HomeMy WebLinkAbout2009-11-10; City Council; 20040; CMFA Bonds for Gemological Institute of AmericaCITY OF CARLSBAD - AGENDA BILL
AB#
MTG.
DEPT.
20.040
11/10/09
FIN
APPROVE ISSUANCE OF TAX EXEMPT
PRIVATE ACTIVITY BONDS BY CMFA
TO REFINANCE PREVIOUSLY ISSUED
BONDS FOR THE BENEFIT OF THE
GEMOLOGICAL INSTITUTE OF
AMERICA, INC.
DEPT. HEAD
CITY ATTY.
CITY MGR.
RECOMMENDED ACTION:
Accept public comment on the intent by the California Municipal Finance Authority (CMFA), a public
entity of the State of California, to issue tax-exempt revenue bonds within the jurisdiction of the City of
Carlsbad to refinance the California Statewide Communities Development Authority Variable Rate
Demand Revenue Bonds (Gemological Institute of America, Inc. Project) Series 2001.
Adopt Resolution No. 2009-286 approving the tax exempt financing and the issuance of the revenue
bonds by CMFA for the Gemological Institute of America, Inc. a California nonprofit corporation.
ITEM EXPLANATION:
In November 1994, Council authorized the sale of tax exempt bonds by California Statewide
Communities Development Authority (CSCDA) to finance a portion of the Gemological Institute of
America's (GIA) new world headquarters in the Carlsbad Ranch area of the City. The GIA is a qualified
non-profit corporation under Section 501(c)(3) of the Federal Tax Code, thus they are able to participate
in the non-profit public benefit financing program offered by CSCDA.
In December 2001, Council authorized CSCDA to refinance the outstanding bonds and issue additional
bonds to assist GIA in the expansion of their facilities. The 2001 Bonds were used to refinance the
acquisition, construction and equipping of certain administrative and educational facilities, including
classrooms, administrative offices, a library, laboratories and parking facilities located at 5345 and 5355
Armada Drive in Carlsbad. In addition, the bonds were used to finance the acquisition of certain
laboratory equipment and a portion of the acquisition of real property on the corner of Cannon and
Legoland Drive in Carlsbad and related capital improvements, and to fund certain reserves and pay
other costs related to the financing.
Recently, the Gemological Institute of America, Inc. has requested that the CMFA participate in the
issuance of one or more series of revenue bonds in an aggregate principal amount not to exceed
$35,000,000 to (1) refinance the California Statewide Communities Development Authority Variable
Rate Demand Revenue Bonds (Gemological Institute of America, Inc. Project), Series 2001 and (2) pay
certain expenses incurred in connection with the issuance of the bonds.
DEPARTMENT CONTACT: Lisa Irvine 760-602-2430 lisa.irvine@carlsbadca.gov
FOR CITY CLERKS USE ONLY.
COUNCIL ACTION:APPROVED
DENIED
CONTINUED
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AMENDED
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The CMFA is a joint powers authority which was formed to assist local government, non-profit
organizations and businesses with the issuance of taxable and tax-exempt financing aimed at improving
the standard of living in California. The City is a member of the CMFA. Although the CMFA will be the
issuer of the bonds, the City must still authorize the tax-exempt financing and the issuance of the
revenue bonds by CMFA. The City is required to hold a public hearing known as a Tax & Equity Fiscal
Responsibility Act (TEFRA) hearing to authorize the tax-exempt financing by CMFA.
Although the City of Carlsbad is not the issuer of the debt that will finance the GIA facilities, the Internal
Revenue Code requires that the financing by CMFA be approved by the City because the proposed
facilities are located within the City's jurisdictional boundaries. All parties should clearly understand that
the debt to be issued to refinance the bonds is not debt of the City 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 CMFA. 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 CMFA.
Participation by the City in the CMFA will not impact the City's appropriation limits and will not constitute
any type of indebtedness by the City. Once the City holds the public hearing and adopts the required
resolution following the public hearing, no other participation of the City in the actions of the CMFA or in
the bond financing will be required.
Staff is recommending that the City Council hold the public hearing as required by the Internal Revenue
Code and 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 CMFA with the authority
to proceed with the GIA financing.
FISCAL IMPACT:
The City of Carlsbad's costs related to this financing will be limited to minimal City staff time to notice
and conduct the public hearing. The Board of Directors of the California Foundation for Stronger
Communities, a California non-profit public benefit corporation (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 Carlsbad, it is expected that
25% of the issuance fee will be granted by the CMFA to the General Fund of the City. Such grant may
be used for any lawful purpose of the City. GIA will be the beneficiary of the Foundation's charitable
donation through a 25% reduction in issuance fees. If the entire $35 million of bonds is issued, then
25% of the issuance fees would be approximately $10,833.
ENVIRONMENTAL IMPACT:
This action does not constitute a project as defined under CEQA (California Environmental
Quality Act) pursuant to Public Resources Code Section 21065 in that these amendments may
not cause a direct physical change in the environment or a reasonably foreseeable indirect
physical change in the environment..
EXHIBITS:
1. Resolution No. 2009-286 approving the issuance of qualified 501 (c) (3) bonds by the California
Municipal Finance Authority (CMFA) for the Gemological Institute of America, Inc.
NOTICE OF PUBLIC HEARING
NOTICE IS HEREBY GIVEN that on November 10, 2009, a public hearing as
required by Section 147(f) of the Internal Revenue Code of 1986 will be held with
respect to the proposed issuance by the California Municipal Finance Authority (the
"Authority") of its revenue bonds in one or more series in an amount not to exceed
$35,000,000 (the "Bonds"). The proceeds of the Bonds will be used by Gemological
Institute of America, Inc. (the "Borrower"), a California nonprofit corporation and an
organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, to
(1) refinance the California Statewide Communities Development Authority Variable
Rate Demand Revenue Bonds (Gemological Institute of America, Inc. Project), Series
2001 (the "2001 Bonds") and (2) pay certain expenses incurred in connection with the
issuance of the Bonds.
The 2001 Bonds were used to refinance the acquisition, construction and
equipping of certain administrative and educational facilities, including classrooms,
administrative offices, a library, laboratories and parking facilities located at 5345 and
5355 Armada Drive, Carlsbad, California (the "Campus"), to finance the acquisition of
certain laboratory equipment to be used at the Campus and a portion of the acquisition of
real property on the corner of Cannon and Legoland Drive in Carlsbad and related capital
improvements (collectively, the "Project"), and to fund certain reserves and pay other
costs related thereto. The Project is owned and operated by the Borrower.
The Bonds and the obligation to pay principal of and interest thereon and any
redemption premium with respect thereto shall not constitute indebtedness or an
obligation of the Authority, the State of California or any political subdivision thereof,
within the meaning of any constitutional or statutory debt limitation, or a charge against
the general credit or taxing powers of any of them. The Bonds shall be a limited
obligation of the Authority, payable solely from certain revenues duly pledged therefor
and generally representing amounts paid by the Borrower.
The hearing will commence at 6 p.m. or as soon thereafter as the matter can be
heard, and will be held in the City Hall Council Chambers, 1200 Carlsbad Village Drive,
Carlsbad, California. Interested persons wishing to express their views on the issuance of
the Bonds or on the nature and location of the facilities proposed to be refinanced may
attend the public hearing or, prior to the time of the hearing, submit written comments.
Written comments should be addressed to the City Clerk, City of Carlsbad,
1200 Carlsbad Village Drive, Carlsbad, California 92008. Additional information
concerning the above-mentioned information may be obtained from the City Clerk, City
of Carlsbad, 1200 Carlsbad Village Drive, Carlsbad, California 92008.
Carlsbad City Council
Dated: October 26, 2009
OHS West:260739675.5
J-
1 RESOLUTION NO. 2009-286
2
3 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
4 CARLSBAD, CALIFORNIA, APPROVING THE ISSUANCE OF THE
CALIFORNIA MUNICIPAL FINANCE AUTHORITY REVENUE BONDS
5 (GEMOLOGICAL INSTITUTE OF AMERICA, INC.), SERIES 2009 IN AN
AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $35,000,000
6 FOR THE PURPOSE OF REFINANCING THE CALIFORNIA
STATEWIDE COMMUNITIES DEVELOPMENT AUTHORITY VARIABLE
7 RATE DEMAND REVENUE BONDS (GEMOLOGICAL INSTITUTE OF
AMERICA, INC. PROJECT), SERIES 2001
o
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WHEREAS, the Gemological Institute of America, Inc. (the "Borrower"), a
California nonprofit corporation and an organization described in Section 501(c)(3) of
12 the Internal Revenue Code of 1986, has requested that the California Municipal
13 Finance Authority (the "Authority") participate in the issuance of one or more series of
14 revenue bonds in an aggregate principal amount not to exceed $35,000,000 (the
"Bonds") to (1) refinance the California Statewide Communities Development Authority
16 Variable Rate Demand Revenue Bonds (Gemological Institute of America, Inc.
17
Project), Series 2001 (the "2001 Bonds") and (2) pay certain expenses incurred in
18
connection with the issuance of the Bonds; and19
WHEREAS, the 2001 Bonds were used to refinance the acquisition,
21
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construction and equipping of certain administrative and educational facilities,
22 including classrooms, administrative offices, a library, laboratories and parking
23
facilities located at 5345 and 5355 Armada Drive, Carlsbad, California (the "Campus"),
24
to finance the acquisition of certain laboratory equipment to be used at the Campus
26 and a portion of the acquisition of real property on the corner of Cannon and Legoland
27
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1 Drive in Carlsbad and related capital improvements (collectively, the "Project"), and to
2 fund certain reserves and pay other costs related thereto; and
3
WHEREAS, the Project is owned and operated by the Borrower and located
5 within the City of Carlsbad (the "City"); and
6
WHEREAS, pursuant to Section 147(f) of the Internal Revenue Code of 1986
7
(the "Code"), the issuance of the Bonds by the Authority must be approved by the City
8
because the Project is located within the territorial limits of the City; and
9
10 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"
12
required to approve the issuance of the Bonds under Section 147(f) of the Code; and
13
14 WHEREAS, the Authority has requested that the City Council approve the
15 issuance of the Bonds by the Authority in order to satisfy the public approval
^ requirement of Section 147(f) of the Code and the requirements of Section 4 of the
17 Joint Exercise of Powers Agreement Relating to the California Municipal Finance
18
Authority, dated as of January 1, 2004 (the "Agreement"), among certain local
19
agencies, including the City; and
20
21 WHEREAS, pursuant to Section 147(f) of the Code, the City Council has,
22 following notice duly given, held a public hearing regarding the issuance of the Bonds,
23 and now desires to approve the issuance of the Bonds by the Authority;
24
25 NOW, THEREFORE, BE IT RESOLVED, by the City Council of the City of
26 Carlsbad as follows:
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1 Section 1. The City Council hereby approves the issuance of the Bonds by the
2 Authority. It is the purpose and intent of the City Council that this resolution constitute
3 approval of the issuance of the Bonds by the Authority, for the purposes of (a) Section
4 147(f) of the Code by
5
the applicable elected representative of the governmental unit
having jurisdiction over the area in which the Project is located, in accordance with
6
said Section 147(f) and (b) Section 4 of the Agreement.
7
8 Section 2. The
g and severally, to do
10 documents which they
11 to and comply with the
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approved hereby.
13
14 Section 3. This
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officers of the City are hereby authorized and directed, jointly
any and all things and to execute and deliver any and all
deem necessary or advisable in order to carry out, give effect
terms and intent of this resolution and the financing transaction
resolution shall take effect immediately upon its adoption.
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PASSED, APPROVED AND ADOPTED at a Regular Meeting of the City Council
of the City of Carlsbad on the 10th day of November. 2009, by the following vote to wit:
AYES: Council Member Lewis, Kulchin, Hall, Packard, and Blackburn.
NOES: None.
ABSENT: None.
CLAUDE A LEWIS, Mayor
ATTEST:
INEM. WOOD, City Clerk
7
Tax Exempt Private
Activity Bonds –
Gemological Institute
of America, Inc.
November 10, 2009
Background
GIA desires to issue up to $35 million in
bonds to refinance their variable rate bonds
issued in 2001
California Municipal Finance Authority (CMFA) will issue the tax-exempt bonds on behalf of GIA
CMFA –Joint Powers authority which assists
local governments, non-profits and
businesses with financing
Background
Internal Revenue Code -Tax & Equity
Fiscal Responsibility Act
Requires City of Carlsbad to hold Public
Hearing because the issuance of the bonds
will be occurring within the City’s jurisdiction
The public hearing allows citizens to voice
concerns that may exist regarding the
proposed financing
Gemological Institute of America
GIA is a nonprofit corporation -eligible to
issue tax exempt bonds
All repayment of debt is GIA obligation
No obligation of City of Carlsbad
City to notify citizens that this tax-exempt
issuance is occurring and provide an
opportunity to comment
Fiscal Impact
CMFA shares a portion of its issuance
fees with its member communities and
local charities
25% of issuance fee will be granted to City
of Carlsbad
25% of issuance fee will be returned to
GIA to reduce GIA’s issuance costs
Resolution
Approve the tax exempt financing and the
issuance of the revenue bonds by CMFA
for Gemological Institute of America, Inc.
Tax Exempt Private
Activity Bonds –
Gemological Institute
of America, Inc.
November 10, 2009