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Home My WebLink AboutRevenue Bonds - Recovery Zone Economic Development Bonds and Council/Agency Meeting Held:; Deferred/Continued to: *App v% _ ❑ C diti Hall Ap roved ❑ Denied C le 's ignatur Council Meeting Date: 1/19/2010 Department ID Number: ED 10 - 08 CITY OF HUNTINGTON BEACH REQUEST FOR CITY COUNCIL ACTION SUBMITTED TO: HONORABLE MAYOR AND CITY COfATOR MEMBERS SUBMITTED BY: FRED A. WILSON, CITY ADMINIST PREPARED BY: BOB HALL, DEPUTY CITY ADMINIS STANLEY SMALEWITZ, DIRECTOR OF ECONOMIC DEVELOPMENTS SUBJECT: RESOLUTION DESIGNATING THE HUNTINGTON BEACH RECOVERY ZONE IN ACCORDANCE WITH THE AMERICAN RECOVERY AND REINVESTMENT ACT OF 2009 FOR THE PURPOSES OF ISSUING TAXABLE RECOVERY ZONE ECONOMIC DEVELOPMENT BONDS AND TAX-EXEMPT PRIVATE ACTIVITY RECOVERY ZONE FACILITY BONDS Elt, ment of Issue,Funding Source,Recommended Action,Alternative Action(s),Analysis,Environmental Status,Attachment(s) -- Statement of Issue: The City Council is asked to adopt Resolution 2010-Odesignating the Huntington Beach Recovery Zone in accordance with the American Recovery and Reinvestment Act of 2009 for the purposes of issuing taxable Recovery Zone Economic Development Bonds and tax-exempt Recovery Zone Facility Bonds. Funding Source: Not applicable. Recommended Action: Motion to: Approve and adopt Resolution2010-O4designating the Huntington Beach Recovery Zone in accordance with the American Recovery and Reinvestment Act of 2009 for the purposes of issuing taxable Recovery Zone Economic Development Bonds and tax-exempt Recovery Zone Facility Bonds. Alternative Action(s): Do not approve and adopt Resolution. REQUEST FOR CITY COUNCIL ACTION MEETING DATE: 1/19/2010 DEPARTMENT ID NUMBER: ED 10 - 08 Analysis: On February 17, 2009, President Barack Obama signed into law the American Recovery and Reinvestment Act (Recovery Act) of 2009 which, among other actions, amended the Internal Revenue Code to create two new methods of federally subsidized financing available to local governments for economic development: Recovery Zone Economic Development Bonds (RZEDBs) and Recovery Zone Facility Bonds (RZFBs). The designation of a "Recovery Zone" is the first step in the process for accessing these bonds and is the action being presented at this time. Without the designation of a Recovery Zone, the City would not be able to take advantage of this opportunity. The action of designating a Recovery Zone does not authorize any bonds to be issued. The City Council will need to approve any issuance of bonds through a public hearing process. However, in order to protect the ability of the City to pursue possible projects which would be eligible for bond proceeds, the Recovery Zone must be designated by the end of January. States, counties, and large municipalities (population over 100,000) were given a direct allocation of bonds to be used by January 1, 2011, to finance certain qualified economic development purposes for use within a designated "Recovery Zone." As a result of the direct allocation, the United States Department of Treasury awarded the City of Huntington Beach an allocation of$11,880,000 in Recovery Zone Bonds to be administered through the following programs: - $4,752,000 - Recovery Zone Economic Development Bonds (RZEDB) -These taxable, public purpose bonds enable the City to issue bonds to finance public purpose projects. The Federal government would subsidize 45 percent of interest costs incurred by any bond the City issues through this program. At this time, staff is exploring whether there is any significant cost savings to the City to utilize these funds. The use of Economic Development Recovery Bonds can be used as a tool to promote economic activity through infrastructure and public building projects (i.e. streets, highways, parking and public facilities), job training, education, and new money (no refinancing of current debt). The City is currently reviewing projects that may be both eligible to use the bonds and able to finance their repayment. - $7,128,000 - Recovery Zone Facility Bonds (RZFB) -These tax-exempt, private activity bonds are economic development bonds to assist local agencies in stimulating economic growth by supporting selected private development projects. The City would act as the conduit issuer of the bonds for projects that meet the requirements of the Recovery Act and would not be liable or obligated to pay any debt incurred as a result. One potential use of Recovery Zone Facility Bonds would be to use this allocation as part of a solar power purchase agreement to install large scale solar on'a number of city facilities. Utilizing these bonds in this manner increases the likelihood of successfully -2- 1/6/2010 3:12 PM REQUEST FOR CITY COUNCIL ACTION MEETING DATE: 1/19/2010 DEPARTMENT ID NUMBER: ED 10 - 08 implementing large scale solar and that the renewable energy generated on-site would be less expensive than utility purchased power over the term of the agreement In order to take advantage of this bond opportunity, the City must designate a "Recovery Zone," which the Recovery Act defines as "any area designated by the issuer as having significant poverty, unemployment, rate of home foreclosure, or general distress." Between May of 2006 and November of 2009, the unemployment rate in the City has increased from 2.8 percent to 7.9 percent. Strategic Plan Goal: Enhance Economic Development. Environmental Status: Not applicable Attachment(s): City Clerk'-$ Page RuIrriber • Description Resolution2aio-o designating the Huntington Beach Recovery Zone in accordance with the American Recovery and Reinvestment Act of 2009 for the purposes of issuing taxable Recovery Zone Economic Development Bonds and tax-exempt Recovery Zone Facility Bonds. .3. 1/6/2010 3:12 PM ATTACHMENT # 1 RESOLUTION NO_ 2010-04 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF HUNTINGTON BEACH AUTHORIZING THE CREATION OF A RECOVERY ZONE UNDER THE PROVISIONS OF THE AMERICAN RECOVERY AND REINVESTMENT ACT OF 2009 FOR THE PURPOSE OF ISSUING RECOVERY ZONE BONDS UNDER SECTION 1400U-1, 1400U-2, AND 140OU-3 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED WHEREAS, Section 1401 of Title I of Division B of the American Recovery and Reinvestment Act of 2009, Pub. L. No. 111-5, 123 Stat. 115 (2009) ("ARRA"), added Sections 140OU-1 through 140OU-3 of the Internal Revenue Code of 1986(the "Code"), authorizing state and local governments to issue Recovery Zone Economic Development Bonds and Recovery Zone Facility Bonds; and The City of Huntington Beach was directly allocated a total of$11,880,000 to be dispersed in the following manner: $4,752,000 in Recovery Zone; and Recovery Zone Economic Development Bonds and Recovery Zone Facility Bonds may be issued before January 1,2011, as provided in Section 1400U-1 of the Code to finance certain economic development projects located within designated "recovery zones; and Section 140OU-1 (b) of the Code requires, in part, that issuers designate an eligible "recovery zone;" and For the purposes of Sections 140OU-1 and 140OU-3 of the Code, the term "recovery zone" means: (1) any area designated by the issuer as having significant poverty, unemployment, rate of home foreclosures, or general distress; (2) any are designated by the issuer as economically distressed by reason of the closure or realignment of a military installation pursuant to the Defense Base Closure and Realignment Act of 1990; and(3) any area for which a designation as an empowerment zone or renewal community is in effect as of the effective date of ARRA, which the effective date is February 17, 2009; and I.R.S. Notice 2009-50 ("Notice 2009-50")provides that for the purposes of any state, county or large municipality that receives an allocation of Recovery Zone Economic Development Bonds and Recovery Zone Facility Bonds may make these designations of "recovery zones" in any reasonable manner as it shall determine in good faith at its discretion; and The City's unemployment rate increased from 2.8 percent to 7.9 percent between May 2006 and November 2009; and The Huntington Beach City Council previously approved areas of the City that were designated as a Community Development Block Grant Areas and Redevelopment areas, whereby the goals of reducing poverty and increasing employment are similar; and 10-2385/42517 2 1 Resolution No. 2010-04 NOW, THEREFORE, the City Council of the City of Huntington Beach does hereby resolve as follows: i. The City's "Recovery Zone," for the purposes of Sections 1400U-1, 1400U-2, and 140OU-3 of the Code, is hereby designated to be the geographical boundaries of the City of Huntington Beach. 2. The City finds that the "Recovery Zone" described above meets the requirements of Section 1400U-1 of the Code. 3. The City Administrator, or his designee, is hereby authorized to execute and deliver any and all documents which may be deemed necessary or advisable in order to designate the Huntington Beach Recovery Zone. PASSED AND, ADOPTED by the City Council of the City of Huntington Beach at a regular meeting thereof held on January 19 , 2010. if MkI00 INITI VIEWED AND APPROVED: City, Mlilhftrator APPROVED AS TO FORM: � 1 Ci Atto ey J 10-2385/42517 2 2 Res. No. 2010-04 STATE OF CALIFORNIA COUNTY OF ORANGE ) ss: CITY OF HUNTINGTON BEACH ) I, JOAN L. FLYNN the duly elected, qualified City Clerk of the City of Huntington Beach, and ex-officio Clerk of the City Council of said City, do hereby certify that the whole number of members of the City Council of the City of Huntington Beach is seven; that the foregoing resolution was passed and adopted by the affirmative vote of at least a majority of all the members of said City Council at a regular meeting thereof held on January 19, 2010 by the following vote: AYES: Carchio, Hardy, Green, Bohr, Dwyer, Hansen NOES: None ABSENT: Coerper ABSTAIN: None y Clerk and ex-officiVClerk of the City Council of the City of Huntington Beach, California RCA ROUTING SHEET INITIATING DEPARTMENT: Economic Development SUBJECT: Resolution Designating the Huntington Beach Recovery Zone COUNCIL MEETING DATE: January 19, 2010 RCA ATTACHMENTS STATUS Ordinance (w/exhibits & legislative draft if applicable) Attached ❑ Not Applicable Resolution (w/exhibits & legislative draft if applicable) Attached ❑ Not Applicable Tract Map, Location Map and/or other Exhibits Attached ❑ Not Applicable Contract/Agreement (w/exhibits if applicable) Attached (Signed in full by the City Attorney) Not Applicable ❑ Subleases, Third Party Agreements, etc. Attached ❑ (Approved as to form by City Attorney) Not Applicable Certificates of Insurance (Approved by the City Attorney) Attached Not Applicable ❑ Fiscal Impact Statement (Unbudgeted, over $5,000) Attached ❑ Not Applicable Bonds (If applicable) Attached ❑ Not Applicable Staff Report (If applicable) Attached ❑ Not Applicable Commission, Board or Committee Report (If applicable) Attached ❑ Not Applicable Findings/Conditions for Approval and/or Denial Attached ❑ Not Applicable EXPLANATION FO'R:MISSING ATTACHMENTS REVIEWED RETURNED FOR DED ' _._....... . Administrative Staff Deputy City Administrator Initial City Administrator Initial City Clerk ( ) EXPLANATION FOR RETURN OF ITEM: (Belo - • RCA Author: Machado, Ext. 1797