Community Development Agency
www.santa-ana.org/cd
Item # 22
City of Santa Ana
20 Civic Center Plaza, Santa Ana, CA 92701
Staff Report
June 2, 2026
TOPIC: Tax Equity Fiscal Responsibility Act Hearing for Orange County School of the Arts and The Legacy Fund
AGENDA TITLE
Public Hearing - Tax Equity Fiscal Responsibility Act Hearing for Orange County School of the Arts and The Legacy Fund
Legal Notice published in the OC Register on May 22, 2026.
RECOMMENDED ACTION
1. Conduct a Tax Equity and Financial Responsibility Act Resolution Hearing in consideration of the issuance of tax-exempt bond financing (“Bonds”) by the California Enterprise Development Authority (“CEDA”) for Orange County School of the Arts (“OCSA”) and The Legacy Fund (together the “Borrower”), both California nonprofit public benefit corporation and organizations described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, to loan the proceeds of the Bonds to Legacy and OCSA pursuant to one or more loan agreements to: (a) refinance the outstanding amount of the CEDA 2016 Tax- Exempt Loan in an amount not expected to exceed $31,000,000 (as defined below); (b) refinance a taxable loan in an amount not expected to exceed $9,000,000, the proceeds of which were utilized to finance a working capital deficit of OCSA (occurring at the OCSA Locations as detailed below); and (c) finance capital educational facilities including equipment to be located at the OCSA Locations in an amount not expected to exceed $6,000,000.
2. Adopt a resolution approving the issuance of revenue bonds by the CEDA in an amount not to exceed $46,000,000.
RESOLUTION NO. 2026-XXX entitled RESOLUTION OF THE CITY COUNCIL
OF THE CITY OF SANTA ANA APPROVING THE ISSUANCE BY THE
CALIFORNIA ENTERPRISE DEVELOPMENT AUTHORITY OF TAX EXEMPT
OBLIGATIONS IN AN AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $46,000,000 FOR THE PURPOSE OF FINANCING AND REFINANCING THE
ACQUISITION OF LAND AND IMPROVEMENTS, CONSTRUCTION, AND
ACQUISITION OF EQUIPMENT FOR ORANGE COUNTY SCHOOL OF ARTS
AND THE LEGACY FUND
GOVERNMENT CODE §84308 APPLIES: Yes
TEFRA Hearing for Orange County School of the Arts and The Legacy Fund June 2, 2026
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DISCUSSION
The Borrower has requested the City of Santa Ana (“City”) to conduct a Tax Equity and Fiscal Responsibility Act (“TEFRA”) hearing. The tax-exempt bonds to be issued are the sole responsibility of the Borrower. The City bears no financial or legal liability for the project(s) or bond repayment and incurs no indebtedness. Additionally, the City was provided a draft resolution, a draft notice, a draft staff report, and a TEFRA Hearing Fee of $820 was required per the City’s Miscellaneous Fee Schedule for the City to conduct the TEFRA hearing.
A TEFRA hearing is a public hearing required by the Internal Revenue Service (IRS) for certain types of tax-exempt bond issuances, particularly those involving private activity bonds (PABs) or bonds issued by nonprofit organizations. The hearing is mandated under the Tax Equity and Fiscal Responsibility Act of 1982 and is a prerequisite for the interest on these bonds to be excluded from gross income for federal tax purposes.
The primary purpose of a TEFRA hearing is to provide the public with an opportunity to comment on the proposed use of tax-exempt bond proceeds. This process ensures transparency and accountability in the allocation of public financial benefits, such as tax exemption, to private projects or nonprofit borrowers.
In order to provide for tax-exempt financing under IRS regulations, the borrower (Orange County School of the Arts) needs approval by a local public agency where the financed project is located following the holding of a Tax Equity Fiscal Responsibility Act (TEFRA) public hearing. OCSA and The Legacy Fund (which is a non-profit foundation supporting OCSA) has requested the City’s approval of its plans to enter into certain loans to finance and refinance certain capital improvements and working capital expenditures at its Santa Ana campus.
Project Description
OCSA and the Legacy Fund plan to refinance certain outstanding loans with Farmers and Merchants Bank (F&M) and to finance certain capital improvements to its Santa Ana campus. OCSA and The Legacy Fund plan to enter into new loan agreements with CEDA and F&M pursuant to which CEDA will loan the proceeds of the F&M loan to OCSA and The Legacy Fund pursuant to one or more loan agreements to:
a. refinance the outstanding amount of the California Enterprise Development Authority 2016 Tax-Exempt Loan (Orange County School of the Arts) Series A, California Enterprise Development Authority 2016 Tax-Exempt Loan (Orange County School of the Arts) Series B, California Enterprise Development Authority 2016 Tax-Exempt Loan (Orange County School of the Arts) Series C, California Enterprise Development Authority 2016 Tax-Exempt Loan (The Legacy Fund) Series A, California Enterprise Development Authority 2016 Tax-Exempt Loan (The Legacy Fund) Series B, and California Enterprise Development Authority 2016 Tax-Exempt Loan (The Legacy Fund) Series C (the “2016 Bonds”) which were issued to finance and refinance capital educational facilities and equipment TEFRA Hearing for Orange County School of the Arts and The Legacy Fund June 2, 2026
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at OCSA’s campus in Santa Ana (OCSA Locations) in an amount not expected to exceed $31,000,000;
b. refinance a taxable loan the proceeds of which were utilized to finance a working capital deficit of OCSA (occurring at the OCSA Locations) in an amount not expected to exceed $9,000,000; and
c. finance capital educational facilities including equipment to be located at the OCSA Locations in an amount not expected to exceed $6,000,000.
The Legacy Fund and OCSA will be solely responsible for the repayment of the loans from CEDA and F&M. The adoption of the Resolution shall not obligate the City or any department thereof to:
(i) provide any financing to acquire or construct the project on behalf of OCSA; (ii) approve any application or request for, or take any other action in connection with, any planning approval, permit, or other action necessary to the project; (iii) make any contribution or advance any funds whatsoever to CEDA; or (iv) take any further action with respect to CEDA or its membership therein. The City is a member of CEDA and has previously approved financings issued through CEDA.
FISCAL IMPACT
Funds in the amount of $820 were deposited into the General Fund revenue account for the TEFRA Hearing Fee – Non-Housing Project (No. 01102002-53902).
EXHIBIT(S)
1. Resolution
2. Hearing Notice Proof of Publication
Submitted By: Michael L. Garcia, Executive Director, Community Development Agency Approved By: Alvaro Nuñez, City Manager