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HomeMy WebLinkAbout12/08/1998, 1 - CALIFORNIA STATEWIDE COMMUNITIES DEVELOPMENT AUTHORITY EQUIPMENT ONLY PURCHASE PROGRAM, TAX EXEMPT INDUSTRIAL DEVELOPMENT BONDS FOR ERNIE BALL, INC. council / j apenba REpoRt 1�N..6w 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. �-z 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; 1-3 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 1-4 e- 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 ISmA-some-WDUC 0(07) I-5' 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. csrnn-eoins-nn-MDUCEtF!(UM _2 f-!o 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 CSMA-EOmB-DD-WDUCERFS(W7) _3_ �7 1 — !