City of Sacramento
City Council - 5PM Report
915 I Street Sacramento, CA 95814
www.cityofsacramento.org
File ID: 2022-01704 11/1/2022 Public Hearing Item 20.
Conduct a Tax Equity and Fiscal Responsibility Act of 1982 (“TEFRA”) Hearing and Adopt a Resolution Approving the Issuance of Bonds by the California Enterprise Development Authority (the “Authority”) for the Purpose of Financing, Refinancing and/or Reimbursing the Cost of Acquiring, Renovating, Remodeling, Equipping and Furnishing an Educational Facility (Noticed 10/24/2022)
File ID: 2022-01704
Location: District 2
Recommendation: Conduct a public hearing under the requirements of TEFRA and the Internal Revenue Code of 1986, as amended (the “Code”) regarding the proposed issuance of bonds by the Authority, a joint powers authority and public entity organized under the laws of the State of California for the benefit CCCA, LLC, a California limited liability company, and Capital College & Career Academy, a nonprofit public benefit corporation duly organized and existing under the laws of the State of California (collectively, the “Borrower”), and upon conclusion, adopt aResolution authorizing the issuance of bonds by the Authority for the benefit of the Borrower for the purpose of financing, refinancing and/or reimbursing the cost of acquiring, renovating, remodeling, equipping and furnishing an educational facility.
Contact: Claudia Lara, Debt Analyst, (916) 808-2267, [email protected]; Brian Wong, Debt Manager, (916) 808-5811, [email protected], Office of the City Treasurer Presenter: Claudia Lara, Debt Analyst, (916) 808-2267, [email protected], Office of the City Treasurer
Attachments:
1-Description/Analysis
2-Resolution
Description/Analysis
Issue Detail: The Borrower has requested that the Authority issue tax-exempt revenue bonds in an amount not to exceed of $20 million (the “Bonds”). The proceeds of the Bonds will be used to finance, refinance and/or reimburse the Borrower for the cost of acquiring, renovating, remodeling, equipping and furnishing the real property located at 501 Arden Way and 2295 Forrest Street,
File ID: 2022-01704 11/1/2022 Public Hearing Item 20.
Sacramento, California 95815 (the “Facility”), as well as to pay capitalized interest on the Bonds, establish a reserve fund for the Bonds to the extent necessary and pay certain costs of issuance in connection with the issuance of the Bonds (the “Project”).
For the Bonds to qualify as tax-exempt bonds, the City of Sacramento, must conduct a public hearing (the “TEFRA Hearing”). The TEFRA Hearing must provide 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 such TEFRA Hearing, reasonable notice must be provided to the members of the community. The TEFRA Hearing notice was provided on October 24, 2022.
Policy Considerations: Under § 147(f) of the Tax Code, the City Council must conduct a public hearing because the Bonds are for the Project located within the City. The City must also adopt a resolution approving the issuance of the Bonds by the Authority for the benefit of the Borrower to satisfy the requirements of the Tax Code.
Economic Impacts: Not applicable.
Environmental Considerations: The authorization to issue the Bonds, is a governmental fiscal activity that does not involve the approval of any physical development or activity that would have the potential for causing a significant effect on the environment. Approval is not a project requiring review under the CEQA. CEQA Guidelines sections 15378 (b)(4) and 15060(c)(3).
Sustainability: Not applicable.
Commission/Committee Action: Not applicable.
Rationale for Recommendation: The City is already a member of the Authority; however, under §147(f) of the Tax Code, the Authority may not issue the Bonds unless the City approves the issuance after holding a public hearing for which reasonable public notice is given. The Authority has requested that the City Council hold the required public hearing regarding the issuance of Bonds and approve the issuance of Bonds by the Authority for the Borrower.
Financial Considerations: The Bonds to be issued by the Authority for the Facility will be the sole responsibility of the Borrower, and the City will have no financial, legal, moral obligation, liability or responsibility for the Project or the repayment of the Bonds for the financing of the Facility. All financing documents with respect to the issuance of the Bonds will contain clear disclaimers that the Bonds are not obligations of the City or the State of California but are to be paid for solely from funds provided by the Borrower.
Local Business Enterprise (LBE): Not applicable.
File ID: 2022-01704 11/1/2022 Public Hearing Item 20.
Background:
Capital College and Career Academy
CCCA is a free public charter school owned and operated by the Borrower of which proceeds of the issuance of the Bonds will benefit from. CCCA is designed to prepare high school students for a wide variety of careers upon graduation, allowing students to possess a number of college units, trade- specific certifications and/or an array of on-the-job training.
California Enterprise Development Authority
The Authority was created in 2006, pursuant to a joint exercise of powers agreement to address gaps in economic and community development through the financing of economic development throughout California. To date, over 200 municipalities, including the City of Sacramento, have become members of the Authority.
The Authority was formed 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.
RESOLUTION NO. 20XX-XXXX
Adopted by the Sacramento City Council
November 1, 2022
RESOLUTION APPROVING THE CALIFORNIA ENTERPRISE
DEVELOPMENT AUTHORITY REVENUE BONDS IN AN AGGREGATE
PRINCIPAL AMOUNT OF NOT TO EXCEED $20,000,000 FOR THE
PURPOSE OF FINANCING, REFINANCING AND/OR REIMBURSING
THE COST OF ACQUIRING, RENOVATING, REMODELING,
EQUIPPING AND FURNISHING AN EDUCATIONAL FACILITY FOR
THE BENEFIT OF CCCA, LLC AND CAPITAL COLLEGE & CAREER
ACADEMY AND OTHER MATTERS RELATING THERETO
BACKGROUND
A. CCCA, LLC, a California limited liability company, and Capital College & Career Academy, a nonprofit public benefit corporation duly organized and existing under the laws of the State of California, the sole member of CCCA, LLC (collectively, the “Borrower”), have submitted and the California Enterprise Development Authority (the “Authority”) has accepted, an application requesting the Authority to issue, from time to time, pursuant to a plan of finance, of one or more series of its tax-exempt bonds, notes, or other evidence of indebtedness, in an aggregate principal amount not to exceed $20,000,000 (the “Bonds”) for the benefit of the Borrower pursuant to Chapter 5 of Division 7 of Title 1 of the Government Code of the State (commencing with Section 6500) (the “Act”); and B. The proceeds of the Bonds will be used to (a) finance, refinance and/or reimburse the Borrower for the cost of acquiring, renovating, remodeling, equipping and furnishing the real property located at 501 Arden Way and 2295 Forrest Street, Sacramento, California 95815, consisting of an approximately 16,316 square foot commercial building (the “Facility”), (b) pay capitalized interest on the Bonds, (c) establish a reserve fund for the Bonds to the extent necessary, and (d) pay certain costs of issuance in connection with the issuance of the Bonds.
C. The Facility will be initially owned and /or operated by the Borrower.
D. Bonds, the interest on which is excluded from gross income of the holders thereof for federal income tax purposes, will be “qualified 501(c)(3) bonds” pursuant to Section 145 of the Internal Revenue Code of 1986, as amended (the “Code”). Accordingly, pursuant to Section 147(f) of the Code, the issuance of the Bonds by the Authority must be approved by an 2 applicable elected representative of a governmental unit within the territorial limits of which the Facility is situated.
E. The Facility is situated within the territorial limits of the City.
F. The City Council of the City (the “Council”) is the elected legislative body of the City and is an “applicable elected representative” of the City.
G. The Authority and the Borrower have requested that the 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 for purposes of the Act.
H. The Facility will provide significant benefits to the City’s residents through the educational and career development services provided by the Borrower to the residents of the community and the Facility will also create and retain employment opportunities for City residents.
I. The Authority’s issuance of the Bonds will result in a more economical and efficient issuance process because of the Authority’s experience in the issuance of conduit revenue obligations.
J. Pursuant to Section 147(f) of the Code and the Act, the City, following notice duly given, held a public hearing regarding the Facility and the issuance of the Bonds and the Council now desires to approve the issuance of the Bonds by the Authority for the Facility.
BASED ON THE FACTS S ET FORTH IN THE BACK GROUND, THE CITY COUNCIL RESOLVES AS FOLLOWS:
Section 1. The statements in paragraph A through J of the Background are true.
Section 2. The Council hereby approves the issuance of Bonds by the Authority, which Bonds are anticipated to be tax -exempt as approved by the Authority in its resolution, in an aggregate principal amount not to exceed $20,000,000 to (a) finance, refinance and/or reimburse the Borrower for the cost of acquiring, renovating, remodeling, equipping and furnishing the Facility, (b) pay capitalized interest on the Bonds, (c) establish a reserve fund for the Bonds to the extent necessary, and (d) pay certain costs of issuance in connection with the issuance of the Bonds. This approval (a) is given for the sole purpose of 3 complying with Section 147(f) of the Code and th e Act; (b) is conditioned on the City Council’s understanding that the City is not obligated to pay any principal, interest, fees, or other costs associated with the Authority’s issuance of the Bonds; and (c) is neither an approval of the underlying credi t issues of the proposed Facility nor an approval of the financial structure of the Bonds.
Section 3. The City finds that the Facility will provide significant benefits to the City’s residents through the educational and career development services provided by the Borrower to the residents of the community and the Facility will also create and retain employment opportunities for City’s residents . The City further finds that the Authority’s issuance of the Bonds will result in a more economical and efficien t issuance process because of the Authority’s experience in the issuance of conduit revenue obligations.
Section 4. The issuance of the Bonds will be subject to the approval of the Authority of all related financing documents to which the Authority is a pa rty. The City will have no responsibility or liability whatsoever with respect to the Bonds or the Facility, and the City Council’s approval of the Authority’s issuance and sale of the Bonds is neither an approval of the underlying credit issues of the Fac ility nor an approval of the financial structure of the Bonds.
Section 5. This resolution does not obligate the City or any City department or any City fund (a) to provide any financing for the Facility or any refinancing of the Facility; (b) to approve any application or request for, or take any other action in connection with, any planning approval, permit, or other action necessary for the Facility; (c) to make any contribution or advance any funds to the Authority; or (d) to take any further action with respect to the Bonds, the Authority, or the City’s membership in the Authority.
Section 6. 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 7. This Resolution shall take effect immediately upon its passage.