The URL can be used to link to this page

Home My WebLink About11 - Authorization to Issue Obligations by the California Municipal Finance Authority to Benefit Harbor Day School ProjectQ �EwPpRT CITY OF O � z NEWPORT BEACH <,FORN'P City Council Staff Report April 28, 2020 Agenda Item No. 11 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: Dan Matusiewicz, Finance Director - 949-644-3123, dmatusiewicz@newportbeachca.gov PREPARED BY: Steve Montano, Deputy Finance Director, smontano@newportbeachca.gov PHONE: 949-644-3240 TITLE: Resolution No. 2020-39: Authorization to Issue Obligations by the California Municipal Finance Authority to Benefit Harbor Day School Project ABSTRACT: The California Municipal Finance Authority (CMFA or Authority) is a joint exercise of powers authority (JPA) used to assist private developers in the financing of economic development, housing, and charitable activities throughout California. Harbor Day School is seeking tax-exempt financing through CMFA for the construction of a project located within City boundaries. The Harbor Day School Project (the "Project") will consist of the demolition of the School's existing facilities and the construction of a new, approximately 100,000 square foot campus, which will include several buildings, and all associated design, engineering and planning costs and related loan expenses. The Project site is located at 3443 Pacific View Drive, Corona del Mar, California. Before moving forward with the financing, the Tax Equity and Fiscal Responsibility Act (TEFRA) tax law requires the local jurisdiction where the project will take place to: 1) hold a public hearing to allow members of the public and the governing board the ability to comment and approve or disapprove the issuance of bonds for the project; and 2) adopt a resolution approving the proposed tax-exempt financing. Any project not approved by the local jurisdiction will not be financed through CMFA. The City of Newport Beach will have no financial or legal obligation, liability or responsibility for the Project or the repayment of the bonds for the financing of the Project. RECOMMENDATION: a) Conduct and close the public hearing under the requirements of TEFRA and the Internal Revenue Code of 1986; Resolution No. 2020-39: Authorization to Issue Obligations by the California Municipal Finance Authority to Benefit Harbor Day School Project April 28, 2020 Page 2 b) Determine this action is exempt from the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) and 15060(c)(3) of the CEQA Guidelines because this action will not result in a physical change to the environment, directly or indirectly. Alternatively, find the approval of this resolution is not a project under CEQA Regulation Section 15061(b)(3) because it has no potential for causing a significant effect on the environment; and c) Adopt Resolution 2020-39, A Resolution of the City Council of the City of Newport Beach, California, Approving the Making of One or More Loans in a Principal Amount Not to Exceed $55,000,000 for the Purpose of Financing the Costs of Certain Improvements to a School Commonly Known as Harbor Day School and Certain Other Matters Relating Thereto, to provide for the financing of the Harbor Day School construction project in satisfaction of the requirements of TEFRA, Internal Revenue Code of 1986 and the California Government Code Section 6500. FUNDING REQUIREMENTS: The City is not a party to any loan agreement or any other documents in connection with the issuance of the Obligations. The Obligations are not secured by any form of taxation or by any obligation of either the City or the Authority. The Obligations do not represent or constitute a general obligation of either the City or the Authority. The assets to be financed with the proceeds of the Obligations are located within the jurisdiction of the City. The Obligations are payable solely from amounts received pursuant to the terms and provisions of one or more loan agreements to be executed by the CMFA and Harbor Day School. All financing documents with respect to the issuance of the bonds will contain clear disclaimers that the bonds are not obligations of the City of Newport Beach or the State of California. DISCUSSION: The CMFA was created on January 1, 2004 pursuant to a joint exercise of powers agreement to promote economic, cultural and community development, through the financing of economic development and charitable activities throughout California. The CMFA assists 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. To date, over 300 municipalities, including the City of Newport Beach, have become members of the CMFA. Harbor Day School requested that the CMFA serve as the municipal issuer of the proposed tax-exempt loans (the "Loans") by Farmers & Merchants Bank or such other to be determined lender (the "Lender") to the CMFA, in a principal amount not to exceed $55,000,000. This is pursuant to a loan agreement (the "Loan Agreement") among the Lender, the CMFA and Harbor Day School (the "School"), a California nonprofit public benefit corporation and an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended. 11-2 Resolution No. 2020-39: Authorization to Issue Obligations by the California Municipal Finance Authority to Benefit Harbor Day School Project April 28, 2020 Page 3 The CMFA will lend the proceeds of the Loans to the School to finance the costs of the demolition of the School's existing facilities and the construction of a new, approximately 100,000 square foot campus, which will include several buildings, and all associated design, engineering and planning costs related thereto, of a school commonly known as Harbor Day School and located at 3443 Pacific View Drive, Corona del Mar, California and related capital project costs (the "Facilities") and paying related expenses incurred with respect to the Loans (collectively, the "Project"). The owner and operator of the Facilities will be the School. In order for all or a portion of the Loans to qualify as tax-exempt, the City of Newport Beach must conduct a public hearing (the "TEFRA Hearing") providing members of the community an opportunity to speak in favor of or against the use of tax- exempt loans for the financing of the Project. Prior to such TEFRA Hearing, reasonable notice must be provided to the members of the community. Following the close of the TEFRA Hearing, an "applicable elected representative" of the governmental unit hosting the Project must provide its approval of the issuance of the Bonds for the financing of the Project. The Loans to be issued by the CMFA will be the sole responsibility of the School, and the City will have no financial, legal obligation, liability or responsibility for the Project or the repayment of the Bonds. All financing documents will contain clear disclaimers that the Loans are not obligations of the City or the State of California, but are to be paid for solely from funds provided by the School. The Board of Directors of the California Foundation for Stronger Communities, a California non-profit public benefit corporation (the "Foundation"), acts as the Board of Directors for the CMFA. Through its conduit issuance activities, the CMFA shares a portion of the issuance fees it receives with its member communities and donates a portion of these issuance fees to the Foundation for the support of local charities. With respect to the City of Newport Beach, it is expected the City will be reimbursed approximately $10,000. Such grant may be used for any lawful purpose of the City. The primary purpose of the grant is to reimburse the City for staff time associated with the financing. =1ki LVA 1:T910IJiI=10k CY111111NANIATITE Staff recommends the City Council finds the approval of the attached resolution is not subject to CEQA pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly. Alternatively, the City Council finds the approval of the attached resolution is not a project under CEQA Regulation Section 15061(b)(3) because it has no potential for causing a significant effect on the environment. 11-3 Resolution No. 2020-39: Authorization to Issue Obligations by the California Municipal Finance Authority to Benefit Harbor Day School Project April 28, 2020 Page 4 NOTICING: The agenda item has been noticed in compliance with the public approval requirements of Section 147(f) of the Internal Revenue Code of 1986 (7 days in advance of the meeting at which the City Council considers the item). Notice of this meeting was also placed on the Agenda, which was posted at City Hall and on the City website. Notice of the TEFRA Hearing was published in the Daily Pilot on April 21, 2020 (7 days in advance of the public hearing). ATTACHMENTS: Attachment A — Resolution No. 2020-39 Attachment B — Proof of Publication 11-4 ATTACHMENT A RESOLUTION NO. 2020-39 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF NEWPORT BEACH, CALIFORNIA, APPROVING THE MAKING OF ONE OR MORE LOANS IN A PRINCIPAL AMOUNT NOT TO EXCEED $55,000,000 FOR THE PURPOSE OF FINANCING THE COSTS OF CERTAIN IMPROVEMENTS TO A SCHOOL COMMONLY KNOWN AS HARBOR DAY SCHOOL AND CERTAIN OTHER MATTERS RELATING THERETO WHEREAS, Harbor Day School, a California nonprofit public benefit corporation (the "School"), will request that the California Municipal Finance Authority or a to be determined financing agency (the "Authority") enter into a loan agreement with Farmers & Merchants Bank or a to be determined lender (the "Lender") and the School pursuant to which the Lender will make one or more loans to the Authority in a principal amount not to exceed $55,000,000.00 (the "Loans") for the purposes of financing the costs of the demolition of the School's existing facilities and the construction of approximately 100,000 square feet of new buildings, and all associated design, engineering and planning costs related thereto, for the School, which is located at 3443 Pacific View Drive, Corona del Mar, California, as well as related capital project costs (the "Facilities") and paying related expenses incurred in connection with the making of the Loans; WHEREAS, the Facilities are to be owned and operated by the School and are located within the City of Newport Beach ("City"); WHEREAS, pursuant to Section 147(f) of the Internal Revenue Code of 1986 (the "Code"), the making of the Loans by the Lender must be approved by a public entity where the Facilities are located and the Facilities are within the territorial limits of the City; WHEREAS, the City Council of the City (the "Council") is the elected legislative body of the City and is one of the applicable elected representatives required to approve the making of the Loans under Section 147(f) of the Code and the requirements of Section 4 of the Joint Exercise of Powers Agreement Relating to the California Municipal Finance Authority, dated as of January 1, 2004 (the "Agreement"), among certain local agencies, including the City; WHEREAS, the School has requested that the Council approve the making of the Loans by the Lender to satisfy the public approval requirement of Section 147(f) of the Code; and 11-5 Resolution No. 2020 - Page 2 of 3 WHEREAS, pursuant to Section 147(f) of the Code, the Council has, following notice duly given, held a public hearing regarding the making of the Loans, and now desires to approve the making of the Loans by the Lender. NOW, THEREFORE, the City Council of the City of Newport Beach resolves as follows: Section 1: The Council does hereby approve the making of the Loans by the Lender. It is the purpose and intent of the Council that this resolution constitutes the approval of the making of the Loans by the Lender, for the purposes of Section 147(f) of the Internal Revenue Code of 1986 by the applicable elected representative of the governmental unit having jurisdiction over the area in which the Facilities are located, in accordance with said Section 147(f) and Section 4 of the Agreement. The City shall have no responsibility or liability whatsoever with respect to the Loans. Section 2: 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 to carry out, give effect to and comply with the terms and intent of this resolution and the financing transaction approved hereby. Section 3: The recitals provided in this resolution are true and correct and are incorporated into the operative part of this resolution. Section 4: If any section, subsection, sentence, clause or phrase of this resolution is, for any reason, held to be invalid or unconstitutional, such decision shall not affect the validity or constitutionality of the remaining portions of this resolution. The City Council hereby declares that it would have passed this resolution, and each section, subsection, sentence, clause or phrase hereof, irrespective of the fact that any one or more sections, subsections, sentences, clauses or phrases be declared invalid or unconstitutional. Section 5: The City Council finds the adoption of this resolution is exempt from environmental review under the California Environmental Quality Act ("CEQA") pursuant to Section 15302 of the CEQA Guidelines, California Code of Regulations, Title 14, Division 6, Chapter 3, because it has no potential to have a significant effect on the environment. The project includes the demolition and reconstruction of an existing private school facility where the new structures will be located on the same site as the structures replaced and will have substantially the same purpose and capacity as the structures replaced. 11-6 Resolution No. 2020 - Page 3 of 3 Section 6: This resolution shall take effect immediately upon its adoption by the City Council, and the City Clerk shall certify the vote adopting the resolution. ADOPTED this 28th day of April, 2020. Will O'Neill Mayor ATTEST: Leilani I. Brown City Clerk APPROVED AS TO FORM: o-;-, c " Aaron C. Harp City Attorney 11-7 Cos Angeles isimes M E D I . G R O U P PROOF OF PUBLICATION (2015.5 C.C.P.) STATE OF CALIFORNIA County of Orange I am a citizen of the United States and a resident of the County aforesaid; I am over the age of eighteen years, and not a party to or interested in the action for which the attached notice was published. I am a principal clerk of the Newport Harbor News Press Combined With Daily Pilot, which was adjudged a newspaper of general circulation on June 19, 1952, Cases A24831 for the City of Newport Beach, County of Orange, and State of California. Attached to this Affidavit is a true and complete copy as was printed and published on the following date(s): Apr 18, 2020 I certify (or declare) under penalty of perjury that the foregoing is true and correct. Dated at Fountain Valley, California on this 21st day of April, 2020. (tet/ C-dd [signature] 10540 Talbert Avenue Fountain Valley, CA 92708 ATTACHMENT B 7690878 - Newport Harbor News Press Combined With Daily Pilot Page 1 of 2 11-8 dos .Angeles Time's M DIA G R O U P LEGAL N4TI-E PUBLIC HOTIOE C[TY OFNENPORT BEACH NOTICE OF PUBLIC HEARING PURSUANT TO SECTION 147[flOFTHE INTERNAL REVENUE COD EOF 1986, A.SAME NDED FOR THE FFINANCING OFCERTAIN IMPROVEMENTS TO FAC ILIT16S FRAM THE ISSUANCE 0FTAX- EXEMPT0PLIGATIONS Wiith rteiullt-athar a tllitnathe m ma iifafft�J�i he ena�dth�t�s mal [afYam�aMe'SAGe' arae4Mer Beale at6,su Q fi bathe pek e A (th. novel d, emium. any, or vArh re tote Loaris 1heC a UDhor7. a ar hydherPli i di, er ii Qi of ag2h al+hest e tell earaGiega euabapaFrylhweeRncYrFpa�4mlat. reamnimum.if ry.ari�eres 411respp�ehc#a eLoans. yiM a� 1prWailrS M �sSee o1 thalsno " t1ahaue a l `Q a eat Ieep�t-vw6eree#ienewUi+Y bresvlltel dan#heh mes44e #hie aucbre oe xdnail h -e uG¢amjalepmesxne WP se am eapaatyasmesbucbres repkced. All hpi.wrc�eeA�ed partes maaVV aa,p�p�egrandpre serr #esGmmV n re]ard#oitis d. IipS�uu o alhe knr9ge The oorlh'Iovrliroer. a. ures �-o dtef re�baome an tt�osei es � cheafineXdmii i@ ade nnaiancevlf oce ein the � idaea. p-uti ceanna4ie gerda BkaCh Califdd�rie3m5�-]U a�#he��ttyv d N�5'�•]tBk�� riea#�wnwhe�oeprip4e�re rains, N�n� i�eres�etl��aa}��oesma partic��abee�nihehearin calm ihebonnll��Yree�e�aaloIn�nurcber �} pll nit,p�,m.thfdo4dr�ga�hdurAlihero ��actth�e�Cihtypefk�a�cesslheCAy"s� e�adY4e�r memeAingbrhare��r �mYYe 3cGrn anih��healing. Fx �uesu(ms re9Ningdeals arte Pp*ct Pease eaftactU M'SFirance DepartMent Ipl9 c� 644 3127. 1s1 LeikniI. Brom, AMC M perk d1he M of Newport Beach Sold To: City of Newport Beach - CA11072031 100 Civic Center Dr Newport Beach,CA 92660-3267 Bill To: City of Newport Beach - CA11072031 100 Civic Center Dr Newport Beach,CA 92660-3267 76901878- Newport Harbor News Press Combined With Daily Pilot Page 2 of 2 11-9