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HomeMy WebLinkAboutStaff Report 4213 City of Palo Alto (ID # 4213) City Council Staff Report Report Type: Action Items Meeting Date: 11/12/2013 City of Palo Alto Page 1 Summary Title: Public Hearing: TEFRA Request; Adopt a Resolution Approving the issuance of the Bonds by the CMFA Title: Tefra Hearing Regarding Conduit Financing for the Gideon Hausner Jewish Day School Project Located at 450, 470, 490 And 560 San Antonio Road, 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, Improvement and Equipping of Various Educational Facilities and Certain Other Matters Relating Thereto 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 Gideon Hausner Jewish Day School, Inc. Executive Summary Gideon Hausner Jewish Day School, Inc., requested that CMFA serve as the municipal issuer of tax exempt revenue bonds in an aggregate principal amount not to exceed $14,000,000. Proceeds will be used to redeem previously issued bonds and to reimburse the School for prior capital costs. To issue these bonds under federal law (TEFRA) and the Internal Revenue Service Code, elected representatives of the host government must conduct a public hearing and approve issuance of the bonds. Since the Gideon Hausner School facilities are located on San Antonio Road within City limits, the School and CMFA have requested this hearing. The bond issuance is the sole responsibility of the Gideon Hausner Jewish Day School, Inc. and the City of Palo Alto will have no financial, legal, moral obligation, liability or responsibility for repayment of the bonds. City of Palo Alto Page 2 Background Gideon Hausner Jewish Day School, Inc. requested that the CMFA serve as the municipal issuer of bonds for the Gideon Hausner Jewish Day School project in an aggregate principal amount not to exceed $14,000,000 of tax exempt revenue bonds. Proceeds from the issuance of the bonds will be used to: redeeming in full the California Municipal Finance Authority Variable Rate Demand Revenue Bonds (Gideon Hausner Jewish Day School) Series 2008; (2) paying and/or reimbursing the School for the costs of constructing, improving, renovating, furnishing and/or equipping of educational facilities and related administrative and support facilities at the School's campus located at 450, 470, 490 and 560 San Antonio Road, Palo Alto, California 94306, including but not limited to the demolition of pre-existing buildings and construction of additional educational facilities, including but not limited to a full size gymnasium, a performing arts facility and multipurpose facilities; and (3) paying costs of issuance with respect to the Loan (collectively, the “Project”). The Project will be owned and operated by the Corporation. 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 Gideon Hausner Jewish Day School. As cited in the published notice of October 25, 2013 in the San Jose Mercury News and the Palo Alto Weekly, 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 financing includes, but is not limited to, financing acquisition, construction, improvement, and equipping of educational facilities and certain other matters relating thereto located at 450, 470, 490 and 560 San Antonio Road, Palo Alto, California 94306. City of Palo Alto Page 3 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 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. Gideon Hausner Jewish Day School, Inc. is requesting authority to issue up to $14 million in bonds through the CMFA. The City will receive a fee for its services when the bonds are issued. The City would receive approximately $7,000 if the par amount of the bonds issued is $14 million. Policy Implications Actions recommended in this report are consistent with Council’s prior actions in supporting non-profit financings under TEFRA. Environmental Review Action on this item does not constitute a project under Section 21065 of the Public Resources Code. Attachments:  Attachment A: Resolution Gideon Hausner Jewish Day School TEFRA (PDF) NOT YET APPROVED 131029 jb 0131150 Resolution No. _____ Resolution of the City Council of the City of Palo Alto Approving the Issuance of Tax- Exempt Obligations of the California Municipal Finance Authority in an Aggregate Principal Amount Not To Exceed $14,000,000 for the Purpose of Financing and Refinancing the Acquisition, Construction, Improvement and Equipping of Various Educational Facilities and Certain Other Matters Relating Thereto A. Gideon Hausner Jewish Day School, a California nonprofit religious corporation and an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the “School”), has requested that the California Municipal Finance Authority (the “Authority”) participate in the issuance of one or more series of tax exempt loans in an aggregate principal amount not to exceed $14,000,000 (collectively, the “Loan”) for the purposes of (1) redeeming in full the California Municipal Finance Authority Variable Rate Demand Revenue Bonds (Gideon Hausner Jewish Day School) Series 2008; (2) paying and/or reimbursing the School for the costs of constructing, improving, renovating, furnishing and/or equipping of educational facilities and related administrative and support facilities at the School's campus located at 450, 470, 490 and 560 San Antonio Road, Palo Alto, California 94306, including but not limited to the demolition of pre-existing buildings and construction of additional educational facilities, including but not limited to a full size gymnasium, a performing arts facility and multipurpose facilities; and (3) paying costs of issuance with respect to the Loan (collectively, the “Project”). B. Pursuant to Section 147(f) of the Internal Revenue Code of 1986 (the “Code”), the issuance of the Loan by the Authority must be approved by the City because the Project is to be 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 Loan under Section 147(f) of the Code. D. The Authority has requested that the City Council approve the issuance of the Loan 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 Loan, and now desires to approve the issuance of the Loan by the Authority. The City Council of the City of Palo Alto RESOLVES as follows: SECTION 1. The City Council hereby approves the issuance of the Loan by the Authority. It is the purpose and intent of the City Council that this resolution constitute approval of the issuance of the Loan 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 131029 jb 0131150 which the Project is to be located, in accordance with said Section 147(f), and (b) Section 4 of the Agreement. SECTION 2. The issuance of the Loan shall be subject to approval of the Authority of all financing documents relating thereto to which the Authority is a party. The City shall have no responsibility or liability whatsoever with respect to repayment or administration of the Loan. SECTION 3. The adoption of this Resolution shall not obligate the City or any department thereof to (i) provide any financing with respect to the Project; (ii) approve any application or request for or take any other action in connection with any planning approval, permit or other action necessary with respect to the Project; (iii) make any contribution or advance any funds whatsoever to the Authority; or (iv) take any further action with respect to the Authority or its membership therein. SECTION 4. 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 5. 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: ____________________________ ___________________________ Senior Assistant City Attorney City Manager or Designee ___________________________ Director of Administrative Services