HomeMy WebLinkAbout1994-11-08; City Council; 12928; Gemological Institute of Americat”-TY OF CARLSBAD - AGTDA BILL
AB # Id; 9 2 p TITLE:
MTG. 11/8/94 NON-PROFIT FINANCING PROGRAM FOR THE
,DEPT. CM GEMOLOGICAL INSTITUTE OF AMERICA
I CSCOG RECOMMENDED ACTION: s-of 74-b
Hold public hearing on the question of issuance of tax-exempt debt to fund a portion
of the improvements related to the Gemological Institute of America project.
Adopt Resolution No. 79 z&Endorsing an lnstallment Purchase Financing to be
undertaken by the California Statewide Communities Development Authority to benefit
the Gemological Institute of America, Inc.
I
ITEM EXPLANATION:
On October 25, 1994, the City Council took action to join the California Statewide
Communities Development Authority (CSCDA). CSCDA is a joint powers agency
formed through the cooperation of the League of California Cities and the County
Supervisors Association of California designed to assist member agencies in pursuing
programs that improve the quality of life and economic vitality of communities. The
primary tool available to CSCDA is the use of tax-exempt financing vehicles that
reduce the cost of borrowing for qualified businesses. These financing tools include
Cooperative Purchasing Programs, Non-Profit Public Benefit Financings, Lease
Financing Programs, and Industrial Development Bonds, just to mention a few.
The City has received a request from the Gemological Institute of America (GIA) for
assistance with the funding of a portion of their project located in the Carlsbad Ranch
Specific Plan. The GIA is a qualified non-profit corporation under Section 501 (c)(3)
of the Federal Tax Code which would be able to benefit from the non-profit public
benefit financing program offered by CSCDA.
The GIA is ready to begin construction on 220,000 square feet of office space which
will be their new world headquarters. This is the first phase of a two-step project
which will ultimately include 550,000 square feet of office, library, theater, museum
and classroom space on the site. Currently the 63-year old institution focuses on
education, research and service to the gem and jewelry industry from an office
located in Santa Monica. The cost of Phase I improvements is $39 million; $30 million
to be provided from a tax-exempt financing program, and $9 million to be provided
by GIA as an equity investment in the project.
The major public benefits received from this project are:
. Educating aspiring and active jewelry industry professionals
. Public access to a library with 14,000 volumes and 125 journals
. Providing uniform standards for the grading of diamonds and gem stones
worldwide
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Page Two of Agenda Bill No. /J; 92K
. Providing information to the public through speakers, computer information
networks, publications and educational material
. Development of advanced gemological instruments and analytical equipment
In addition, the GIA facility, when completed, will create about 100 jobs in the
Carlsbad/North San Diego County market.
Although the City of Carlsbad is not the issuer of the debt that will finance the GIA
facilities, Section 147(f) of the Internal Revenue Code of 1986 requires that the
financing and delivery to the related purchase agreements by CSCDA be approved
by the City because the proposed facilities are located within the City’s jurisdictional
boundaries, In addition, the Joint Exercise of Powers Agreement between the City
and CSCDA states that CSCDA cannot issue debt to finance any project unless the
governing body of the jurisdiction has approved the financing.
All parties should clearly understand that the debt to be issued to fund these facilities
is not debt of the Citv of Carlsbad in any way. There is no obligation of any kind on
the part of the City, the City Council or any entity controlled by the City to repay the
debt issued by CSCDA. All repayment of debt is the strict obligation of the property
owner, GIA. All monitoring and administrative actions related to this issue are the
responsibility of CSCDA.
The staff is recommending that the City Council hold the public hearing as required
by the Internal Revenue Code. At this hearing, anyone may comment on the
proposed financing. Following the public hearing, the City Council may consider the
adoption of the attached resolution which states the Council’s endorsement of the GIA
financing plan. This resolution will provide CSCDA with the authority to proceed with
the GIA financing.
A representative of GIA will be available at the public hearing to answer any questions
the Council may have.
FISCAL IMPACT:
The City of Carlsbad’s costs related to this financing will be limited to minimal staff
time to monitor the CSCDA process. All direct costs, if any, will be funded through
the debt issue.
The GIA financing will be in the form of an installment purchase agreement paid over
30 years. The current interest rate for this type of financing is approximately 6%.
EXHIBITS:
1. Resolution No. ?q- 30yEndorsing an lnstallment Purchase Financing to be
undertaken by the California Statewide Communities Development Authority to
benefit the Gemological Institute of America, Inc.
2. GIA project description,
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EXHIBIT 1
RESOLUTION NO. 94-308
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD,
CALIFORNIA, ENDORSING AN INSTALLMENT PURCHASE FINANCING
TO BE UNDERTAKEN BY THE CALIFORNIA STATEWIDE
COMMUNITIES DEVELOPMENT AUTHORITY TO BENEFIT THE
OLOGICAL IN INSTITUTE OF AMERICA, INC. G EM
WHEREAS, the Gemological Institute of America, Inc. (the “Institute”), a not-for-
profit corporation, has requested that the California Statewide Communities Development
Authority (“CSCDA”) participate in an installment purchase financing (the “Financing”) for
the purpose of acquiring, constructing and equipping certain gemological research and
educational facilities (the “Facilities”) currently owned by the Institute; and
WHEREAS, in connection with the Financing, CSCDA and the Institute will enter into
an installment purchase agreement (the “Purchase Agreement”) under which the Institute
will sell the Facilities to CSCDA and CSCDA will agree to make payments (the “Installment
Payments”) to the Institute for the purchase thereof; and
WHEREAS, certificates of participation (the “Certificates”) in an aggregate principal
amount not to exceed thirty million dollars ($30,000,000), each representing a
proportionate undivided interest in the lnstallment Payments, will be executed, delivered and
sold in connection with the Financing; and
WHEREAS, pursuant to Section 147(f) of the Internal Revenue Code of 1986 (the
“Code”) the Financing and the execution and delivery of the Purchase Agreement by
CSCDA must be approved by the City of Carlsbad (the “City”) because the Facilities are
located within the territorial limits of the City; and
WHEREAS, the City Council of the City (the “City Council”) is the elected legislative
body of the City and is one of the applicable elected representatives required to approve the
Financing and the execution and delivery of the Purchase Agreement under Section 147(f)
of the Code; and
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WHEREAS, CSCDA and the Institute have requested that the City Council approve
the Financing and the execution and delivery of the Purchase Agreement in order to satisfy
the public approval requirement of Section 147(f) of the Code, the requirements of Section
9 of the Joint Exercise of Powers Agreement (the “Agreement”), dated as of June 1, 1988,
among certain local agencies, including the City; and
WHEREAS, pursuant to Section 147(f) of the Code, the City Council has, following
notice duly given, held a public hearing regarding the Financing and the execution and
delivery of the Purchase Agreement, and now desires to approve the Financing and the
issuance of the Purchase Agreement.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad,
California, as follows:
1. That the above recitations are true and correct.
2. That the City Council hereby endorses the Financing and the Purchase
Agreement. It is the purpose and intent of the City Council that this resolution constitute
approval of the Financing and the execution and delivery of the Purchase Agreement (and
the execution and delivery of the certificates of participation related thereto) for the
purposes of (a) Section 147(f) of the Code 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 (b) Section 9 of the Agreement.
3. That 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.
Ill
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4. That this resolution shall take effect immediately upon its passage.
PASSED, APPROVED AND ADOPTED at a regular meeting of the Carlsbad City
Council held on the 8th day of NOVEMBER , 1994, by the following vote, to
wit:
AYES: Council Members Lewis, Stanton, Kulchin, Nygaard, Finnila
NOES: None
ABSENT: None
ATTEST:
ALETHA L. RAUTENKRANZ, City Clerk
(SEAL)
h EXHIBIT 2
The Gemological Institute of America, Inc.
I - General Background
The Gemological Institute of America, Inc. , (the “Institute”) is
an Ohio not-for-profit educational organization under Section
501(c)(3) of the Internal Revenue Code, which offers full-time
on-campus resident courses, one to four-week extension
classes, one to three-day seminars and distance education
(home study) courses to the gem and jewelry industry as well
as to the general public. The Institute’s wholly owned
subsidiary, GIA Enterprises, Inc. has important divisions within
it: GIA Gem Trade Laboratory (GTL), GIA GEM Instruments
(GEM) and GIARMS. GIA Gem Trade Laboratory provides
quality analysis grading and identification services on
diamonds, colored stones and other gem materials. GEM
Instruments develops gemological equipment to enhance the
jeweler’s technical precision and professional image. GIARMS
provides computerized management systems and educational
support to retailers.
II - Public Benefit
The Institute is a 63-year old institution encompassing
education, research and service to the gem and jewelry
industry. The Institute greatly benefits the public through:
+ Educating aspiring and active jewelry industry
professionals;
+ Maintaining a library, open to the public, comprising
14,000 volumes and subscriptions to 125 journals;
+ Conducting research to enable jewelers to deal
confidently with technological change to ensure the
public trust;
+ Applying uniform criteria to provide unbiased
opinions on the quality and identity of diamonds,
gemstones and other gem materials;
Alex Brown % Sons Incorporated
September 23,1994
6
h
The Gemological Institute of America, Inc.
Publishing topical information in its three in-house
periodicals: Gems & Gemology, the premier journal
of the gem and jewelry industry, In FOCUS, and
Loupe, G/A World News;
Providing speakers and instructional support to both
trade and public audiences;
Making available a wide selection of gemological and
other topical. books, publications and gift items to
students and the general public through its
bookstore;
Hosting an annual Jewelry CareerFair and providing
vocational assistance to students, graduates and
other interested persons;
Linking students and public users to the information
superhighway with access to GIA-Net, its in-house,
on-line global telecommunication network; and
Developing gemological instruments and analytical
equipment to enhance the jeweler’s technical
precision.
During the 63 years of its existence, thousands of jobs have
been created by the Institute alone. The new headquarters
facility in Carlsbad is expected to include a library, a
conference center, a museum, classrooms, research and
laboratory facility, and administrative offices. This project is
expected to create at least 100 new jobs within the first year of
operation, significantly enhancing both the City of Carlsbad’s
economy and the Institute‘s ability to further its mission: to
benefit public trust in the gem and jewelry industry through
education, research and service.
Ill -- Purpose of Financing
The unique mission of the Institute in education and research
and the consolidation of its growing operations under one roof
has led to the need for additional space. In 1993, the Institute
Alex Brown % Sons Incorporated
September 23, I994 page 2
h
The Gemological Institute of America, Inc.
purchased 18 acres in the Carlsbad Ranch Development
intended as the site for a new facility to initially accommodate
200,000 gsf of classrooms, library, conference center,
laboratories, and administrative offices (the “Project”).
The Institute also holds an option to purchase, in 2002, an
additional 12 acres adjacent to its current property and plans
additional buildup to some 550,000 gsf over the following 15
years which will add several hundred new jobs in the
community over time. Plans include expanded meeting space,
an auditorium, and a gemological museum, all of which will
ensure the Institute’s long-term future and at the same time,
provide useful facilities in the community.
Of the total 550,000 gsf planned, the following represents an
estimate of the percentage allocated to both non-profit and
profit making activities:
Non Profit Space Allocation for the 20-Year Expansion Period
Activity Square Footage
% of Total
(using 550,000 gsf)
GIA 440,000 80.0% of Total
Profit Making Space Allocation for the 20.Year Expansion Period
Activity
Gem Trade
Laboratory
GEM Instruments
GIARMS
Square Footage
75,000
30,000
5.000
% of Total
(using 550,000 gsf)
13.8%
5.5%
0.9%
20.0%
Alex Brown % Sons Incorporated
September 23,1994
The Gemological Institute of America, Inc.
IV - Estimated Sources & Uses of Funds
The following represents an estimate of the sources and uses
of the Project funds:
Sources of Funds
Bond Proceeds $30,000,000
Equity Contribution 9,000,000
Total $39,000,000
Uses of Funds
Construction $27,200,000
Equipment 6,400,OOO
Debt Service Reserve 2,200,000
Capitalized Interest 2,500,OOO
Costs of Issuance 700,000
Total $39,000,000
V - Conduit Issuer
The Institute does not have the enabling legislation to issue
tax-exempt bonds and consequently it would need to rely on a
conduit issuer for that purpose. The Institute has three options
for a conduit issuer from which to choose:
+ The City of Carlsbad;
+ The County of San Diego; and
+ The California Statewide Communities Development
Authority.
VI - TEFRA Public Approval
Regardless of the issuer, qualified 501 (c)(3) bonds, including
those issued for the benefit of the Institute may be issued only
after public approval (commonly referred to as “TEFRA”
Aler Brown & Sons Incorporated
September 23,1994
page4
9
The Gemological Institute of America, Inc.
approval) has been obtained with respect to the issuance of
the bonds and the facility to be financed (or refinanced) with
the proceeds thereof. Generally, public approval must be given
by the governmental unit within whose jurisdiction the facility to
be financed or refinanced is located. In this case, we
recommend that the public hearing be done through the City of
Carlsbad.
TEFRA, Tax Equity and Fiscal Responsibility Act of 1982,
approval must be obtained prior to the issuance of the bonds,
but not more than one year before the issue date. TEFRA
approval may be given only by the governmental unit’s elected
legislative body, its chief elected executive officer, or another
elected officer designated by the chief executive officer of the
governmental unit.
TEFRA approval may be given only after a public hearing has
been held. At the hearing, the public must have adequate
opportunity to be heard regarding the issuance of the bonds
and the financing or refinancing of the project. At least 14 days
prior to the hearing date, notice of the hearing must be
published in a newspaper of general circulation within the
approving governmental units. Included in the notice must be a
general description of the facility, the exact location (including
street address) of the facility, the maximum dollar amount of
the financing, and the identity of the initial owner or operator of
the facility.
TEFRA approval is not required for bonds issued to current
refund a prior issue of bonds for which TEFRA approval was
obtained, so long as the average maturity date of the refunding
bonds is not later than the remaining average date of the
refunded bonds.
For projects financed through the California Statewide
Communities Development Authority, the governing body (the
city council or the county board of supervisors) of the local
member of the Authority (the county or the city) holds the
TEFRA public hearing and thereafter adopts a resolution
approving the financing. Bond counsel drafts the notice of the
hearing and the approving resolution in consultation with the
Alex Brown & Sons Incorporated
September 23,1994
page5
The Gemological Institute of America, Inc.
borrower and its counsel. The Authority also approves the
financing by resolution.
VII - California Statewide Communities Development
Authority (the “Authority”)
The Authority is a public entity organized pursuant to a Joint
Exercise of Powers Agreement among a number of California
counties and cities. While the County of San Diego is a
member of the Authority, the City of Carlsbad is not and would
need to join if the City wishes the Authority to act as the conduit
issuer for the Institute. The Authority is authorized to issue tax-
exempt securities on behalf of qualified 501(c)(3)
organizations.
VIII - Inducement Resolution
The Institute passed an inducement resolution declaring its
intent to be reimbursed certain expenditures from the proceeds
of tax-exempt bonds to issued on its behalf. The declaration of
official intent was approved by unanimous written consent of
the Board of Governors of the Institute taken without a meeting
on August 24, 1994.
Alex Brown & Sons Incorporated
September 23, I994
The Gemological Institute of America, Inc.
IX - Financing Schedule
Week
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Activity Responsibility
Notitkation to the City of Cartsbad or application
filed with California Statewide Communities
Development Authority for proposed bond issuance
I, IC, u
Public notice for TEFRA Hearing (Tax Equity
and Fiscal Responsibility Act of 1982
First draft of documents sent to all parties and
rating agencies
Public hearing for bond issue (confirm with the
City of Cartsbad)
Solicit credit enhancement
Document review session
Rating agency presentation
Second draft of documents sent to all parties
and rating agencies
Final document review session
Mail Preliminary OftIdal Statement
Receive ratings from rating agencies
Pricing of bonds
Closing
I, c, IC
BC, u, UC
BC, U, UC, IC
c, IC, BC, U
u, 1
All Parties
I, u
BC, U, UC, IC
All Parties
u, UC
U
u, 1
. All Parties
SC Bond Counsel
C City of Cartsbad or California Statewide Communitiis Development Authority
I Gemological Institute of America
IC Institute Counsel
U Undemriter
UC Underwriter Counsel
Alex Brown % Sons Incorporated
September 23, I994
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Gemological Institute of America Project Information
The Gemological Institute of America (GIA) is planning to build its campus and headquarters on approximately 30 acres of land located in the Carlsbad Ranch Development at the corner of Cannon Road and Armada Drive.
This process is designed in two major phases. The first on
17.76 acres with approximately 220,000 square feet of building area. This will allow GIA to relocate from its current facilities in Santa Monica, California. The second phase consists of adding approximately 12 acres with a total build out of 550,000 square feet of building area. This will allow the institute to complete its campus and provide room for future growth.
The following buildings are identified on the illustrative plan:
Building 1.
Building 2.
Building 3.
Building 4.
Research laboratory, print shop, inventory
warehouse
Classrooms, library and information center,
instructor offices, student services
Bookstore
Course development, alumni office,
administration
Note: Buildings 1-4 are planed for the first phase.
Building 5. Dining and recreation
Building 6. Auditorium and Museum
Buildings 7. Student dormitories
Buildings 8. Future growth
.
PROOF OF PUBLICATION
(2015.5 C.C.P.)
STATE OF CALIFORNlA
County of San Diego
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 above-entitled matter. I am the principal clerk of the printer of
Blade-Citizen
a newspaper of general circulation, printed and published daily in the City of Oceanside and qualified for
the City of Oceanside and the North County Judicial
district with substantial circulation in Bonsall, Fallbrook, Leucadia, Encinitas, Cardiff, Vista and Cartsbad, County
of San Diego, and which newspaper has been adjudged a newspaper of general circulation by the Superior
Court of the County of San Diego, State of California.
under the date of June 30.1989, case number 171349; that the notice, of which the annexed is a printed copy
(set in type not smaller than nonpareil), has been published in each regular and entire issue of said
newspaper and not in any supplement thereof on the following dates, to-wit:
October 21, 1994
I certify (or declare) under penalty of perjury that the
foregoing is tme and correct.
Dated at Oceanside.Califomia, this day 21 of Oct. 1994
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Signature - 1 Z&‘;: ---m------
BLADE-CITIZEN
Legal Advertising
1722 South Hill Street
P-0. Box 90 Oceanside, CA 92054 (619) 433-7333
._
This space is for the County Clerk’s Filing Stamp
Proof of Publication of
Notice of Hearing
n-a.rA PIinn:“” -6 *to
munltfes Development Authorfty (and the execution and delivery 01 cartffkates of
PXtiCiiXtiOll proportfonate representing interests fherefn) h an amount not to exceed $30,000,000 for the
Gemologlcai Purpose of as$sfsi The
~erica. inc., an Ohlo no? Ibr-profit corporation (the ‘instftw). to undertake the ffnancing of the acquisitfon. construction and equipping of artain gemoiogkai research lnd educahionai facflitfes to be ocated on a portion of lot 2 md ION 56 and 7 in the area :ommonfy known as Carfsbad 3anch. located south and east If the Intersection of Cannon bad and Car Country Drive, n Carlsbad. Cailfornfa (the ProNcr). The instftute. an rrganlzation as described In iectfon 501(c)(3) of the Code dil own and operate said 1ciiitk?s. -. The hearin lence at 6:0 8 will corn- j p.m.. local I me, or as soon thereafter as le matter can be heard, and 1 fill be held at the Council ’ hamber, 1200 Carfsbad ’ tiiage Drfve. Carfsbad, Call- ! )rnla 92008. interested ! ! I( I persons wisnlng to express 1 their views on the issuance of : such instaiiment purchase 1 agreement or on the nature / and ; location of the Project j may attend the public hearing J ; or, vrfor to the time of the !
NMICE OF PUBLIC HEARING NOTICE IS HEREBY GIVEN that on Tuesday, November 6, 1994, a publk hearing. as re- r quked by Section 147({ of 1 the internal Revenue Co e 01 1986 (the *Code) will be held wfth respect to the proposed issuance al an lnstallment purchase Caiifornfa P reement by the tatewfde Com-
i hl sarlng, submit written com- I m cnts to the Offke of the City j Cl lerk, 1200 Carfsbad Village
;g dv& Carisbad, California
Dated: October 21 994 2% 81 a Cltfan
I CN276652.10/21/94
/Legal-Ocloberzl. we.4
Itice
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