The HumanGood affiliated group of companies has requested that the California Municipal Finance Authority (“CMFA”) serve as the municipal issuer of the Bonds in an aggregate principal amount not to exceed $150,000,000 of tax-exempt revenue bonds. The proceeds of which will be used, among other things, (a) to finance or reimburse the cost of remodeling, renovating, furnishing and equipping certain of HumanGood's continuing care communities located in several jurisdictions throughout the state of California, including in the City of Redlands, (b) to pay a portion of the interest on the Bonds, if deemed necessary or advisable by CMFA or HumanGood, (c) to provide working capital to HumanGood, if deemed necessary or advisable by the CMFA or HumanGood, (d) to fund a debt service reserve fund, if deemed necessary or advisable by the CMFA or HumanGood, and (e) to pay certain expenses incurred in connection with the issuance of the Bonds (collectively, the “Project”).
A portion of the proceeds of the Bonds, in a principal amount not to exceed $25,000,000, will be used to finance expenditures for various renovations to existing infrastructure and upgrades to housing units and amenities at the following continuing care community owned and operated by HumanGood and located in the City of Redlands: Plymouth Village, located at 900 Salem Drive, Redlands, California, 92373. This is the same property site as the California Municipal Finance Authority Revenue Bonds, Series 2019 (HumanGood). The borrower wishes to take advantage of favorable market conditions for financing opportunities.
In order for all or a portion of the Bonds to qualify as tax-exempt bonds, the City of Redlands must conduct a public hearing (the “TEFRA Hearing”) providing for the members of the community an opportunity to speak in favor of or against the use of tax-exempt bonds for the financing of the Project. Prior to such TEFRA Hearing, reasonable notice must be provided to the members of the community. Following the close of the TEFRA Hearing, an “applicable elected representative” of the governmental unit hosting the Project must provide its approval of the issuance of the Bonds for the financing of the Project.
In order for the CMFA to have the authority to serve as the issuer of the bonds for the Project, it is necessary for the City of Redlands to be a member of the CMFA. Attached to this report is a copy of the Joint Exercise of Powers Agreement that was executed by the City at the time of the last TEFRA for HumanGood, dated July 22, 2019.
The Joint Exercise of Powers Agreement provides that the CMFA is a public entity, separate and apart from each member executing such agreement. The debts, liabilities and obligations of the CMFA do not constitute debts, liabilities or obligations of the members executing such agreement.
The Bonds to be issued by the CMFA for the Project will be the sole responsibility of the Borrower, and the City will have no financial, legal, moral obligation, liability or responsibility for the Project or the repayment of the Bonds for the financing of the Project. All financing documents with respect to the issuance of the Bonds will contain clear disclaimers that the Bonds are not obligations of the City or the State of California but are to be paid for solely from funds provided by the Borrower.
Outside of holding the TEFRA hearing, no other participation or activity of the City or the City Council with respect to the issuance of the Bonds will be required.
Furthermore, Section 147(f) of the Internal Revenue Code of 1986 requires that the proposed financing be approved by a governmental unit having jurisdiction over the area in which the facility to be financed is located. A financing will be treated as having been approved by a governmental unit if “the applicable elected representative” of such governmental unit approves such issue after a public hearing following reasonable public notice of such hearing.
In order to satisfy the requirements of the Agreement and of the Internal Revenue Code, the City must (1) hold a public hearing and (2) adopt the TEFRA Resolution approving the financing to be undertaken through CMFA.
Each financing completed by CMFA is structured so the local agency completing the TEFRA hearing process has no liability with respect to the issuance of bonds or the repayment of any debt service relating to such bonds. In addition, the local agency completing the TEFRA hearing process is not a party to any of the financing documents relating to the issuance of the bonds nor is it named in any of the disclosure documents describing the bonds or the proposed financing.
|No expenditure of financial or staff resources is anticipated as a result of approving Resolution No. 8258. Further, as a matter of policy, the CMFA will grant a portion of the issuance fees that it assesses HumanGood to the City's general fund.
As a part of the 2019 financings initiated by HumanGood through CMFA, for which the City also conducted a TEFRA hearing, the CMFA donated $1,628 to the City. It is estimated that payment for the 2021 financing will be a similar amount.