TO: ADAM PIRRIE, CITY MANAGER
FROM: JEREMY STARKEY, FINANCE DIRECTOR
DATE: SEPTEMBER 10, 2024
Reviewed by:
City Manager: AP
SUBJECT:
Title
TAX EQUITY AND FISCAL RESPONSIBILITY ACT OF 1982 HEARING TO APPROVE THE ISSUANCE OF UP TO $36 MILLION IN TAX EXEMPT FINANCING BY THE CALIFORNIA MUNICIPAL FINANCE AUTHORITY FOR THE BENEFIT OF SCRIPPS COLLEGE
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SUMMARY
Scripps College (the "Borrower") requests approval of tax-exempt financing in an amount not to exceed $36 million. Financing is being made available through the California Municipal Finance Authority (CMFA). The federal Tax Equity and Financial Responsibility Act (TEFRA) requires that a public hearing be held by the governing body of the jurisdiction in which the project is located, and that the local jurisdiction approve the proposed financing. The City has held such hearings in the past for the Webb Schools, Mt. San Antonio Gardens, Pilgrim Place, Western Christian Schools, Pomona College, Keck Graduate Institute, and Harvey Mudd College. Approval of the proposed financing will not impose any financial responsibilities on the City.
RECOMMENDATION
Recommended Action
Staff recommends the City Council adopt a RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CLAREMONT, CALIFORNIA, APPROVING THE ISSUANCE OF THE CALIFORNIA MUNICIPAL FINANCE AUTHORITY 2024 TAX EXEMPT LOAN (SCRIPPS COLLEGE) IN AN AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED OF $36,000,000 FOR THE FINANCING AND REFINANCING ALL OR A PORTION OF THE COSTS OF THE ACQUISITION, CONSTRUCTION, RENOVATION, RETROFITTING, EQUIPPING AND IMPROVEMENT OF CERTAIN EDUCATIONAL FACILITIES, INCLUDING BUT NOT LIMITED TO: ADMINISTRATIVE FACILITIES, SITE IMPROVEMENTS, STUDENT HOUSING FACILITIES, FACULTY HOUSING FACILITIES, AND PARKING, OWNED AND OPERATED BY SCRIPPS COLLEGE, LOCATED WITHIN THE CITY, AND CERTAIN OTHER MATTERS RELATING THERETO.
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ALTERNATIVES TO RECOMMENDATION
In addition to the recommendation, there are the following alternatives:
A. Request further information from staff.
B. Take no action.
FINANCIAL REVIEW
The Board of Directors of the California Foundation for Stronger Communities, a California non-profit public benefit corporation, 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 Claremont, it is expected that 25 percent of the issuance fee will be granted by the CMFA to the City's General Fund. Such grant may be used for any lawful purpose of the City. The Borrower will be the beneficiary of a charitable donation through a 25 percent reduction in issuance fees.
As noted in this report, the City's approval of the issuance of the bonds will place no financial obligations upon the City. The staff cost to prepare this report and administer this program is estimated at $700 and is included in the operating budget of the Financial Services Department.
ANALYSIS
Scripps College, a California nonprofit public benefit corporation and an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the “Code”), has requested that the California Municipal Finance Authority (the “Authority”) issue certain tax-exempt obligations pursuant to a plan of financing in an aggregate principal amount not to exceed $36,000,000 (the “Obligations”) in one or more series and make one or more loans to the Borrower pursuant to a plan of financing to (i) finance and refinance the 2024 Project, as defined below, and related working capital expenditures; (ii) pay interest on the Obligation to the extent permitted under the Code; and (iii) pay certain expenses incurred in connection with the issuance of the Obligations.
The term “2024 Project” means, collectively, the costs of acquisition, construction, renovation, retrofitting, equipping and improvement of certain educational facilities of the Borrower, including but not limited to: administrative facilities, site improvements, student housing facilities, faculty housing facilities, and parking, located at 251 E. Tenth Street within the City of Claremont, California.
The CMFA was created on January 1, 2004 pursuant to a joint powers agreement to promote economic cultural and community development, through the financing of economic development and charitable activities throughout California. To date, over 320 municipalities have become members of CMFA, including the City of Claremont.
The CMFA was formed to assist local governments, non-profit organizations, and businesses with the issuance of taxable and tax-exempt financing aimed at improving the standard of living in California. The CMFA' s representatives and its Board of Directors have considerable financing experience.
The Joint Exercise of Power Agreement provides that the CMFA is a public entity, separate and apart from each member executing such agreement. The debts, liabilities, and obligations of the CMFA do not constitute debts, liabilities or obligations of the member executing such agreement.
The bonds to be issued by the CMFA will be the sole responsibility of the Borrower, and the City will have no financial, legal, moral obligation, liability or responsibility for the repayment of the bonds. All financing documents with respect to the issuance of the bonds will contain clear disclaimers that the bonds are not an obligation of the City.
Participation by the City in the approval of this financing will not constitute any type of indebtedness by the City. Outside of holding the TEFRA hearing and adopting the required resolution, no other participation or activity of the City or the City Council with respect to the issuance of the bonds will be required.
RELATIONSHIP TO CITY PLANNING DOCUMENTS
Staff has evaluated the agenda item in relationship to the City's strategic and visioning documents and finds that it does not apply to any of the City's planning documents.
CEQA REVIEW
This item is not subject to environmental review under the California Environmental Quality Act (CEQA).
PUBLIC NOTICE PROCESS
Notice of the public hearing was published on August 30, 2024 in the Claremont Courier. The agenda and staff report for this item have been posted on the City website and distributed to interested parties. If you desire a copy, please contact the City Clerk’s Office.
Submitted by:
Jeremy Starkey
Finance Director
Attachment:
Scripps College TEFRA Resolution