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HomeMy WebLinkAbout23 - Approving the Issuance of Revenue Obligations by the California Enterprise Development Authority for the Benefit of Sage Hill SchoolQ �EwPpRT CITY OF s NEWPORT BEACH `q44:09 City Council Staff Report August 27, 2024 Agenda Item No. 23 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: Jason AI -Imam, Finance Director/Treasurer - 949-644-3126, jalimam@newportbeachca.gov PREPARED BY: Shelby Burguan, Budget Manager - 949-644-3085, sburguan@newportbeachca.gov TITLE: Resolution No. 2024- 65: Approving the Issuance of Revenue Obligations by the California Enterprise Development Authority for the Benefit of Sage Hill School ABSTRACT: The City Council will hear and consider information concerning the issuance of one or more series of tax-exempt revenue obligations by the California Enterprise Development Authority (the "Issuer") in an aggregate principal amount not to exceed $55,000,000 (the "Obligations") for the benefit of Sage Hill School, a California nonprofit public benefit corporation, or a related or successor entity (the "Borrower"). The Issuer will loan the proceeds of the Obligations to the Borrower pursuant to one or more loan agreements (the "Loan Agreement"). The proceeds of the Obligations loaned to the Borrower will be applied for the purpose of (a) financing and/or reimbursing the cost of the acquisition, construction, installation, equipping and furnishing of a new 38,658-square-foot educational facility that will include classrooms, a gymnasium, faculty and administrative offices, a cafe, and other related and appurtenant facilities and improvements to be located at 20402 Newport Coast Drive (collectively, the "Facilities") and (b) paying capitalized interest and costs of issuance in connection with the Obligations. RECOMMENDATIONS: a) Conduct a public hearing; b) Determine this action is exempt from the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) and 15060(c)(3) of the CEQA Guidelines because this action will not result in a physical change to the environment, directly or indirectly; and c) Adopt Resolution 2024-65: A Resolution of the City Council of the City of Newport Beach, California, Approving the Issuance of Revenue Obligations by the California Enterprise Development Authority in an Aggregate Principal Amount Not to Exceed $55, 000, 000 for the Benefit of Sage Hill School to Finance and/or Reimburse the Cost of Acquisition, Construction, Installation, Equipping and Furnishing of Educational Facilities and Other Improvements Relating Thereto. 23-1 Resolution No. 2024- 65: Approving the Issuance of Revenue Obligations by the California Enterprise Development Authority for the Benefit of Sage Hill School August 27, 2024 Page 2 DISCUSSION: Sage Hill School opened on September 7, 2000. It was founded by community leaders and parents who desired to build a nonprofit, nondenominational, independent school in Orange County that would inspire innovative thinking, nurture creative thought and embrace diversity. Sage Hill School, the Borrower, offers students an academically challenging, college preparatory curriculum enriched by opportunities for participation in athletics, the arts, leadership, service and a wide variety of community activities. Sage Hill School currently serves students in grades 9 through 12 and intends to begin serving grades 7 and 8 in fall 2026. The Borrower has been accredited by the Western Association of Schools and Colleges since 2003 and is also accredited by the California Association of Independent Schools. It is a member of the National Association of Independent Schools, the National Association for College Admission Counselling, the College Entrance Exam Board, and the Council for Advancement and Support of Education. The Borrower is an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the "Code") and will own and operate the Facilities in connection with its mission of providing education to students as Orange County, California's premier independent middle and high school. The City of Newport Beach is an associate member of the Authority, a joint powers agency established by the California Association for Local Economic Development whose purpose is to issue tax-exempt and taxable conduit revenue bonds to fund commercial and industrial development projects within member jurisdictions. The Joint Powers Act, comprising Articles 1, 2, 3 and 4 of Chapter 5 of Division 7 of Title 1 (commencing with Section 6500) of the Government Code of the State of California and Internal Revenue Code Section 145 provide for the issuance of tax-exempt "private activity" obligations by a conduit governmental issuer on behalf of a 501(c)(3) corporation to finance facilities used, owned and/or operated by such entity. For interest on such private activity obligations to be tax-exempt, Section 147(f) of the Internal Revenue Code requires, among other things, the obligations and the facilities financed thereby must be approved by both the governmental unit which will issue the obligations (in this case, the Authority) and the governmental unit in which the obligation -financed facilities are located (City of Newport Beach). Further, a public hearing, for which reasonable notice has been given, must be held. This hearing and process is referred to as TEFRA, after the Tax Equity and Fiscal Responsibility Act of 1982. The assets to be financed with the proceeds of the Obligations are located within the jurisdiction of the City. Therefore, the City has been asked to conduct the public hearing, and to approve the Obligations as the host governmental unit. The City has effectuated proper notice of the hearing via publication at least 14 days in advance. 23-2 Resolution No. 2024- 65: Approving the Issuance of Revenue Obligations by the California Enterprise Development Authority for the Benefit of Sage Hill School August 27, 2024 Page 3 The Obligations will be payable solely from amounts received pursuant to the terms and provisions of one or more loan agreements to be executed by the Authority and the Borrower. The City will not be a party to any loan agreement or any other documents in connection with the issuance of the Obligations. The Obligations will not be secured by any form of taxation or by any obligation of either the City or the Authority. Neither will the Obligations represent or constitute a general obligation of either the City or the Authority. As announced in the published notice, the TEFRA hearing is an opportunity for all interested persons to speak or to submit written comments concerning the proposal to issue the Obligations to finance the Facilities. There is no requirement that either the Borrower or the City Council respond to any specific comments made or submitted at the hearing. FISCAL IMPACT: There is no fiscal impact related to this item. The City's approval of this financing bears with it no cost or other financial obligation, but serves as a public acknowledgement of the refinancing of the Facilities by the host jurisdiction. ENVIRONMENTAL REVIEW: Staff recommends the City Council find this action is not subject to the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly. NOTICING: The agenda item has been noticed according to the Brown Act (72 hours in advance of the meeting at which the City Council considers the item). Additionally, the City has effectuated proper notice of the public hearing via publication at least 10 days in advance. 000Ti4.IJiI=1L1k&I Attachment A — Resolution 2024-65 Attachment B — Notice of Public Hearing 23-3 ATTACHMENT A RESOLUTION NO. 2024- 65 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF NEWPORT BEACH, CALIFORNIA, APPROVING THE ISSUANCE OF REVENUE OBLIGATIONS BY THE CALIFORNIA ENTERPRISE DEVELOPMENT AUTHORITY IN AN AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $55,000,000 FOR THE BENEFIT OF SAGE HILL SCHOOL TO FINANCE AND/OR REIMBURSE THE COST OF ACQUISITION, CONSTRUCTION, INSTALLATION, EQUIPPING AND FURNISHING OF EDUCATIONAL FACILITIES AND OTHER IMPROVEMENTS RELATING THERETO WHEREAS, the California Enterprise Development Authority ("Authority") is authorized pursuant to the provisions of California Government Section 6500 et seq. ("Act") and the terms of the Joint Powers Agreement, dated as of June 1, 2006 ("Agreement"), among certain public agencies throughout the State of California, including the City of Newport Beach ("City"), to issue revenue bonds and other forms of financing to assist nonprofit corporations to obtain tax-exempt financing for projects and purposes serving the public interest; WHEREAS, Sage Hill School, a California nonprofit public benefit corporation, and/or a related or successor entity ("Borrower") has requested that the Authority issue tax-exempt and/or taxable revenue obligations in an amount not to exceed $55,000,000 ("Obligations"), for the benefit of the Borrower, pursuant to the provisions of the Act, to (a) finance and/or reimburse the cost of the acquisition, construction, installation, equipping and furnishing of a new approximately 38,658 square foot educational facility that will include classrooms, a gymnasium, faculty and administrative offices, a cafe, and other related and appurtenant facilities and improvements to be located at 20402 Newport Coast Drive, Newport Coast, California 92657 (collectively, "Facilities"), and (b) pay capitalized interest and costs of issuance in connection with such financing; WHEREAS, the Borrower will own and operate the Facilities in connection with its mission of providing a premier independent school education in Orange County, California and inspiring in students a love of knowledge and the ability to use that knowledge creatively, compassionately and courageously throughout their lives; 23-4 Resolution No. 2024- Page 2 of 4 WHEREAS, the Facilities are located within Newport Beach and the City is an Associate Member of the Authority and is eligible to participate in the Authority's financing programs; WHEREAS, the issuance of the Obligations shall be subject to the approval of and execution by the Authority of all financing documents relating thereto to which the Authority is a party; WHEREAS, the interest on the Obligations may qualify for tax exemption under Section 103 of the internal Revenue Code of 1986, as amended ("Code") only if the Obligations are approved by an elected representative of the governmental unit having jurisdiction over the area in which the Facilities are located, in accordance with Section 147(f) of the Code; WHEREAS, the Borrower and the Authority have requested City Council approve the issuance of the Obligations to satisfy the public approval requirements of Section 147(f) of the Code; WHEREAS, it is intended that this resolution shall comply with the public approval requirements of Section 147(f) of the Code; provided, however, that this resolution is neither intended to nor shall it constitute an approval by the City Council of the Facilities for any other purpose; WHEREAS, pursuant to Section 147(f) of the Code, a notice of public hearing was published on August 17, 2024, in the Daily Pilot, a newspaper of general circulation, providing the date, time, location and notice that a public hearing would be held on August 27, 2024, regarding issuance of the Obligations; and WHEREAS, a public hearing was held by the City Council on August 27, 2024, in the City Council Chambers located at 100 Civic Center Drive, Newport Beach, California. A notice of time, place, and purpose of the hearing was given in accordance with Government Code Section 54950 of seq. ("Ralph M. Brown Act"). Evidence, both written and oral, was presented to, and considered by, the City Council at this hearing. 23-5 Resolution No. 2024- Page 3 of 4 NOW, THEREFORE, the City Council of the City of Newport Beach resolves as follows: Section 1: The City Council hereby approves the issuance of the Obligations by the Authority, from time to time, pursuant to a plan of finance, which Obligations may be tax-exempt and/or taxable as approved by the Authority in its resolution, in an amount not to exceed $55,000,000 to finance and/or reimburse the costs of the Facilities. This resolution shall constitute approval of the issuance of the Obligations by the applicable elected representatives of the City for purposes of Section 147(f) of the Code; provided, however, that this resolution shall not constitute an approval by the City Council of the Facilities for any other purpose. The City shall not bear any responsibility for the tax- exempt status of the interest on the Obligations, the payment of the principal of or interest on the Obligations or any other matter related to the Obligations. The City does not have any responsibility for the debt and is not pledging any assets as security for the debt. Section 2: All actions taken by the officers, employees and agents of the City with respect to the approval of the Obligations are hereby approved, confirmed and ratified, and the officers and employees of the City and their authorized deputies and agents are hereby authorized and directed, jointly and severally, to execute and deliver any and all certificates and documents which they or bond counsel may deem necessary or advisable in order to consummate the Obligations and otherwise to effectuate the purposes of this resolution. Section 3: The adoption of this resolution shall not obligate the City or any department thereof to (i) provide any financing for the Facilities; (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 or operation of the Facilities; or (iii) make any contribution or advance any funds whatsoever to the Authority. Section 4: The recitals provided in this resolution are true and correct and are incorporated into the operative part of this resolution. 23-6 Resolution No. 2024- Page 4 of 4 Section 5: If any section, subsection, sentence, clause or phrase of this resolution is, for any reason, held to he invalid or unconstitutional, such decision shall not affect the validity or constitutionality of the remaining portions of this resolution. The City Council hereby declares that it would have passed this resolution, and each section, subsection, sentence, clause or phrase hereof, irrespective of the fact that any one or more sections, subsections, sentences, clauses or phrases be declared invalid ❑r unconstitutional. Section 6: The City Council finds the adoption of this resolution is not subject to the California Environmental Quality Act ("CEQA") pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA Guidelines, California Code of Regulations, Title 14, Division 6, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly. Section 7: This resolution shall take effect immediately upon its adoption by the City Council, and the City Clerk shall certify the vote adopting the resolution. ADOPTED this 27th day of August, 2024. Will O'Neill Mayor ATTEST: Leilani 1. Brown City Clerk APPROVED AS TO FORM: CITY ATTORNEY'S OFFI E Aakpn C. Harp City Attorney 23-7 ATTACHMENT B 4 rya Rr Faw CITY OF NEWPO IT BEACH NOTICE OF PUBLIC HEARING NOTICE IS HEREBY GIVEN that on Tuesday, August 27, 2024, at 4:00 p.m. or soon thereafter as the matter shall be heard, a public hearing will be conducted in the Council Chambers at 100 Civic Center Drive, Newport Beach. The City Council of the City of Newport Beach will consider the following item: The City Council of the City of Newport Beach (the "City Council") will conduct a public hearing (the "Public Hearing") at which the City Council will hear and consider information concerning the issuance, from time to time, pursuant to a plan of finance, of one or more series of tax-exempt revenue obligations by the California Enterprise Development Authority (the "Issuer") in an aggregate principal amount not to exceed $55,000,000 (the "Obligations") for the benefit of Sage Hill School, a California nonprofit public benefit corporation, or a related or successor entity (the "Borrower"). The Issuer will loan the proceeds of the Obligations to the Borrower pursuant to one or more loan agreements (the "Loan Agreement"). The proceeds of the Obligations loaned to the Borrower will be applied for the purpose of (a) financing and/or reimbursing the cost of the acquisition, construction, installation, equipping and furnishing of a new 38,658 square foot educational facility that will include classrooms, a gymnasium, faculty and administrative offices, a cafe, and other related and appurtenant facilities and improvements to be located at 20402 Newport Coast Drive, Newport Coast, California 92657 (collectively, the "Facilities") and (b) paying capitalized interest and costs of issuance in connection with the Obligations. The Borrower is an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the "Code"). The Borrower will own and operate the Facilities in connection with its mission of providing a premier independent school education in Orange County, California and inspiring in students a love of knowledge and the ability to use that knowledge creatively, compassionately and courageously throughout their lives. Neither the faith and credit nor the taxing power of the City of Newport Beach (the "City"), the State of California (the "State"), or any other political corporation, subdivision or agency of the State is pledged to the payment of the principal of, premium, if any, or interest on, the Obligations, nor shall the City, the State or any other political corporation, subdivision or agency of the State be liable or obligated to pay the principal of, premium, if any, or interest on, the Obligations. NOTICE IS HEREBY FURTHER GIVEN that this action is not subject to the California Environmental Quality Act ("CEQA") pursuant to Section 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly. Anyone wishing to attend the public hearing should check the August 27, 2024, meeting agenda on the City's webpage at www.newportbeachca.gov/agendas or contact the City Clerk at 949-644-3005 or cityclerkCcDnewportbeachca.gov, during normal business hours, to receive information on how to attend this meeting. Those wishing to comment on the proposed nature and location of the Facilities and the financing of the Facilities with the proceeds of the Obligations may either appear in person at the time and place indicated above or submit written comments, which must be received prior to the Public Hearing by the City of Newport Beach, Attention: City Clerk, 100 Civic Center Drive, Newport Beach, California 92660. a �EW'ORr O bm /s/ Leilani I. Brown, MMC, City Clerk, City of Newport Beach 23-8