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Resolution No. 2013-065RESOLUTION NO. 2013-65 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF VERNON APPROVING THE ISSUANCE OF REVENUE BONDS BY THE CALIFORNIA STATEWIDE COMMUNITIES DEVELOPMENT AUTHORITY IN AN AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $7,000,000, FOR THE PURPOSE OF REFINANCING CERTAIN FOOD PROCESSING FACILITIES OWNED OR OPERATED BY 3450 VERNON AVENUE, LLC, OR AN AFFILIATE THEREOF, AND PAYING CERTAIN COSTS OF ISSUANCE, AND OTHER RELATED MATTERS WHEREAS, pursuant to Chapter 5 of Division 7 of Title 1 of the Government Code of the State of California (the "Act"), certain public agencies (the "Members"), have entered into a Joint Exercise of Powers Agreement (the "Agreement"), in order to form the California Statewide Communities Development Authority (the "Authority"), for the purpose of promoting economic, cultural and community development, and in order to exercise any powers common to the Members, including the issuance of bonds, notes or other evidences of indebtedness; and WHEREAS, the Authority is authorized to issue and sell revenue bonds, including industrial development revenue bonds, for the purpose, among others, of financing or refinancing the acquisition and/or construction of capital projects such as the Project (defined below), within the jurisdiction of its Members; and WHEREAS, the City of Vernon (the "City"), is a Member of the Authority; and WHEREAS, 3450 Vernon Avenue, LLC, or another affiliate thereof (the "Borrower"), has requested that the Authority issue and sell recovery industrial development revenue bonds in the maximum principal amount of $7,000,000 (the "Bonds"), for the purpose of making a loan to the Borrower, to enable the Borrower to refinance an 070213800 approximately 42,000 square foot food processing facility (including equipment), owned or operated by the Borrower and located at 3450/3470 E. Vernon Avenue in the City (the "Project"); and WHEREAS, the proposed loan financing will be tax exempt income to investors and the effective interest rate will therefore be demonstrably lower for the borrower than if the loan were obtained without the tax exempt status; and WHEREAS, undertaking the project in a timely fashion will cause employment benefits, both due to the temporary construction and installation jobs, and to the permanent expansion of the facility; and WHEREAS, in order for the interest on the Bonds to be tax-exempt, Section 147(f) of the Internal Revenue Code of 1986, as amended (the "Code"), requires that an "applicable elected representative" of the governmental unit, the geographic jurisdiction of which contains the site of facilities to be financed with the proceeds of the Bonds, hold a public hearing on the issuance of the Bonds and approve the issuance of the Bonds following such hearing; and WHEREAS, the Authority has determined that the City Council is an "applicable elected representative," for purposes of holding such hearing and approving such issuance; and WHEREAS, as a condition to issuing bonds to assist in the financing or refinancing of capital projects, the Agreement requires the approval of the Member within the jurisdiction of which the project is situated; and WHEREAS, the Authority has requested that the City Council approve the issuance of the Bonds by the Authority in order to satisfy the public approval requirement of Section 147(f) of the Code, and the - 2 - 070213800 requirements of the Agreement; and WHEREAS, notice of such public hearing has been duly given as required by the Code, and this City Council has heretofore held such public hearing at which all interested persons were given an opportunity to be heard on all matters relative to the financing of the Project and the Authority's issuance of the Bonds therefor; and WHEREAS, it is in the public interest and for the public benefit that the City Council approve the issuance of the Bonds by the Authority for the aforesaid purposes. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF VERNON AS FOLLOWS: SECTION 1: The City Council of the City of Vernon hereby finds and determines that the above recitals are true and correct. SECTION 2: The City Council of the City of Vernon finds that this action is exempt under the California Environmental Quality Act (CEQA), in accordance with Section 15061(b)(3), the general rule that CEQA only applies to projects that may have an effect on the environment. SECTION 3: The City Council of the City of Vernon hereby approves the issuance of the Bonds by the Authority. It is the purpose and intent of the City Council that this Resolution constitute approval of the issuance of the Bonds, (a) by the "applicable elected representative" of the governmental unit having jurisdiction over the area in which the Project is or is to be located in accordance with Section 147(f) of the Code, and, (b) by the City Council in accordance with the Agreement. SECTION 4: The issuance of the Bonds shall be subject to the approval of the Authority of all financing documents relating 3 - 070213800 thereto to which the Authority is a party. The City shall have no responsibility or liability whatsoever with respect to the Bonds. SECTION 5: The adoption of this Resolution shall not obligate the City or any department thereof to, (i) provide any financing to acquire or construct the Project or any refinancing of the Project; (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, rehabilitation or operation of the Project; (iii) make any contribution or advance any funds whatsoever to the Authority; or (iv) take any further action with respect to the Authority or its membership therein. SECTION 6: The executing officers, the Interim City Clerk and all other proper officers and officials of the City are hereby authorized and directed to execute such other agreements, documents and certificates, and to perform such other acts and deeds, as may be necessary or convenient to effect the purposes of this Resolution and the transactions herein authorized. SECTION 7: This resolution shall take effect immediately upon its passage. - 4 - 070213800 SECTION 8: The Interim City Clerk, or Deputy City Clerk, of the City of Vernon shall certify to the passage, approval and adoption of this resolution., and the Interim City Clerk, or Deputy City Clerk, of the City of Vernon shall cause this resolution and the Interim City Clerk's, or Deputy City Clerk's, certification to be entered in the File of Resolutions of the Council of this City. APPROVED AND ADOPTED this 2nd day of July, 2013. ATTEST �Rdkna Reed V Interim City Clerk / Name: W. Michael McCormick Title: Mayor / APPROVED AS TO FORM: Scott E. Porter, Deputy City Attorney - 5 - 070213800 STATE OF CALIFORNIA ) ) ss COUNTY OF LOS ANGELES ) I, Dana Reed I Interim City Clerk 4_�C't; Cl- r'.._ f the City of Vernon, do hereby certify that the foregoing Resolution, being Resolution No. 2013-65, was duly passed, approved and adopted by the City Council of the City of Vernon at a regular meeting of the City Council duly held on Tuesday, July 2, 2013, and thereafter was duly signed by the Mayor r Mayor Pro-Tem of the City of Vernon. Executed this day of July, 2013, at Vernon, California. (SEAL) Dfia Reed Interim City Clerk / - 6 - 070213800 CITY CLERK'S OFFICE INTEROFFICE MEMORANDUM DATE: July 8, 2013 TO: William Fox, Finance Director Masami Higa, Assistant Finance Director Joaquin Leon, Deputy City Treasurer FROM: Deborah Juarez, Records Management Assistant RE: Resolution No. 2013-65 — A Resolution of the City Council of the City of Vernon Approving the Issuance of Revenue Bonds by the California Statewide Communities Development Authority in an Aggregate Principal Amount not to Exceed $7,000,000, for the Purpose of Refinancing Certain Food Processing Facilities Owned or Operated by 3450 Vernon Avenue, LLC, or an Affiliate Thereof, and Paying Certain Costs of Issuance, and Other Related Matters Transmitted herewith is a copy of Resolution No. 2013-65 referenced above, which was approved by the City Council on July 2, 2013. Thank you. Attachment c: Resolution No. 2013-65 RECEIVED RECEIVED JUN 2 6 2013 JUN 2 7 2013 CITY ADMINISTRATION CfIY CLERK'S OFFICE STAFF REPORT Finance Department DATE: July 2, 2013 TO: Honorable Mayor and City Council FROM: William Fox, Finance Director W1 RE: Hearing and Resolution regarding the Issuance of Industrial Development Revenue Bonds by the California Statewide Communities Development Authority Recommendation It is recommended that the City Council: 1. Find that adoption of the resolution proposed in this staff report for the issuance of the Bonds required for the financing, refinancing, acquisition, and capital projects implementation, which are exempt under the California Environmental Quality Act (CEQA) in accordance with Section 15061(b)(3), the general rule that CEQA only applies to projects that may have an effect on the environment. Subsequent construction activity could be subject to CEQA. 2. Approve the attached resolution which would allow 3450 Vernon Avenue, LLC or related affiliate entity, also known as Golden West Trading Company, Inc., to issue and sell Bonds with a maximum principal amount of $7,000,000. Background On June 13, 2013 proper Public Notice was made in the Vernon Sun announcing a Public Hearing as required by Section 147(f) of the Internal Revenue Code of 1986, with respect to the proposed issuance of Bonds by the California Communities Development Authority in an amount not to exceed $7 million. State law allows for tax-exempt securities to be issued in amounts up to $10 million by a governmental entity to provide money for the acquisition, construction, rehabilitation and equipping of manufacturing and processing facilities for private companies. The proceeds from the Bonds are governed by both federal and state laws and regulations. The following are some of the key requirements: • Manufacturing Facility. The project financed by the Bonds must be a facility used for the manufacturing, production or processing of tangible property (including the processing resulting in the change of such property). No more than 25% of the Bond proceeds can be applied to ancillary office, warehouse or other space. • Qualifying Costs. At least 95% of the Bond proceeds must be spent on qualifying costs. Qualifying costs are generally capital expenditures such as land, building and equipment and other depreciable property (and can also include capitalized interest during construction). • Land. No more than 25% of the Bond proceeds can be used to acquire land. • Acquisition of Existing Manufacturing Facilities. The acquisition of an existing facility can be financed if at least 15% of the portion of the Bond amount used to purchase the facility is spent on rehabilitation of the building within a two-year period. • Used Equipment. If Bond proceeds are used to acquire used equipment, 100% of the cost must be spent on rehabilitation of the equipment within a two-year period. • Maturity. The average maturity of the Bonds cannot exceed 120% of the average economic life of the assets financed. • No Working Capital or Inventory. Bond proceeds cannot be used to finance working capital or inventory. • $20,000,000 Capital Expenditure Limitation. The capital expenditures for the project, when added to the company's other capital expenditures in the same public jurisdiction as the project for the three years immediately preceding and three years following the closing of the financing of the project, cannot exceed $20,000,000. • $40,000,000 Aggregate Limitation. A borrower and certain users may not be the beneficiary of more than $40,000,000 of certain tax-exempt Bonds regardless of the location of the projects; during a three year period after the facility being financed is placed in service. • Public Benefits. The project financed by the Bonds must meet certain public benefit criteria established by the California Debt Limit Allocation Committee (CDLAC), which include, among other things, the creation or retention of jobs. Prevailing Wage. The prevailing wage must be paid to workers involved in the construction or renovation of a facility financed with IDBs in compliance with California Labor Code. • Credit Requirements. The borrower must generally secure a letter of credit in the amount of the Bonds from a bank with a long-term credit rating of at least "AY from Moody's Investors Service, or an "A-" from Standard & Poor's or Fitch Ratings. Fiscal Impact There is no fiscal impact to the City of Vernon for the approval of the resolution. This allows the petitioner the opportunity to obtain attractive rate Bond financing under the jurisdiction of the California Statewide Communities Development Authority. There is not any recourse or financial obligation to the City of Vernon as a result of the Bond financing. The transaction will provide financial benefit since capital will be infused into the City of Vernon through job creation and business expansion.