HomeMy WebLinkAbout1995-01-24; City Council; 13002; Establishing Industrial Development AuthorityCIT” OF CARLSBAD - AGEN-1 BT’ ’ fjiefJ@9 #) ILL &G &y I AB # ) 1, &02-, TITLE: Consideration of an
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RECOMMENDED ACTION:
Introduce Ordinance No. /vS - 30 / establishing the City of Carlsbad
Industrial Development Authority. Adopt Resolution No. 9 5 - 13 declaring
the Carlsbad City Council to be the Board of Directors of the Industrial
Development Authority of the City of Carlsbad. Direct staff to return at a future
date with a Council Policy for the use and process of evaluating projects for
participation in an industrial development bond program.
I ITEM EXPLANATION:
One of the areas that the City has been investigating as a part of an enhanced
Economic Development program is the use of non-monetary incentives as tools for
attracting new business. Perhaps the most widely used tools for inducing private
investment is the issuance of tax-exempt bonds. These bonds must be sold
through a public body such as a municipality or state government in order to
maintain a tax-exempt status. The public purpose for issuance of tax-exempt
bonds includes, but is not limited to job retention, job creation, resource
conservation, tourism benefits and tax-base expansion.
There are a variety of private-purpose tax-exempt bond types, but the most
common is the Industrial Development Revenue Bond (IDRB). IDRB’s offer private
manufacturing companies preferential financing terms for projects which meet
certain qualifying requirements. Qualifying projects may finance the purchase of
land, fund the rehabilitation of a facility, purchase or lease equipment, and finance
interest payments and closing costs. IDRB’s can also be used by developers of
build-to-suit facilities for qualified manufacturing concerns. IDRB’s carry a tax-
exempt status and are only available for new projects or expansions, subject to
state approval.
Repayment of the Industrial Development Revenue Bonds comes directly from the
private sector borrower, not the issuing municipality. The issuer of the bonds
becomes a “conduit issuer”, and has no financial obligation to the bond holders.
Financing terms for the borrower are typically 15 to 20 years on real estate, and 5
to 7 years on equipment.
In October of 1994, the City Council joined the California Statewide Communities
Development Authority (CSCDA). This joint-powers agency assists member
agencies in pursuing programs which improve the quality of life and economic
vitality of communities. Tax-exempt financing, which includes Industrial
Development Revenue Bonds, is one of the primary tools used by CSCDA.
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PAGE 2 OF AGENDA dlLL NO. )3,00 ?--
Recently, the City was approached regarding issuance of Industrial Development
Revenue Bonds as a way of assisting a developer finance construction of two new
manufacturing facilities; one existing high tech manufacturer expansion, and one
new biotech manufacturer wanting to relocate. Although, the City is a member of
CSCDA and could have referred the developer to that agency for assistance, the
developer could not meet the credit requirements of the “public bond placement”
offered through CSCDA.
A second option available to the City and the developer is participation in a
“privately placed” IDRB issue. Essentially the publicly and privately placed bond
programs are the same in terms of the City’s involvement, however in a private
placement the bonds are purchased by a bank who agrees to hold them for a
minimum period in their portfolio, thus the transaction resembles a traditional two-
party bank loan. Benefits of a privately placed issue include significant cost
savings to the borrower and no requirement for a Letter of Credit or other credit enhancement. Under either type of issue, the City would have no financial
obligation to the bond holder(s).
In order to consider participating in a privately placed IDRB issue, the City must
form an Industrial Development Authority (IDA). Under the Industrial Development
Financing Act, the State of California gives each public agency the right to form
such an authority for the purpose of issuing revenue bonds in the accomplishment
of public purposes. The authority to issue bonds under the act lapsed on
December 31, 1994 and will require futher state legislative action to be extended.
At this point in time there is no opposition to such an extension, and it is expected
that the extension will be granted on an urgency basis in due course after the
Legislature has organized itself and can move forward. Establishment of an
Industrial Development Authority by the City Council, requires that action be
accomplished by ordinance, subject to referendum.
An Industrial Development Authority is governed by a board of directors. The City
Council may declare itself to be the IDA board, just as Council members serve as
the board of the Redevelopment Authority and Water District. Each authority must
designate a chairperson elected by the members of the board from its
membership. Public officers of the authority consist of the chairperson, members
of the board, a secretary, a treasurer, and any assistants for the secretary and
treasurer as the board may appoint.
An Authority’s powers include but are not limited to; (1) acquiring property by
purchase, exchange, gift, lease, contract, or otherwise by eminent domain, (2)
maintaining property, (3) disposal of property by lease, sale, exchange, donation,
release, relinquishment, or otherwise, (4) borrowing money and issuing bonds.
Per California Government Code section 91543, an the Industrial Development
Authority under the Industrial Development Financing Act is exempt from
provisions of the California Environmental Quality Act (CEQA).
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PAGE 3 OF AGENDA ijILL NO. /3,0 0 2 I
As a part of an enhanced economic development effort, staff is recommending the
City Council adopt the attached ordinance and resolution, forming an Industrial
Development Authority and designating the City Council as the Industrial
Development Authority of the City of Carlsbad. In addition, Council may consider
directing staff to return at a future date with a City Council Policy addressing the
use and process to be utilized when evaluating project requests for participation in
an Industrial Development Revenue Bond program. City Council adoption of an
ordinance establishing the Industrial Development Authority would not constitute
an approval of any present or future request for issuance of Industrial
Development Revenue Bonds.
FISCAL IMPACT:
The creation of the Industrial Development Authority and the issuance of IDRB’s
does not create any financial obligation for the City. Any costs related to the
issuance of IDRB’s will be paid by the private party benefitting from the bond
issue. Administration of the IDA requires minimal staff time. The IDA may recover
all costs and collect a small fee for each IDRB issue undertaken. The City, the
City Council and the subordinate agencies of the City have no financial obligation
for any debt issued by the IDA.
EXHIBITS
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2.
Ordinance No. NS -301 ,Declaring the need for the Industrial
Development Authority of the City of Carlsbad.
Resolution No. q5 -d 3 , Designating the City Council as the Industrial
Development Authority of the City of Carlsbad.
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ORDINANCE NO. NS-301
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF CARLSBAD,
CALIFORNIA DECLARING THE NEED FOR FORMATION OF THE
INDUSTRIAL DEVELOPMENT AUTHORITY OF THE CITY OF
CARLSBAD.
WHEREAS, the City Council has established an economic development
program in order to encourage and facilitate continued economic growth within
the community; and
WHEREAS, providing tax-exempt financing through the issuance of
industrial development bonds provides an economic incentive for inducing new
private development within the City; and
WHEREAS, pursuant to the California Industrial Development Financing
Act (California Government Code Section 91500 et. seq.) (the “Act”), there is in
each city a public, corporate instrumentality for the State of California, known
as the industrial development authority of such city, which authority is
authorized to issue revenue bonds for the public purposes of the Act, including
financing industrial and other activities within the city with demonstrated job
creation potential and other public benefit; and
WHEREAS, the City Council of the City of Carlsbad, California (the “City”)
wishes to authorize the authority to transact business and exercise Its powers;
and
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WHEREAS, Section 91520 of the Act prescribes that the authority shall
not transact any business or exercise any powers unless the City Council by
ordinance declares that there is a need for the authority and that the authority
shall function.
NOW THEREFORE, the City Council of the City of Carlsbad does ordain
as follows:
SECTION 1: That there is a need for the industrial development
Authority of the City of Carlsbad and that the authority shall function.
SECTION 2: The authority shall be named the ’ Industrial Development
Authority of the City of Car&bad”.
EFFECTIVE DATE: The provisions of this Ordinance shall be effective
thirty (30) days after the date of its adoption, and the City Clerk shall certify to
the adoption of this ordinance and cause it to be published at least once in a
newspaper of general circulation in the City within fifteen (15) days after its
adoption.
INTRODUCED AND FIRST READ at a regular meeting of the Carlsbad
City Council on the 24th day of JANUARY, 1995, and thereafter.
PASSED AND ADOPTED at a regular meeting of the City Council of the
City of Carlsbad on the
following vote to wit:
day of t 1995, by the
AYES:
NOES:
ABSENT:
ABSTAIN:
APPROVED AS TO FORM AND LEGALITY
RONALD R. BALL, City Attorney
.
CLAUDE A. LEWIS, Mayor
ATTEST:
ALETHA L. RAUTENKRANZ, City Clerk
(SEAL)
,
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RESOLUTION NO. 95-23
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD
DECLARING ITSELF TO BE THE BOARD OF DIRECTORS OF THE
INDUSTRIAL DEVELOPMENT AUTHORITY OF THE CITY OF
CARLSBAD.
WHEREAS, pursuant to the California Industrial Development Financing
Act (the “‘Act”) there is in each city of the State a public, corporate
instrumentality known as the industrial development authority of such city; and
WHEREAS, Section 91520 of the Act provides that an authority shall not
transact any business unless, by ordinance, the City Council declares there is a
need for the authority and that authority shall function, and there has been
introduced Ordinance No. NS-301 of the City making such declaration in
accordance with Section 91520; and
WHEREAS, pursuant to Section 91523 of the Act, the City Council may,
at its sole discretion and at any time, by resolution, declare itself to be the
board, in which case all the rights, powers, privileges, duties, liabilities,
disabilities and immunities vested in a board of directors shall be vested in the
City Council as such board, and the City Council deems it appropriate at this
time to so declare itself the board.
NOW, THEREFORE, the City Council of the City of Carlsbad does hereby
resolve as follows:
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1. That the above recitations are true and correct.
2. That the City Council hereby declares itself to be the Board of
Directors of the Industrial Development Authority of the City of Cat&bad in
accordance with Section 91523 of the Act.
3. That the Chairperson of the Board of Directors shall be the Mayor,
that the Secretary of the Board shall be the City Clerk, and that the
Treasurer of the Board shall be the City Finance Director.
4. That this resolution shall be effective upon the effective date of
.Ordinance No. NW01 of the City, in which the City Council has
declared the need for the Authority and that the Authority shall function.
PASSED AND ADOPTED at a regular meeting of the City Council of the City of
Car&bad on the 24th day of JANUARY t 1995, by the following
vote to wit:
AYES: Council Members Lewis, Nygaard, Kulchin, Finnila, Hall
NOES: None
ABSENT: None
ATTEST:
ALETHA L. RAUTENKFWNZ, City Clerk ’
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