HomeMy WebLinkAbout12/08/1998, 1 - CALIFORNIA STATEWIDE COMMUNITIES DEVELOPMENT AUTHORITY EQUIPMENT ONLY PURCHASE PROGRAM, TAX EXEMPT INDUSTRIAL DEVELOPMENT BONDS FOR ERNIE BALL, INC. council /
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CITY OF SAN LUIS O S I S P O
FROM: Ken Hampian,Assistant CAO
Prepared By: Diane Sheeley,Economic Development Manager O$
SUBJECT: CALIFORNIA STATEWIDE COMMUNITIES DEVELOPMENT
AUTHORITY EQUIPMENT ONLY PURCHASE PROGRAM,TAX
EXEMPT INDUSTRIAL DEVELOPMENT BONDS FOR ERNIE
BALL,INC.
CAO RECOMMENDATION
Following a public hearing,adopt a resolution expressing approval for the issuance of tax exempt
Industrial Development Bonds by the California Statewide Communities Development Authority
(CSCDA) Equipment Only Purchase Program for Ernie Ball, Inc. in an amount not-to-exceed
$600,000 for the financing of new manufacturing equipment.
DISCUSSION
Background
Business retention and expansion is a high priority for the City's Economic Development
Program. Accordingly, on an ongoing basis, staff works with local businesses to learn about
their existing and future needs, including attending numerous business related meetings, such as
the Association of Manufacturers and Distributors (AMD)meetings.
At the July, 1998, AMD meeting attended by staff, the State of California Trade and Commerce
Agency (TCA) representatives presented information on various incentives and programs
available to existing California companies. As a follow-up to the AMD meeting, City staff
initiated further discussions with TCA advocating additional one-on-one outreach efforts to
expanding San Luis Obispo businesses. One such business, Ernie Ball, Inc.,which annexed into
the City approximately two (2) years ago, previously requested assistance in identifying lower
interest financing programs to allow them to purchase additional equipment.
Consequently, in September, 1998, the first one-on-one meeting was held with Ernie Ball
representatives. Following the meeting, the company opted to pursue the CSCDA Equipment
Only Purchase Program, and ultimately received written approval October 26, 1998, pending
endorsement by the City.
CSCDA Equipment Only Purchase Program
The Federal and State governments have created a special exemption for manufacturers and
processors to use tax exempt bonds to finance capital expenditures through the California
Statewide Communities Development Authority (CSCDA). CSCDA is jointly sponsored by the
Council Agenda Report—TAX EXEMPT BONDS FOR ERNIE BALL
Page 2
League of California Cities, the California Manufacturers Association, and the California State
Association of Counties, and include several member counties and cities, including San Luis
Obispo (our City joined CSCDA in June 1994 to assist San Luis Sourdough in their expansion),
Resolution 8301. As a result of this program, manufacturers and processors have access to tax
exempt bond financing,normally reserved for government owned projects.
The State of California's requirements include the creation of new jobs. Specifically, for every
$50,000 in bond financing, one(1)new job(should)be created within two (2) years of financing.
Envie Ball, Inc. anticipates adding 20 new employees to their payroll within the allowable two
(2) year timeframe.
The first level of approval required for the tax exempt bond financing,the inducement resolution,
was approved October 26, 1998 by the California Industrial Development Financing Advisory
Commission. In addition to the approved inducement resolution, a public hearing is required by
the county or the city where the equipment is to be located, followed by the adoption of a
resolution indicating the city's support for the financing. This step is required in order to assure
CSCDA that the financing is consistent with local goals and plans. Following the City's
approval,the bonds are placed with the investor,usually within two(2)weeks.
Staff believes that this financing represents exactly the kind of support our Economic
Development Program should facilitate for our local businesses. It is also fully consistent with
City plans and goals, and thus the resolution should be adopted by the City Council.
FISCAL IMPACT
The financing program is structured such that the local government agency is subject to
absolutely no fiscal liability, should the borrower default on repayment. The City's only role is
to endorse the purpose of the financing.
The City is likely realize some added sales tax as a result of the equipment purchase, although
the exact amount cannot be estimated.
ATTACHMENT
Resolution and Exhibit
NOTE: A summary of the CSCDA Equipment Only Purchase Program and a related article are
available for review in the Council Reading File.
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RESOLUTION NO. (1998 Series)
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN LUIS OBISPO
APPROVING THE ISSUANCE OF EQUIPMENT ONLY PURCHASE PROGRAM
NOTES BY THE CALIFORNIA STATEWIDE COMMUNITIES DEVELOPMENT
AUTHORITY
Local Government Participant: City of San Luis Obispo, California
Issuer: California Statewide Communities Development Authority
Borrower: Ernie Ball,Inc. or an affiliate
Notes: Equipment Purchase Program Note or Notes (Ernie Ball, Inc.
Project)of the Issuer
Maximum Principal Amount: $600;000
Public Hearing Date: December 8, 1998
WHEREAS, the Issuer in its inducement resolution (the "Inducement Resolution')
attached hereto as Exhibit A has proposed to issue its Equipment Purchase Program Note or
Notes in an aggregate principal amount not expected to exceed the Maximum Principal Amount
pursuant to the California Industrial Development Financing Act, Section 91500 et seq. of the
Government Code of the State of California,as amended and supplemented(the"Act'); and
WHEREAS, the project to be financed by the Notes consists of the acquisition and
installation of the property and financing cost (the "Project') as described in the Inducement
Resolution; and
WHEREAS, the Issuer has requested that the City Council of the City of San Luis
Obispo (hereafter "Participant') the governing body of the Local Government approve the
issuance of the Notes in order to satisfy the public approval requirement of Section 147(f) of the
Internal Revenue Code of 1986, as amended (the "Code'), the requirements of Section 9 of the
Amended and Restated Joint Exercise of Powers Agreement (the"Agreement'), dated as of June
1, 1988, among certain local agencies, including the Local Government Participant, and the
public agency approval requirement of Section 91530(f) of the Government Code of the State of
California, as amended; and
WHEREAS, the governing body of the Local Government Participant hereby finds and
determines that the Project is not substantively inconsistent with the Local Government
Participant's general plan as prepared and adopted in accordance with Article 5 (commencing
with Section 65300 of the Government Code of the State of California) of Chapter 3 of Title 7;
and
WHEREAS, the Local Government Participant held a public hearing on December 8,
1998, providing a reasonable opportunity for persons to comment on the issuance of the Notes
and the Project; and
WHEREAS, it is intended that this resolution shall constitute the approval of the
issuance of the Notes required by Section 147(f) of the Internal Revenue Code, Section 9 of the
Agreement and Section 91530(f)of the Government code of the State of California;
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Resolution No. (1998 Series)
Page 2
NOW, THEREFORE, BE IT RESOLVED, by the governing body of the Local
Government Participant, that the issuance of the Notes is hereby approved for the purposes of
Section 147(f)of the Internal Revenue Code, Section 9 of the Agreement and Section 91530(f) of
the Government Code of the State of California.
BE IT FURTHER RESOLVED, the Clerk of the Local Government Participant shall
certify the adoption of this resolution, and thenceforth and thereafter the same shall be in full
force and effect.
Upon motion of , seconded by
and on the following roll call vote:
AYES:
NOES:
ABSENT:
the foregoing resolution was adopted this day of , 1998.
Mayor Allen Settle
ATTEST:
Lee Price, City Clerk
APPROVED AS TO FORM:
. J rg � C' Attorney
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Exhibit A
RESOLUTION NO.98EPP-29
RESOLUTION OF THE CALIFORNIA STATEWIDE . COMMUNITIES
DEVELOPMENT AUTHORITY MAKING DETERMINATIONS WITH
RESPECT TO THE FINANCING OF FACILTTmS AND DECLARING ITS
OFFICIAL INTENT TO UNDERTAKE THE FINANCING AND TO
REIMBURSE CERTAIN CAPITAL EXPENDITURES FROM PROCEEDS OF
INDEBTEDNESS
Borrower: Ernie Ball,Inc.or an affiliate
Notes: Equipment Purchase Program Note or Notes(Ernie Ball,Inc.Project)
Maximum
Principal Amount: $600,000
Equipment Location: 151 Suburban Road, San Luis Obispo,California 93401
Activities and Uses
of the Equipment: In a manufacturing facility or facilities for the manufacturing of electric
guitars and related accessories
Anticipated
Public Benefits: (a) Employment benefits (within the meaning of Section 91502.1(b)(1)
of the Act)by securing or increasing the number of employees of the
Borrower and any other direct users of the Equipment or the
compensation for such employment.
(b) Consumer benefits (within the meaning of Section 91502.1(b)(3) of
the Act) by improving the quantity or quality or reducing the price
of products,energy or related services or facilities, and by producing
new or improved products or related services or facilities.
WHEREAS, the California Statewide Communities Development Authority (the "Issuer") is
authorized and empowered by the provisions of Title 1, Division 7, Chapter 5 of the Government Code
of the State of California to issue its industrial development notes pursuant to the California Industrial
Development Financing Act, as amended and supplemented (the "Act"), for the purpose of financing
certain costs of a project,as that term is defined in the Act; and
WHEREAS, the Borrower desires to acquire and install certain manufacturing equipment (the
"Equipment"),which will be located in the Equipment Location; and
WHEREAS,the Borrower is willing to acquire and install the Equipment upon the issuance by
the Issuer of the Notes to finance the Equipment pursuant to the Act; and
WHEREAS, the Borrower has heretofore submitted, and this Commission has accepted, an
application requesting financing for the Equipment; and
WHEREAS, the Issuer may not issue industrial development notes to finance the Equipment
until this Commission makes certain determinations with respect to public benefits and qualification of
the Equipment as required by the Act; and
WHEREAS,this Commission has carefully considered and discussed the information contained
in the Borrower's application and other information necessary to make such determinations; and
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WHEREAS, this Commission desires to induce the Borrower to commence acquisition and
installation of the Equipment at the earliest possible time so as to produce the public benefits set forth
herein; and
WHEREAS, the Issuer, in the course of assisting the Borrower in the financing of the
Equipment expects that the Borrower has paid or may pay certain expenditures (the "Reimbursement
Expenditures") in connection with the Equipment within 60 days prior to the adoption of this Resolution
and prior to the issuance of the Notes for the purpose of financing costs associated with the Equipment
on a long-term basis; and
WHEREAS, the Issuer reasonably expects that Notes in an amount not expected to exceed the
Maximum Principal Amount will be issued and that certain of the proceeds of the Notes may be used to
reimburse the Reimbursement Expenditures;and
WHEREAS, Section 1.103-8(a)(5) and Section 1.150-2 of the Treasury Regulations require the
Issuer to declare its reasonable official intent to reimburse prior expenditures for the Equipment with
proceeds of a subsequent borrowing,
NOW,THEREFORE,the Commission of the California Statewide Communities Development
Issuer does hereby resolve as follows:
Section 1. This Commission hereby finds and determines that the foregoing recitals are true and
correct.
Section 2. This Commission hereby finds and determines that:
(a) the Activities and Uses of the Equipment are in accord with Section 91503 of the
Act;
(b) the use of the Equipment is likely to produce the Anticipated Public Benefits;
(c) the issuance of the Notes by the Issuer in an amount sufficient to finance certain
costs of the Equipment, which is now estimated not to exceed the Maximum Principal Amount,
as described in the Borrower's application attached hereto as Exhibit A, is likely to be a
substantial factor in the accrual of one or more of the Anticipated Public Benefits from the use of
the Equipment as proposed in the Borrower's application; and
(d) the acquisition of the Equipment by the issuance of the Notes is otherwise in
accord with the purposes and requirements of the Act.
Section 3. It is the present intent of the Issuer to issue, at one time or from time to time, the
Notes(the interest of which is intended to be exempt from federal income taxation) when permitted to do
so under the Act in the amount not to exceed the Maximum Principal Amount to finance certain costs of
the Equipment.
Section 4. This Resolution is being adopted by the Issuer solely for purposes of establishing
compliance with the requirements of Section 1.103-8(a)(5) and Section 1.150-2 of the Treasury
Regulations. In that regard, the Issuer hereby declares its official intent to use proceeds of indebtedness
to reimburse the Reimbursement Expenditures. Notwithstanding the foregoing, this resolution does not
bind the Issuer to make any expenditure, incur any indebtedness, or proceed with the financing of the
Equipment.
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Section 5. This resolution shall take effect immediately upon its passage.
PASSED AND ADOPTED by the California Statewide Communities Development
Authority this 26`h day of October, 1998.
I, the undersigned, a duly appointed and qualified Member of the Commission of the California
Statewide Communities Development Authority, DOES HEREBY CERTIFY that the foregoing
resolution was duly adopted by the Commission of the Issuer at a duly called meeting of the Commission
of the Issuer held in accordance with law on October 26, 1998.
Memfbei of the Commission
California Statewide Communities
Development Authority
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