To: Honorable Mayor and Members of City Council
From: Vin Smith, Community Development Director
Prepared By: Neal Harrison, Economic Development Manager
TITLE:
Title
Blue Oak School Middle School Campus Improvement Funding
LABEL
RECOMMENDED ACTION:
Recommendation
It is recommended that the City Council:
1. Conduct a public hearing as required by Section 147(f) of the Internal Revenue Code of 1986 to receive comments relating to the issuance by the California Enterprise Development Authority (the “Authority”) of not to exceed $20,000,000 of the Authority’s Revenue Obligations (the “Obligations”) for the benefit of The Blue Oak School, a California nonprofit public benefit corporation (the “Borrower”).
2. Adopt a resolution approving Associate Membership by the City of Napa in the California Enterprise Development Authority and Authorizing the City Manager to Execute the Associate Membership Agreement.
3. Adopt a resolution (A) approving the issuance by the California Enterprise Development Authority (the “Authority”) of not to exceed $20,000,000 aggregate principal amount of the Authority’s Revenue Obligations for the purpose of financing, refinancing, and/or reimbursing the cost of acquisition, construction, renovation, improvement and equipping educational facilities for the benefit of Blue Oak School and other matters relating thereto herein specified; and (B) determining the actions authorized by this resolution were adequately analyzed by a previous CEQA action.
Body
DISCUSSION:
The Blue Oak School (“Borrower”) has requested that that the City Join the California Enterprise Development Authority (CEDA) and approve issuance of tax-exempt financing for the ongoing construction of their school facilities. Membership of CEDA would also allow other businesses within the City to take advantage of the tax exempt financing tools, given Council approval.
Background
On August 7, 2001, the Napa City Council approved an application to rezone the parcel on which the Blue Oak elementary school is located from Public/Quasi-Public to Central Business District, a Use Permit, and a Design Review Permit to allow the construction of Blue Oak Elementary School across Polk Street to the north of the subject site. The school has been operating in its current location since it was complete.
On July 16, 2020, the Planning Commission approved a Use Permit and Design Review Permit for the Borrower to construct a middle school campus consisting of an 11,450 square foot, two-story classroom and administration building and a 10,000 square foot gymnasium building. The approval of tax-exempt financing would be put forth toward the construction of this middle school facilities.
The Authority. The Authority is a joint powers authority (JPA) established by the California Association for Local Economic Development (CALED) whose purpose is to issue tax-exempt and taxable conduit revenue bonds to fund commercial and industrial development projects within member jurisdictions. Federal and state laws provide the ability for cities and counties to join together under cooperative agreements to form joint powers authorities to issue tax-exempt and taxable bonds to fund projects that provide a public benefit and serve the needs of residents within the jurisdictions of the participating members. Cities and counties in California utilize joint powers authorities primarily for economies of scale, to access specialized transaction knowledge and resources, and to avoid using valuable local staff time on these types of transactions.
The Authority is a joint powers authority created by the cities of Selma, Lancaster and Eureka. There are approximately 200 cities and counties who are associate members of the Authority. The Authority’s activities are dedicated to providing economic development assistance to member jurisdictions as an extension of the economic development assistance provided by CALED to its members.
The JPA Agreement permits any other local agency in California to join the Authority as an “Associate Member.” The Authority’s Board of Directors has requested that the City become an Associate Member of the Authority. Associate membership in the Authority will assist the City as well as for-profit and nonprofit organizations located within the City in financing industrial and commercial development projects and other public purpose projects within the City. The Authority’s Associate Members enjoy nearly all the benefits of regular membership without the concomitant duties or obligations. Associate Members have ample opportunity to provide input on proposed or existing programs. Further, Associate Members are not restricted or inhibited in any way with respect to their independent ability to finance any project in any manner they deem appropriate, which may or may not involve or include the Authority.
Once the City becomes an Associate Member of the Authority, the City will be eligible to participate in the Authority’s programs.
The Borrower. Blue Oak School (“Borrower”) and the Authority have requested that the City conduct a Tax Equity and Fiscal Responsibility Act of 1982 (“TEFRA”) hearing and approve a resolution in accordance with Internal Revenue Code Section 147(f) authorizing the issuance of tax-exempt obligations by the Authority in an amount not to exceed $20,000,000. A TEFRA hearing is required by the Internal Revenue Code before tax-exempt debt can be issued for the benefit of a private nonprofit corporation. The hearing gives the public an opportunity to comment on the use of tax-exempt funds by the Borrower.
The proceeds of the Obligations will be used to (a) finance, refinance and/or reimburse to the Borrower for the cost of acquisition, construction, renovation, improvement and/or equipping of certain school facilities and associated infrastructure including, but not limited to, a middle school building consisting of classrooms, a gymnasium, school administrative offices, and other improvements to the Borrower’s educational campus, all of which projects are, or will be, located at 1436 Polk Street, 1461 Polk Street, 1455 Polk Street, 1526 Clay Street, 1584 Clay Street and 1120 Seminary Street, Napa, California 94559 (collectively, the “Facilities”) [and related working capital]; (b) fund a debt service reserve fund and certain interest related to the Obligations, and (c) pay certain financing and other costs incurred in connection with the issuance of the Obligations.
The Borrower is an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986 (the “Code”). The Facilities will be owned by the Borrower or by one or more limited liability companies whose sole member is the Borrower and operated by Borrower or a related or successor entity as a private K-8 school supporting the Borrower’s mission of providing a challenging and stimulating education to children of diverse backgrounds and interests.
The Borrower commenced operations in 2002 with approximately 70 students in grades K-4, and now operates the only non-denominational K-8 school in Napa Valley, serving approximately 198 students. The loan will be used to pay for a portion of the construction for a new middle school building. Once the middle school facility is complete, it the Borrower will be able to achieve full enrollment of 222 students.
Balancing structure with choice and the requirements of the group with the needs of the individual, the Borrower holds itself to the highest standards of responsible educational innovation so student develop enduring learning skills and habits The Borrower is accredited by California Association of Independent Schools, and is a member of the National Association of Independent Schools, the Progressive Educator’s Network and the California Teacher Development Collaborative.
The issuance of the Obligations as tax-exempt will reduce financing costs and debt service costs for the Borrower. In order to satisfy the requirements for the obligations to be issued as tax-exempt, an applicable elected representative which is also a member of the Authority is required to conduct the TEFRA hearing and approve the issuance of the tax-exempt obligations in accordance with Section147(f) of the Code. The City Council of the City of Napa constitutes an applicable elected representative under Section 147(f) of the Code.
FINANCIAL IMPACTS:
There is no fiscal impact to the City. The adoption of the resolution approving the financing and refinancing of the Facilities and the issuance of the Obligations complies with the requirements of Section 147(f) of the Internal Revenue Code of 1986. The City does not bear any responsibility for the tax-exempt status of the interest on the Obligations, the debt service on the Obligations or any other matter related to the Obligations.
CEQA:
City Staff recommends that the City Council determine that the potential environmental effects of the Recommended Action described in this Staff Report were adequately addressed by the Initial Study/Addendum for the Blue Oak Middle School Project (“Addendum”) approved by the Planning Commission on July 16, 2020, which was prepared as an addendum to the Downtown Napa Specific Plan Environmental Impact Report (SCH#20100042043) certified by the City Council by Resolution No. R2012-54 (“DNSP EIR”) pursuant to CEQA Guidelines Section 15164. Since the potential environmental impacts of the Project were adequately analyzed and addressed by the DNSP EIR, no further environmental review is required pursuant to CEQA Guidelines Sections 15162, 15164, and 15168
DOCUMENTS ATTACHED:
ATCH 1 - City of Napa Associate Membership Agreement CEDA
ATCH 2 - Resolution City of Napa Joining CEDA
ATCH 3 - Resolution City of Napa Blue Oak School Financing
NOTIFICATION:
A public notice of today’s public hearing was published on behalf of the City at least seven days prior to the hearing in the Napa Valley Register by the law firm of Square Patton Boggs (US) LLP.