FROM:
City Manager's Office
SUBJECT:
Title
California Enterprise Development Authority / REAL Journey Academies, Inc.
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RECOMMENDATION:
Recommendation
1. Conduct the public hearing with respect to the approval of the issuance of the Obligations by the California Enterprise Development Authority;
2. Adopt Resolution No. 2024-032, in accordance with Internal Revenue Code Section 147(f) authorizing the issuance of a tax-exempt obligation by the California Enterprise Development Authority in an amount not to exceed $55,500,000 for the benefit of REAL Journey Academies Foundation, Inc., a California nonprofit public benefit corporation and an entity described in Section 501(c)(3) of the Internal Revenue Code of 1986, or a related or successor entity.
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COUNCIL GOALS:
• Concentrate on Inter-governmental relations by establishing partnerships and positive working relationships with other public agencies providing services to residents and local businesses.
DISCUSSION:
CALIFORNIA ENTERPRISE DEVELOPMENT AUTHORITY
California Enterprise Development Authority (the “Authority”) is a joint powers authority 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 City of Fontana (the “City”) joined CEDA as an associated member in November 2015 pursuant to Resolution No. 2015-074.
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 BORROWER, REAL JOURNEY ACADEMIES, INC. AND THE PROJECT
The 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 $55,500,000. 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 by the Borrower to finance the cost of acquisition, renovation, equipping and furnishing of certain educational and ancillary facilities located at the Borrower’s campuses at (a) 7775 Sierra Ave., Fontana, CA 92336, consisting of approximately 51,000 square feet designed to serve approximately 525 students in grades 9 through 12 in an amount not to exceed $50,000,000 (the “Entrepreneur High School Fontana”), and (b) 3333 Concours St., Building 9, Ontario, California 91764, consisting of approximately 8,700 square feet designed to serve as administrative offices in an amount not to exceed $5,500,000 (together, the “Facilities”). The proceeds of the Obligations will also be used to fund a reserve fund and capitalized interest with respect to the Obligations, if necessary, and to pay certain expenses 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 leased to and operated by Real Journey Academies, Inc., a California nonprofit public benefit corporation and an organization described in Section 501(c)(3) of the Code (the “Charter Operator”), as public charter school facilities.
The Charter Operator commenced operations in 2008, and now manages charter schools at four campuses in San Bernardino, Moreno Valley, Highland and Fontana, California, in the aggregate serving approximately 2,362 students from TK through 12th grade, and maintains its administrative facilities in Ontario, California. The schools operated by the Charter Operator are accredited by Western Association of Schools and Colleges (WASC).
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 Section 147(f) of the Code. The City Council of the City of Fontana constitutes an applicable elected representative under Section 147(f) of the Code.
FISCAL IMPACT:
There is no financial impact to the City. The Authority will act as issuer and perform all of the necessary legal and administrative responsibilities associated with the financing. The Obligations are special, limited obligations of the Authority payable solely through the repayment of the loans from the Authority which repayment is used to pay the principal of and interest on the Obligations. The Obligations issued by the Authority are not an obligations of the City or any member of the Authority. Neither the faith or credit, nor the taxing power of the City, any member of the Authority, the State or any political subdivision is pledged to the repayment of the Obligations.
MOTION:
Approve staff recommendation.