200 S. Anaheim Blvd.
Suite #643
Anaheim, CA 92805
Tel: (714) 765-5195
Fax: (714) 765-5260
www.anaheim.net
CITY COUNCIL AGENDA REPORT
City of Anaheim
FINANCE DEPARTMENT
DATE: DECEMBER 20, 2022
FROM: FINANCE DEPARTMENT
SUBJECT: FINANCING FOR QCF/I, INC.
ATTACHMENT (Y/N): YES ITEM # 34
REQUESTED ACTION:
That the City Council, following a public hearing under the requirements of the Tax Equity and Fiscal Responsibility Act (TEFRA) and the Internal Revenue Code of 1986, as amended (the “Code”), by Resolution:
1. Approve the issuance of tax-exempt revenue bonds by the California Municipal Finance Authority, in an aggregate principal amount not to exceed $850,000,000, for the financing and/or refinancing of certain costs by QCF/I, Inc., in conjunction with the acquisition, construction, expansion, rehabilitation, remodeling, renovation, and equipping of hospital facilities known as the Anaheim Community Hospital, an acute psychiatric hospital, located in the city at 3340 West Ball Road and 3350 West Ball Road, Anaheim, CA 92804, in an amount not to exceed $185,000,000.
DISCUSSION:
Background
This financing item came before City Council as a hearing on November 16, 2021 and was approved. The COVID-19 pandemic caused delays in licensing of two of the hospitals involved in the issuance of the bonds, and the marketing and selling of the bonds could not prudently commence until that licensing occurred and the two hospitals commenced operations. The two hospitals have since received their licenses, commenced operations, and the process to issue the bonds is now proceeding; because however, the issuance will not have occurred prior to the one year expiration of the November 16, 2021 City Council approval, it was necessary to bring the item back before City Council.
This financing will be between QCF/I, Inc. (the “Borrower”) and the California Municipal Finance Authority, a joint exercise of power authority, made up of more than 300 California local public agency members, including the city.
Further, this item concerns the proposed issuance by the California Municipal Finance Authority (the “Authority”) of qualified 501(c)(3) bonds pursuant to section 145 of the Code in an aggregate principal amount not to exceed $850,000,000 (the “Bonds”). The Financing for QCF/I, Inc.
December 20, 2022
Bonds will be part of a plan of finance, and may be issued in one or more series from time to time over a period of multiple years.
A portion of the proceeds of the Bonds, in an amount not expected to exceed $185,000,000, is intended to finance and/or refinance hospital facilities located in the city at 3340 West Ball Road and 3350 West Ball Road, Anaheim, CA 92804, including facilities which are functionally related and subordinate to the main hospital facilities (the “Anaheim Hospital Project”).
The Bonds and the obligation to pay principal of and interest thereon and any redemption premium with respect thereto, do not constitute indebtedness or an obligation of the city, the Authority, the State of California, or any political subdivision thereof, within the meaning of any constitutional or statutory debt limitation, or a charge against the general credit or taxing powers of any of them. The Bonds shall be a limited obligation of the Authority, payable solely from certain revenues duly pledged therefor and generally representing amounts paid by the Borrower.
Project Description
The proceeds of the QCF/I, Inc. loan will be applied to:
(i) acquire, construct, expand, rehabilitate, remodel, renovate, and equip:
(a) hospital facilities known as the Anaheim Community Hospital, an acute psychiatric hospital located at 3340 West Ball Road and 3350 West Ball Road, Anaheim, California 92804, including facilities which are functionally related and subordinate to the main hospital facilities (the “Anaheim Hospital Project”), to which an aggregate amount of Bonds not exceeding $185,000,000 is allocable;
(b) hospital facilities known as Aliso Ridge Behavioral Health located at 200 Freedom Lane, Aliso Viejo, California, 92656, including facilities which are functionally related and subordinate to the main hospital facilities (the “Aliso Viejo Hospital Project”), to which an aggregate amount of Bonds not exceeding $200,000,000 is allocable; and
(c) hospital facilities known as the Aurora Santa Rosa Hospital located at 1265 through 1287 Fulton Road, Santa Rosa, California, 95401 and 2598 Guerneville Road, Santa Rosa, California, 95401, including facilities which are functionally related and subordinate to the main hospital facilities (the “Santa Rosa Hospital Project” and together with the Anaheim Hospital Project and the Aliso Viejo Hospital Project, each a “Hospital Project” and collectively the “Project”), to which an aggregate amount of Bonds not exceeding $465,000,000 is allocable;
(ii) fund reserves,
(iii) fund interest on the Bonds, and
Financing for QCF/I, Inc.
December 20, 2022
(iv) fund costs of issuing the Bonds.
A separate single-member, limited liability company will be the operator and legal owner of each Hospital Project following the purchase thereof; however, the Borrower will be the true beneficial party of interest of the Project because it is the sole member of each limited liability company, each of which is a disregarded entity for federal tax purposes.
About California Municipal Finance Authority
The purpose of California Municipal Finance Authority is to assist local governments, non-profit organizations, and businesses with the issuance of taxable and tax-exempt bonds aimed at improving the standard of living in California. The Authority requested the city facilitate a public hearing as required by TEFRA and the Code. In order for all or a portion of the bonds to qualify as tax-exempt bonds, the city of Anaheim must conduct a public hearing to provide members of the community with an opportunity to speak in favor of or against the use of tax-exempt bonds for the financing and/or refinancing of the project. Additionally, the governing body of the borrower, in whose jurisdiction the project is located (in this case the Anaheim City Council), must approve the project and its financing.
California Municipal Finance Authority shares a portion of the issuance fees charged to borrowers with its member communities and donates a portion of these issuance fees to their foundation for the support of local charities. With respect to the city of Anaheim, it is expected that 25% of the issuance fees attributable to the City will be remitted by the California Municipal Finance Authority to the city’s General Fund.
IMPACT ON BUDGET:
The city’s General Fund will receive a portion of the issuance fee. However, the city will have no liability for this financing and there will be no impact on the Budget related to the obligations of the Borrower.
Respectfully submitted,
Deborah A. Moreno
Finance Director/City Treasurer
Attachment:
1. Resolution