palo Alto, California 94301; and (ii) financing the acquisition, construction, equipping and furnishing of improvements at the Borrower’s continuing care retirement community located generally at and in the vicinity of 850 Webster Street, Palo Alto, California 94301 (collectively, the “Project”). B. Pursuant to Section 147(f) of the Code, the issuance of the Bonds by the Authority must be approved by the City of Palo Alto (the “City”) because the Project is located within the territorial limits of the City. C. The City Council of the City (the “City Council”) is the elected legislative body of the City and is one of the “applicable elected representatives” required to approve the issuance of the Bonds under Section 147(f) of the Code. D. The Authority has requested that the City Council approve the issuance of the Bonds by the Authority in order to satisfy the public approval requirement of Section 147(f) of the Code and the requirements of Section 4 of the Joint Exercise of Powers Agreement Relating to the California Municipal Finance Authority, dated as of January 1, 2004 (the “Agreement”), among certain local agencies, including the City. E. Pursuant to Section 147(f) of the Code, the City Council has, following notice duly given, held a public hearing regarding the issuance of the Bonds, and now desires to approve the issuance of the Bonds by the Authority. NOW, THEREFORE, the City Council of the City of Palo Alto RESOLVES as follows: SECTION 1. The foregoing resolutions are true and correct. Attachment A 170209 ms 0140176 SECTION 2. The City Council hereby approves the issuance of the Bonds by the Authority. It is the purpose and intent of the City Council that this resolution constitute approval of the issuance of the Bonds by the Authority, for the purposes of (a) Section 147(f) of the Code by the applicable elected representative of the governmental unit having jurisdiction over the area in which the Project is to be located, in accordance with said Section 147(f) and (b) Section 4 of the Agreement. SECTION 3. The officers of the City are hereby authorized and directed, jointly and severally, to do any and all things and to execute and deliver any and all documents which they deem necessary or advisable in order to carry out, give effect to and comply with the terms and intent of this resolution and the financing transaction approved hereby. SECTION 4. This resolution shall take effect immediately upon its adoption. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: City Clerk Mayor APPROVED AS TO FORM: APPROVED: City Attorney City Manager or Designee Director of Administrative Services [SEAL] OHSUSA:766422019