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HomeMy WebLinkAbout2021-11-16; City Council; ; Tax and Equity Fiscal Responsibility Act Public Hearing for the Issuance of Tax-Exempt Bonds by the California Municipal Finance Authority for the Benefit of Camston Wrather LLCMeeting Date: Nov. 16, 2021 To: Mayor and City Council From: Scott Chadwick, City Manager Staff Contact: Matt Sanford, Economic Development Manager matt.sanford@carlsbadca.gov, 760-607-2923 David Graham, Chief Innovation Officer david.graham@carlsbadca.gov, 760-473-2259 Subject: Tax and Equity Fiscal Responsibility Act Public Hearing for the Issuance of Tax-Exempt Bonds by the California Municipal Finance Authority for the Benefit of Camston Wrather LLC District: 2 Recommended Action Hold a public hearing, under the requirements of the Tax and Equity Fiscal Responsibility Act and the Internal Revenue Code of 1986 and adopt a resolution approving the issuance of California Municipal Finance Authority revenue bonds by the California Municipal Finance Authority for the benefit of Camston Carlsbad Asset 1 LLC or a subsidiary or affiliate. The bonds are to finance and refinance the construction, expansion, improvement and/or equipping of an approximately 116,000 square-foot, solid waste disposal facility in the City of Carlsbad that will process printed circuit boards and related materials derived from used computers, flat panel televisions and smartphones. Executive Summary The borrower, Camston Wrather LLC, on behalf of the Camston Carlsbad Asset 1 LLC, a Delaware limited liability company, has requested that the California Municipal Finance Authority issue one or more series of revenue bonds in an aggregate principal amount not to exceed $80 million. The project, a solid e-waste disposal facility to be built at 2856 Whiptail Loop East in Carlsbad, is to be owned and operated by the borrower. The borrower is also asking the Municipal Finance Authority to pay certain expenses in connection with the issuance of the bonds. For the bonds to qualify as tax-exempt bonds, the City of Carlsbad is required to conduct a public hearing, known as a TEFRA hearing, to provide members of the community an opportunity to speak in favor of, or against the use of tax-exempt bonds for the financing of the project. Although the City of Carlsbad is not issuing the bonds, or in any way obligated to repay the bonds, the Internal Revenue Code requires the financing by Municipal Finance Authority be approved by the City Council because the proposed project is located within Carlsbad’s jurisdictional boundaries. Nov. 16, 2021 Item #10 Page 1 of 9 Discussion The Municipal Finance Authority was formed as a joint powers authority to assist 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. The City of Carlsbad is a member of the authority, whose representatives and board of directors have considerable experience in bond financing. Once the City Council holds the required TEFRA hearing and adopts the required resolution, no other participation of the City of Carlsbad in the bond financing will be required. All parties should clearly understand: • The debt issued that is financed by 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 of Carlsbad, the City Council or any entity controlled by the City of Carlsbad to repay the debt issued by the California Municipal Finance Authority. All repayment of debt is the strict obligation of the borrower. • All monitoring and administrative actions related to this issuance are the responsibility of the California Municipal Finance Authority. • The City of Carlsbad’s participation in the issuance of these state bonds will not impact the city's appropriation limits and will not constitute any type of indebtedness by the city. The solid e-waste disposal facility Camston Carlsbad Asset 1 LLC plans to build with the borrowed funds will reduce the amount of e-waste going to landfills, and thus support clean, safe solid- waste disposal within the City of Carlsbad. Options Staff recommend the City Council: • Conduct a hearing required by the Tax and Equity Fiscal Responsibility Act on Nov. 16, 2021, on the subject of the proposed issuance of revenue bonds by the California Municipal Finance Authority in an amount not to exceed $80,000,000 for the construction, expansion, improvement and/or equipping of the project • Adopt the attached City Council resolution in favor of the issuance of the bonds The council could choose to not approve the recommended resolution, but there would be no benefit to the city for doing. Failing to approve the resolution this could result in the facility locating elsewhere. Fiscal Analysis As noted above, the City of Carlsbad will have no financial, legal, moral obligation, liability or responsibility for the project or the repayment of the bonds financing of the project. There is no fiscal impact to the City of Carlsbad for the Municipal Finance Authority to issue the bonds for the noted development. The Municipal Finance Authority shares a portion of the issuance fees it receives with its member communities when it issues bonds. The minor administrative and staff costs to prepare the reports and related documents required by the borrower and the Municipal Finance Nov. 16, 2021 Item #10 Page 2 of 9 Authority are reimbursed to the City of Carlsbad through a small portion of the bond issuance fee paid to the city’s General Fund. Next Steps Should the City Council approve the proposed resolution, City staff will forward it to the California Municipal Finance Authority, allowing its staff and the borrower to proceed with bond issuance and project financing. Environmental Evaluation This action does not constitute a project as defined under the California Environmental Quality Act in accordance with Public Resources Code Section 21065 in that this action may not cause a direct physical change in the environment or a reasonably foreseeable indirect physical change in the environment. Public Notification and Outreach This item was noticed in keeping with the state's Ralph M. Brown Act. It was available for public viewing and review at least 72 hours before the scheduled meeting date. A seven-calendar day public Tax and Equity Fiscal Responsibility Act hearing notice was posted in a newspaper of general circulation on Oct. 26, 2021, and on the city website. Copies of the notice are available in the Office of the City Clerk. Exhibits 1. City Council resolution 2. Description of the proposed project Nov. 16, 2021 Item #10 Page 3 of 9 RESOLUTION NO. 2021-256 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, APPROVING THE ISSUANCE OF THE CALIFORNIA MUNICIPAL FINANCE AUTHORITY REVENUE BONDS IN AN AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $80,000,000 FOR THE PURPOSE OF FINANCING OR REFINANCING THE ACQUISITION, CONSTRUCTION, REHABILITATION, IMPROVEMENT AND EQUIPPING SOLID WASTE DISPOSAL FACILITIES FOR THE BENEFIT OF CAMSTON CARLSBAD ASSET 1, LLC AND CERTAIN OTHER MATTERS RELATING THERETO Exhibit 1 WHEREAS, Camston Wrather LLC (the "Sponsor"), on behalf of the Camston Carlsbad Asset 1, LLC, a Delaware limited liability company (the "Borrower"), has requested that the California Municipal Finance Authority (the "Authority") issue one or more series of revenue bonds in an aggregate principal amount not to exceed $80,000,000 (the "Bonds"), including but not limited to revenue bonds issued as part of a plan to (1) finance or refinance the construction, expansion, improvement and/or equipping of an approximately 116,000 square foot solid waste disposal facility, described in Section 142(a)(G) of the Internal Revenue Code (Code), that will process printed circuit boards and related materials derived from used computers, flat panel televisions, and smartphones (the "Project") to be owned and operated by the Borrower and located at 2856 Whiptail Loop E within the City of Carlsbad (the "City"), and (2) pay certain expenses in connection with the issuance of the Bonds; and WHEREAS, pursuant to Section 147(f) of the Code, the issuance of the Bonds by the Authority must be approved by the City of City of Carlsbad (the "City") because the Project is 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 issuance of the Bonds under Section 147(f) of the Code; and WHEREAS, the Authority has requested that the City Council approve the issuance of the Bonds by the Authority in order to satisfy the public appro'(al requirement of 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; and Nov. 16, 2021 Item #10 Page 4 of 9 Exhibit 1 WHEREAS, pursuant to Section 147(f} of the Code, the City Council has, following notice duly given, held a public hearing regarding the issuance of the Bonds, and now desires to approve the issuance of the Bonds by the Authority; NOW, THEREFORE, BE IT RESOLVED, by the City Council of the City of Carlsbad, California as follows: 1. The foregoing recitals are true and correct. 2. The City Council approves the issuance of the Bonds by the Authority, including but not limited to Bonds issued as part of a plan to finance or refinance the Project facilities. It is the purpose and intent of the City Council that this resolution constitute approval of the issuance of the Bonds by the Authority for the Project, for the purposes of (a} Section 147(f} of the Code by the applicable elected representative of a governmental unit having jurisdiction over the area in which the Project is to be located, in accordance with Section 147(f} and (b} Section 4 of the Agreement. 3. The issuance of the Bonds shall be subject to the approval of the Authority of all financing documents relating thereto to which the Authority is a party. The City shall have no responsibility or liability whatsoever with respect to the Bonds. 4. The adoption of this Resolution shall not obligate the city or any department thereof to (i} provide any financing to acquire or construct the Project or any refinancing of the Project; (ii} approve any application or request for or take any other action in connection with any planning approval, permit or other action necessary for the acquisition, construction, rehabilitation, installation or operation of the Project; (iii} make any contribution or advance any funds whatsoever to the Authority; or (iv} take any further action with respect to the Authority or its membership therein. 5. The City Manager or designee is authorized and directed to do any and all things and to execute and deliver any and all documents deemed 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. 6. This resolution shall take effect immediately upon its adoption. Nov. 16, 2021 Item #10 Page 5 of 9 ATTACHMENT E DESCRIPTION OF THE PROPOSED PROJECT 1) The type of operation or process that will be conducted at the proposed facility. The company is building a Plant that will process printed circuit boards (E-scrap) and related materials (PCBs) derived from old computers, flat panel televisions, and smartphones (“E-waste”). Such material is generally acquired from recyclers of whole E-waste or from the original equipment manufacturers (OEM) that need to dispose E-Waste. 2) The end product or consumer services to be provided. At the end of the Camston process you will have materials in the following buckets: ferrous metals, non- ferrous metals and polymers. Each product has its own market that it can be sold into with the non-ferrous bucket being the economic driver of the plant. COMPONENT % by volume 1 Breakage (button batteries, fines, wires, and screws) 2.9% 2 Steel throw 3.5% 3 Gray Metal (aluminum, etc.) 5.8% 4 Plastic throw 2.6% 5 Ferrous metals 0.7% 6 Au/Ag/Pd/Cu/Other concentrate 29.7% 7 Plastic/Polymer Throw 51.% 8 Bag House 0.7% Nov. 16, 2021 Item #10 Page 7 of 9 3) The number of acres to be acquired. N/A 4) The amount of square footage to be constructed/renovated. 116,097 Square feet 5) Description of any new equipment or vehicles to be installed or purchased. • Primary Shredding and Secondary Sorting Line. In this step, the PCBs are first shredded to approximately 1¼ inch pieces. These 1¼-inch pieces are sorted (“Secondary Sorting”) to remove larger ferrous materials (the “Steel Throw”), plastic material (the “Plastic Throw”) and non-ferrous metals (the “Grey Metal Throw” and together with the Steel Throw and the Plastic Throw, the “Initial Throw Items”). Together, the Initial Throw Items comprise approximately 69.7% by weight of the PCB feedstock. Each of the Initial Throw Item categories is separately weighed and stored so that their mass balances will be calculated along with the other processing products in order to comply with extended producer requirements. Each of the Initial Throw Items will be sold without any further processing. The Initial Sorting and the Initial Shredding and Secondary Sorting will be referred to herein as the “Initial Processing.” The material that remains after the Initial Processing (the “Initial Processing Residual”) is not a marketable material. • Secondary Shredding Line. The Initial Processing Residual is next processed through the Secondary Shredder Line and the Milling Line described below in a closed system that reduces the Initial Residue to a powder form. Material leaving the Secondary Shredder Line is expected to be no larger than 5/8 inch and is conveyed in a closed system directly to the Milling Line described below for further processing. The material that has been processed in the Secondary Shredding Line and is to be conveyed to the Milling Line is not a saleable product. • Milling Line The 5/8-inch material generated by the Secondary Shredder Line is next processed through the Milling Line to produce a powder (“Milled Powder”) having an optimal particle size range as needed for processing in the Hydro Separation Line described below to produce the saleable products. The Milled Powder produced in the Milling Line is not a saleable product. • Hydro-Separation Line The Milled Powder produced in the Milling Line is discharged pneumatically into the “wetting bowl” where water will be applied to facilitate the subsequent separation of the Milled Powder into different products. The wetted material first enters an elutriation step, in which the particles are separated by weight and density in a hydro-cyclone, producing two separate streams: plastics and metals. The plastics are discharged from the hydro-cyclone to a filter press where the water is removed, and the plastics are auto- bagged for sale as a commodity. The metals stream exiting the elutriator is routed by enclosed piping to a ferrous removal step, using a hydro-electromagnetic process that separates ferrous metals (primarily iron, cobalt and nickel) from non-ferrous metals (primarily copper and precious metals). The ferrous metals Nov. 16, 2021 Item #10 Page 8 of 9 stream and the non-ferrous metal streams are each sent to separate filter presses for removal of water, and the dewatered ferrous (e.g., iron, cobalt, and nickel) and non-ferrous (e.g., copper and precious metals) streams are separately assayed, auto-bagged and weighed for sale as commodities. The metals stream produced by the hydro-cyclone process (i.e., where it is separated from the plastics stream) is not a saleable product until it has been processed in the hydro-electromagnetic process to produce the separate ferrous and non-ferrous streams. 6) The communities to be served by the proposed facility. The Camston process serves the global community by creating a viable alternative to recover the elements contained in e-scrap. The current end of life standard is to size reduce e-scrap in order to be able to fit more into a gaylord box, then redirect it overseas, to the poor countries of the world. Once e-waste reaches its final destination it is usually burned in open fields in an attempt to recover what little value can be collected or is smelted by a smelter which releases numerous environmental harming biproducts. This process is not only dangerous and harmful to individuals in its immediate surrounding but create harmful gases that have much further reaching negative repercussions. 7) Any other special feature of the proposed project (i.e. new technology) Camston Wrather’s precious metals recovery process is a new technology in that it combines instruments from multiple industries to create an e-scrap recovery solution. The facility has been tested at scale for extended periods; therefore, diminishing scale up risk. But the technology is novel in its nature and will be a first of its kind facility. Nov. 16, 2021 Item #10 Page 9 of 9 NOTICE OF PUBLIC HEARING NOTICE IS HEREBY GIVEN that on Nov. 16, 2021, a public hearing as required by Section 147(f) of the Internal Revenue Code of 1986 (the "Code") 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 $80,000,000 (the "Bonds"), including but not limited to revenue bonds issued as part of a plan to: (1) finance and refinance the construction, expansion, improvement and/or equipping of an approximately 116,000 square foot solid waste disposal facility, described in Section 142(a) (6) of the Code, that will process printed circuit boards and related materials derived from used computers, flat panel televisions, and smartphones to be located at 2856 Whiptail Loop E., Carlsbad, California (the "Project"); and (2) pay certain expenses incurred in connection with the issuance of the Bonds. The facilities are to be owned and operated by Camston Carlsbad Asset 1, LLC, a Delaware limited liability company. The Bonds and the obligation to pay principal thereof and interest thereon and any redemption premium with respect thereto do not constitute indebtedness or an obligation of the City of Carlsbad, California, 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. Copies of the staff report will be available on and after Nov. 12, 2021. If you have any questions, please contact Matt Sanford at (760} 607-2923 or Matt.Sanford@carlsbadca.gov. Per California Executive Order N-29-20, and in the interest of public health and safety, we are temporarily taking actions to prevent and mitigate the effects of the COVID-19 pandemic by holding City Council and other public meetings online only. All public meetings will comply with public noticing requirements in the Brown Act and will be made accessible electronically to all members of the public seeking to observe and address the City Council. You may participate by phone or in writing. The hearing will commence at 3 p.m. or as soon thereafter as the matter can be heard, and will be held via teleconference only. 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 financed or refinanced may call (888) 475-4499 and enter meeting ID: 918 1501 1322. Participation in writing: email comments to clerk@carlsbadca.gov. Comments received by 2 p.m. the day of the meeting will be shared with the City Council prior to the meeting. When e-mailing comments, please identify in the subject line the agenda item to which your comments relate. All comments received will be included as part of the official record. Written comments will not be read out loud. Please visit: https:ljwww.carlsbadca.gov/city-hall/meetings-agendas for additional details. PUBLISH: Month day, 2021 City of Carlsbad City Council Tax and Equity Fiscal Responsibility Act Public Hearing for Issuance of Tax-Exempt Bonds by the California Municipal Finance Authority for the Benefit of Camston Wrather LLC David Graham, Chief Innovation Officer Matt Sanford, Economic Development Manager Innovation & Economic Development November 16, 2021 {city of Carlsbad RECOMMENDED ACTION •Conduct the public hearing •Adopt a resolution approving the issuance of tax- exempt bonds in an amount not to exceed $80,000,000 for the purpose of financing the Camston Wrather E-Waste Recycling Facility CAMSTON WRATHER E-WASTE RECYCLING {city of Carlsbad BACKGROUND CAMSTON WRATHER E-WASTE RECYCLING •Project Operator, Camston Wrather, is working with the California Municipal Finance Authority (CMFA) to issue tax-exempt bonds. •Camston Wrather has asked CMFA to be the issuer of up to $80 million of tax-exempt bonds to finance the project. •Federal Tax and Equity Fiscal Responsibility Act requires a public hearing on the use of tax-exempt bonds for the project. •Today’s action is to provide the public hearing and adopt a resolution approving the issuance of tax-exempt bonds not to exceed $80,000,000 for the construction of the Camston Wrather eWaste Recycling Facility {city of Carlsbad PROJECT •Located at 2856 Whiptail Loop East •Will process printed circuit boards and related materials derived from used computers, flat panel televisions, and smartphones •Generally aligns with City’s sustainability goals CAMSTON WRATHER E-WASTE RECYCLING {city of Carlsbad FISCAL ANALYSIS •Not debt of the City of Carlsbad •No obligation of the City of Carlsbad to repay the debt •All monitoring and administrative actions are the responsibility of CMFA •Will not impact the city's appropriation limits and will not constitute any type of indebtedness by the city. CAMSTON WRATHER E-WASTE RECYCLING {city of Carlsbad RECOMMENDED ACTION •Conduct the public hearing •Adopt a resolution approving the issuance of tax- exempt bonds in an amount not to exceed $80,000,000 for the purpose of financing the Camston Wrather E-Waste Recycling Facility CAMSTON WRATHER E-WASTE RECYCLING {city of Carlsbad