Title
SUMMARY: Public Hearing to facilitate a tax exempt bond financing for capital improvements to school facilities at the Chinese Christian School located on Bay Farm Island. The bonds are not an obligation of the City.
Public Hearing Under the Tax Equity and Fiscal Responsibility Act (TEFRA) to Consider Adoption of Resolution Approving Associate Membership by the City of Alameda in the California Enterprise Development Authority (CEDA) and the Execution of an Associate Membership Agreement Relating to Associate Membership of the City in the Authority; and Adoption of Resolution Approving the Issuance by the California Enterprise Development Authority of Its Revenue Obligations on Behalf of the Bay Area Chinese Bible Church and/or a Related Entity in an Aggregate Amount Not to Exceed $12,000,000 for the Purpose of Financing and Refinancing the Cost of Acquisition, Construction, Improvement and Equipping of Certain Property, Providing the Terms and Conditions for Such Obligations and Other Matters Relating Thereto. (City Attorney 2310)
Note: The bonds will not represent a debt of the City, nor do they obligate the City in any way.
Body
To: Honorable Mayor and Members of the City Council
From: Jill Keimach, City Manager
Re: Public Hearing Under the Tax Equity and Fiscal Responsibility Act (TEFRA) to Consider Adoption of Resolution Approving Associate Membership by the City of Alameda in the California Enterprise Development Authority and the Execution of an Associate Membership Agreement Relating to Associate Membership of the City in the Authority; and Adoption of Resolution Approving the Issuance by the California Enterprise Development Authority of Its Revenue Obligations on Behalf of the Bay Area Chinese Bible Church and/or a Related Entity in an Aggregate Amount Not to Exceed $12,000,000 for the Purpose of Financing and Refinancing the Cost of Acquisition, Construction, Improvement and Equipping of Certain Property, Providing the Terms and Conditions for Such Obligations and Other Matters Relating Thereto
BACKGROUND
The Chinese Christian School has requested the City to conduct a public hearing to allow them to: (1) refinance the cost of acquisition, construction, improvement and equipping of an approximately eight acre educational complex located at 1801 and 1803 North Loop Road, Alameda, California 94502 with (i) an approximately 35,926 square foot, two-story educational building with classrooms, offices and meeting rooms and (ii) an approximately 30,231 square foot, one-story building with a gymnasium, multi-purpose rooms, kitchen and nursery and pre-school; and (2) finance and refinance various capital projects, including but not limited to, construction of a new kitchen to provide meals to students and visitors, upgrades and expansions to sports fields and improvements to the nursery and pre-school (collectively, the “Facilities”). A portion of the proceeds of the Obligations will be used to pay certain expenses incurred in connection with the issuance of the Obligations. The Facilities will be owned and operated by the Bay Area Chinese Bible Church (the “Borrower”), a nonprofit religious corporation and an organization described in Section 501(c)(3) of the Code.
DISCUSSION
The Authority: The Authority is a joint powers authority (JPA) established by the California Association for Local Economic Development (CALED), whose purpose is to issue tax-exempt and taxable conduit revenue bonds to fund commercial and industrial development projects within member jurisdictions. Federal and state laws provide the ability for cities and counties to join together under cooperative agreements to form joint powers authorities to issue tax-exempt and taxable bonds to fund projects that provide a public benefit and serve the needs of residents within the jurisdictions of the participating members. Cities and counties in California utilize joint powers authorities primarily for economies of scale, to access specialized transaction knowledge and resources, and to avoid using valuable local staff time on these types of transactions.
The Authority is a joint powers authority created by the cities of Selma, Lancaster and Eureka. There are approximately 200 cities and counties, who are associate members of the Authority. The Authority’s activities are dedicated to providing economic development assistance to member jurisdictions as an extension of the economic development assistance provided by CALED to its members.
The JPA Agreement permits any other local agency in California to join the Authority as an “Associate Member.” The Authority’s Board of Directors has requested that the City of Alameda become an Associate Member of the Authority. Associate membership in the Authority will assist the City as well as for-profit and nonprofit organizations located within the City in financing industrial and commercial development projects and other public purpose projects within the City. The Authority’s Associate Members enjoy nearly all the benefits of regular membership without the concomitant duties or obligations. Associate Members have ample opportunity to provide input on proposed or existing programs. Further, Associate Members are not restricted or inhibited in any way with respect to their independent ability to finance any project in any manner they deem appropriate, which may or may not involve or include the Authority.
Once the City becomes an Associate Member of the Authority, the City will be eligible to participate in the Authority’s programs.
The Borrower: The Borrower and the Authority have requested that the City of Alameda conduct a Tax Equity and Fiscal Responsibility Act of 1982 (“TEFRA”) hearing and approve a resolution in accordance with Internal Revenue Code Section 147(f) authorizing the issuance of tax-exempt obligations by the Authority in an amount not to exceed $12,000,000. A TEFRA hearing is required by the Internal Revenue Code before tax-exempt debt can be issued for the benefit of a private nonprofit corporation. The hearing gives the public an opportunity to comment on the use of tax-exempt funds by the Borrower.
The proceeds of the Obligations will be used to (1) finance and refinance the cost of acquisition, construction, improvement and equipping of an approximately 7.93-acre parcel of land with (a) an approximately 35,926 square foot, two-story educational building with classrooms, offices and meeting rooms and (b) an approximately 30,231 square foot, one-story building with a gymnasium, multi-purpose rooms, kitchen and nursery and pre-school; and (2) finance and refinance various capital projects, including but not limited to, construction of a new kitchen to provide meals to students and visitors, upgrades and expansions to sports fields and improvements to the nursery and pre-school (collectively, the “Facilities”). The proceeds of the Obligations will also be used to pay certain expenses incurred in connection with the issuance of the Obligations. While the exact numbers have not been completely finalized, approximately $10.2 million will be used to refinance existing loans, with the balance being used for improvements to the Borrower’s properties and costs of issuance. The Borrower currently owns the property at 1801 and 1803 North Loop Road, Alameda, California 94502, and the refinancing and improvements will solidify the Borrower’s educational operations in the City for many years to come.
The Borrower is an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986 (the “Code”) and owns and operates the Facilities in connection with its charitable and educational public benefit purposes. The Facilities serve as a part of the Borrower’s campus and are used to further the Borrower’s mission of providing a quality education.
The issuance of the Obligations as tax-exempt will reduce financing costs and debt service costs for the Borrower. In order to satisfy the requirements for the obligations to be issued as tax-exempt, an applicable elected representative, which is also a member of the Authority is required to conduct the TEFRA hearing and approve the issuance of the tax-exempt obligations in accordance with Section147(f) of the Code. The City Council of the City of Alameda constitutes an applicable elected representative under Section 147(f) of the Code.
A public notice (attachment A) of today’s public hearing was published on behalf of the City at least two weeks prior to the hearing in the Alameda Journal newspaper by the law firm of Kutak Rock LLP.
FINANCIAL IMPACT
There is no fiscal impact to the City. Bonds issued as part of this process will not represent a debt of the City, nor do they obligate the City in any way. The adoption of the resolution approving the financing and refinancing of the Facilities and the issuance of the Obligations complies with the requirements of Section 147(f) of the Internal Revenue Code of 1986. .
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
None.
ENVIRONMENTAL REVIEW
The approval of the Obligations to finance and refinance the Facilities is not subject to compliance with the California Environmental Quality Act (California Public Resources Code, Section 21100, et seq.).
RECOMMENDATION
It is recommended that the City Council:
1. Conduct a public hearing as required by Section 147(f) of the Internal Revenue Code of 1986 to receive comments relating to the issuance of the Obligations by the Authority to finance and refinance the Facilities.
2. Adopt a resolution approving an Associate Membership Agreement between the City of Alameda and the Authority.
3. Adopt the attached resolution authorizing approving the issuance of the Obligations by the Authority to finance and refinance the Facilities on behalf of the Borrower.
Respectfully submitted,
Janet C. Kern, City Attorney
Financial Impact section reviewed,
Elena Adair, Finance Director
Exhibit:
1. Associate Membership Agreement