City Council
Report
City Council Meeting: July 18, 2023
Agenda Item: 12.A
1 of 5
To: Mayor and City Council
From: Gigi Decavalles-Hughes, Director, Finance Department, Revenue Subject: Public Hearing and Adoption of Resolution Approving the California Enterprise Development Authority (CEDA) to Issue Revenue Obligations for New Roads School
Recommended Action
Staff recommends that the City Council:
1. Hold a public hearing under the requirements of the Tax and Equity Fiscal Responsibility Act (“TEFRA”) and the Internal Revenue Code of 1986, as amended;
2. Adopt a resolution approving the issuance of California Enterprise Development Authority Revenue Obligations (the “Obligations”) in an amount not-to-exceed $25,000,000 for the benefit of New Roads School, a California nonprofit public benefit corporation, or a related or successor entity (the “Borrower”); and
3. Adopt a finding of no possibility of significant impact pursuant to Section 15061(b)(3) (Common Sense Exemption) of the California Environmental Quality Act (CEQA) Guidelines
2 of 5
Summary
The California Enterprise Development Authority (CEDA), a joint powers authority established by the California Association for Local Development, of which the City is a member, proposes to issue revenue obligations (bonds) in an amount not-to-exceed $25,000,000 for the benefit of New Roads School (Borrower) located at 3131 Olympic Boulevard in Santa Monica. Under the requirements of the Tax and Equity Fiscal Responsibility Act (TEFRA) and the Internal Revenue Code of 1986 (Code), as amended, the City must hold a public hearing to approve issuance of the bonds by CEDA. Proceeds of the obligations will be used to:
(a) finance or refinance the cost of acquisition, construction, development, improvement, renovation, furnishing and equipping of the Borrower’s educational campus consisting of:
(i) an approximately 2.6 acre campus located at 3131 Olympic Boulevard, Santa Monica, California 90404, and
(ii) an approximately 9,700 square foot building located at 1836 Franklin Street, Santa Monica, California 90404 (collectively, the Facilities), and (b) pay certain costs of issuance in connection with such financing or refinancing.
The City Council previously approved issuance of these bonds on October 26, 2021 (Resolution Number 11382 City Council Series). However, the bonds were not issued within the period of time allowed in accordance with the Code. Therefore, a new approval is necessary to satisfy the requirements for the bonds to be issued as taxexempt.
This approval does not obligate the City financially in any way, but is the requirement imposed by the Federal government to verify that projects meet a legitimate public purpose in order to have the advantage of exemption from Federal taxes.
Discussion
The Borrower, New Roads School, was established in 1995 and currently serves over 520 students in grades K-12. The Borrower is a California nonprofit public benefit corporation and an organization described in Section 501(c)(3) of the Internal Revenue 3 of 5
Code of 1986, as amended (the Code). The Borrower was established as a model for education in the ethnically, racially, culturally and socioeconomically diverse community of greater Los Angeles and operates in an approximately 73,150 square foot educational campus located at 3131 Olympic Boulevard, Santa Monica, California 90404. The Borrower regards education as an active and ongoing quest to develop the habits of mind, character, awareness and participation that will allow young people to thrive as they begin to take a larger role in making their communities and their world.
Approximately 30% of the Borrower’s tuition budget is dedicated to needs-based financial aid, enabling the Borrower to provide financial assistance to more than 50% of its families.
CEDA is a joint powers authority established by the California Association for Local Economic Development whose purpose is to issue tax-exempt and taxable conduit revenue bonds to fund commercial and industrial projects within member jurisdictions.
In order to satisfy the requirements for the obligations to be issued as tax-exempt, the City as a member of CEDA is required to conduct the TEFRA hearing and approve the issuance of the obligations in accordance with Section 147(f) of the IRS Code. The City Council previously approved issuance of these bonds on October 26, 2021 (Resolution Number 11382 City Council Series). However, the bonds were not issued within the period of time allowed in accordance with the Code. Therefore, a new approval is necessary to satisfy the requirements for the bonds to be issued as tax-exempt.
The Bonds to be issued by the CEDA on behalf of the Borrower will be the sole responsibility of the Borrower, and the City will have no financial, legal, or moral obligation, liability or responsibility for the repayment of the bonds. 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.
As required by law, a public hearing notice was published in The Santa Monica Daily Press at least 7 days prior to the hearing date.
Past Council Actions
4 of 5
Meeting Date Description
10/26/2021
(Attachment A)
The City Council previously approved issuance of these
bonds on October 26, 2021, per Resolution Number 11382
Environmental Review
Approval of the bonds is exempt from the California Environmental Quality Act (CEQA) pursuant to Section 15061(b)(3) of the CEQA Guidelines. The approval of bonds is covered by the common sense exemption which states that CEQA does not apply “where it can be seen with certainty that there is no possibility that the activity in question may have a significant impact on the environment”.
Financial Impacts and Budget Actions
The issuance of the bonds will have no financial impact to the City. The Authority will act as issuer and perform all of the necessary legal and administrative responsibilities associated with the financing. The Obligations are special, limited obligations of the Authority payable solely through the repayment of the loans from the Authority which repayment is used to pay the principal of and interest on the Obligations. The Obligations issued by the Authority are not an obligation of the City or any member of the Authority. Neither the faith or credit, nor the taxing power of the City, any member of the Authority, the State or any political subdivision is pledged to the repayment of the Obligations.
Prepared By: David Carr, Assistant City Treasurer
Approved Forwarded to Council
Attachments:
A. Attachment A - New Roads School Santa Monica City Council Resolution 11382 5 of 5
B. New Roads School Santa Monica City Council Resolution 070623 (001)