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HomeMy WebLinkAboutStaff Report 14762 City of Palo Alto (ID # 14762) City Council Staff Report Meeting Date: 10/17/2022 Report Type: City of Palo Alto Page 1 Title: TEFRA Hearing Regarding Conduit Financing for the Kehillah Jewish High School's for the Partial or Full Refinancing of the 2014 Loan and Financing the Development, Construction, Renovation, Improvement and Equipping of the Corporation's Campus at 3900 Fabian Way, Palo Alto; and Approving the issuance of a Tax-exempt Loan by the California Municipal Finance Authority for this Purpose and Other Matters Relating Thereto From: City Manager Lead Department: Administrative Services Recommendation Staff recommends the City Council: 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 loan(s) by the California Municipal Finance Authority (CMFA) for the benefit of Kehillah Jewish High School (the “Borrower”). Background Kehillah Jewish High School (the “Borrower”), a California nonprofit public benefit corporation and an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the “Code”), has requested that the California Municipal Finance Authority (the “Authority”) participate in the issuance of one or more series of qualified 501(c)(3) tax-exempt loan(s) in an aggregate principal amount not to exceed $10,500,000 (collectively, the “Loan(s)”) in order to: (1) prepay in full or part the outstanding balance of the Authority’s 2014 Tax- Exempt Loan (Kehillah Jewish High School) (the “2014 Loan”); (2) finance the costs of construction, renovation, improvement and equipping of the Corporation’s campus at 3900 Fabian Way, Palo Alto, California 94303 (the “Facilities”), and (3) pay various costs of executing and delivering the Loan(s) and other related costs (collectively, the “2022 Projects”). The proposed Loan(s) will be secured under the provision of an Indenture and Loan Agreement and City of Palo Alto Page 2 will be payable solely by revenues consisting primarily of Loan(s) Repayments made by the Borrower. The proceeds of the 2014 Loan were used by the Corporation to (A) refund the outstanding principal amount of the Authority’s Variable Rate Demand Revenue Bonds (Kehillah Jewish High School) Series 2009 (the “2009 Bonds”), the proceeds of which were to enable the Corporation to finance or refinance the costs of the acquisition, construction, renovation and improvement of the Facilities; and (B) pay various costs of issuance and other related costs with respect to the 2014 Loan (the “2014 Projects, and collectively with the 2022 Project, the “Projects”). In order for all or a portion of the Loan(s) to qualify as a tax-exempt loan, the City of Palo Alto, at the request of the Borrower and CMFA, is conducting 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 Loan(s) for the financing of the project. Prior to the hearing, reasonable notice must be provided to the members of the community. This was done by the Borrower’s (via CMFA) financing team with coordination with the City Clerk’s Office. 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 Loan(s) 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 the issuance of the Loan(s) by the CMFA for the benefit of the Borrower. Again, the proposed Loan(s) will be a limited obligation of the CMFA, secured under the provision of an Indenture and Loan Agreement, and will be payable solely by revenues consisting primarily of Loan Repayments made by the Borrower. As cited in the published notice of September 22, 2022, 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, CMFA, or the Council to respond to any specific comments made during the hearing or submitted in writing. The Loan(s) are intended to partially or fully refinance the 2014 Loan and finance the Project described herein for the acquisition, construction, improvement, equipping and maintenance of certain educational, support and administrative facilities owned and operated within the City 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 City of Palo Alto Page 3 obligations of the CMFA do not constitute debts, liabilities or obligations of the members executing such agreement. The Loan(s) 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 Loan(s) for the financing of the project. All financing documents with respect to the issuance of the Loan(s) will contain clear disclaimers that the Loan(s) are not an obligation of the City of Palo Alto or the State of California but is 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 Loan(s) 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. The Borrower is requesting the issuance up to $10,500,000 Loan(s) through CMFA. The City will receive a fee for its services when the Loan(s) are issued (est. $7,000). Policy Implications Actions recommended in this report are consistent with Council’s prior actions in supporting non-profit financings under the TEFRA (e.g., most recently approving tax-exempt financing through the California Municipal Finance Authority for Wilton Court on February 10, 2020 (CMR ID # 10976) and Silicon Valley International School on September 13, 2021 (CMR ID # 13445, item # 5) and again recently on April 11, 2022 (CMR ID # 14048, item # 11). Stakeholder Engagement City staff coordinated with representatives of CMFA to prepare for the TEFRA hearing. Environmental Review Action on this item does not constitute a project under Section 21065 of the Public Resources Code. Attachments: • Attachment A: TEFRA Resolution- Kehillah Jewish High School NOT YET APPROVED 3704935.5 046219 RSIND Resolution No. ____ TEFRA Hearing Regarding Conduit Financing for Kehillah Jewish High School for the Purpose of Prepaying in Full or Part the California Municipal Finance Authority’s 2014 Tax-Exempt Loan (Kehillah Jewish High School) and the Financing and Refinancing of Construction, Improvement, Renovation, Furnishing and/or Equipping of Certain Facilities of Kehillah Jewish High School; and Approving the Issuance of a Tax-Exempt Loan by the California Municipal Finance Authority for this Purpose and Other Matters Relating Thereto R E C I T A L S A. Kehillah Jewish High School (the “Corporation”), a California nonprofit public benefit corporation and an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the “Code”), has requested that the California Municipal Finance Authority (the “Authority”) participate in the issuance of one or more series of qualified 501(c)(3) tax-exempt loans in an aggregate principal amount not to exceed $10,500,000 (collectively, the “Loan”) in order to: (1) prepay in full or part the outstanding balance of the Authority’s 2014 Tax-Exempt Loan (Kehillah Jewish High School) (the “2014 Loan”); (2) finance or refinance the costs of construction, improvement, renovation, furnishing and equipping of the Corporation’s campus at 3900 Fabian Way, Palo Alto, California 94303 (the “Facilities”); and (3) pay various costs of executing and delivering the Loan and other related costs (collectively, the “2022 Projects”). The proceeds of the 2014 Loan were used by the Corporation to (A) refund the outstanding principal amount of the Authority’s Variable Rate Demand Revenue Bonds (Kehillah Jewish High School) Series 2009, the proceeds of which were loaned to the Corporation to enable the Corporation to finance or refinance the costs of the acquisition, construction, renovation and improvement of the Facilities; and (B) pay various costs of issuance and other related costs with respect to the 2014 Loan (the “2014 Projects,” and collectively with the 2022 Project, the “Projects”); and B. Pursuant to Section 147(f) of the Code, the issuance of the Loan by the Authority must be approved by the City of Palo Alto (the “City”) because the Projects are to be located within the territorial limits of the City; and 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; and 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; and 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 Council of the City of Palo Alto RESOLVES as follows: Section 1. The foregoing recitals are true and correct. Section 2. The City Council, as the “applicable elected representative” of the governmental unit on behalf of which the Loan will be issued and having jurisdiction over the territorial limits in which the Projects are to be located, 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 which the Projects are to be located, in accordance with said Section 147(f), and (b) Section 4 of the Agreement. Section 3. 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 4. The adoption of this Resolution shall not obligate the City or any department thereof to (i) provide any financing with respect to the Projects; (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 Projects; (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 5. 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 6. 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