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Home My WebLink About2009-10-27 - AGENDA REPORTS - SC RECOVERY ZONE (2)CONSENT CALENDAR DATE: SUBJECT: DEPARTMENT: Agenda Item: CITY OF SANTA CLARITA AGENDA REPORT City Manager Approval: Item to be presented by: Jason Crawford October 27, 2009 5 RESOLUTION DESIGNATING THE SANTA CLARITA 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 City Manager's Office RECOMMENDED ACTION City Council adopt resolution designating the Santa Clarita 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. BACKGROUND 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," local businesses would not be able to take advantage of this opportunity. However, 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. 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 Adopted: es R -26 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 Santa Clarita an allocation of $22,117,000 in Recovery Zone Bonds to be administered through the following programs: $8,847,000 - 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. $13,270,000 - 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. The City has been approached by local businesses, including Aerospace Dynamics, interested in accessing these funds. On April 28. 2009, the City Council unanimously approved the 21 -Point Business Plan for Progress, a broad -reaching economic development stimulus program to strengthen our local economy for both the short- and long-term. The 21 -Point Business Plan for Progress will enhance local business partnerships, encourage quality job creation in the area through business retention, expansion and attraction, bolster retail spending, and attract external dollars to the community. A component of the plan included maximizing the funds available to the City as a result of President Obama's stimulus package and aggressively pursuing opportunities that would maximize job creation. 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 March 2008 and July 2009, the unemployment rate in the City has increased from 3.5 percent to 7.7 percent. The City Council previously approved an area of the City that was designated as a California Enterprise Zone whereby the goals to reduce poverty and increase employment are similar. Accordingly, staff recommends the Santa Clarita Recovery Zone consist of the geographic boundaries of the Santa Clarita Enterprise Zone, which encompasses 97 percent of all commercial and industrial zoned areas in the City. The action being considered is the designation of a "Recovery Zone" within the City of Santa Clarita and does not authorize any bonds to be issued at this time. Any future action pertaining to the issuance of bonds will be presented to the City Council at a public hearing at a later date. ALTERNATIVE ACTIONS Other action as determined by City Council. FISCAL IMPACT There is no fiscal impact as a result of this action. ATTACHMENTS Resolution Recovery Zone Map j RESOLUTION 09- A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SANTA CLARITA, CALIFORNIA, 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 1400U-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 1400U-1 through 1400U-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 WHEREAS, the CIty of Santa Clarita was directly allocated a total of $22,117,000 to be dispersed in the following manner: $8,847,000 in Recovery Zone Economic Development Bonds and $13,270,000 in Recovery Zone Facility Bonds; and WHEREAS, Recovery Zone Economic Development Bonds and Recovery Zone Facility Bonds may be issued before January 1, 2011, as provided in Section 1400U -I of the Code to finance certain economic development projects located within designated "recovery zones;" and WHEREAS, Section 1400U-1 (b) of the Code requires, in part, that issuers designate and eligible "recovery zone;" and WHEREAS, for the purposes of Sections 1400U-1 and 1400U-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 WHEREAS, 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 WHEREAS, the City's unemployment rate increased from 3.5 percent to 7.7 percent between March 2008 and July 2009; and WHEREAS, the Santa Clarita City Council previously approved an area of the City that was designated as a California Enterprise Zone, whereby the goals of reducing poverty and increasing employment are similar; and WHEREAS, the Santa Clarita Enterprise Zone encompasses 97 percent of all commercial and industrial zoned areas of the City. NOW, THEREFORE, the City Council of the City of Santa Clarita does hereby resolve as follows: SECTION 1. The City's "Recovery Zone," for the purposes of Sections 1400U-1, 1400U-2, and 1400U-3 of the Code, is hereby designated to be the area denoted on the map attached to this resolution, consisting of the geographical boundaries of the Santa Clarita Enterprise Zone. SECTION 2. The City finds that the "Recovery Zone" described above meets the requirements of Section 1400U-1 of the Code. SECTION 3. The City Manager, 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 Santa Clarita Recovery Zone. SECTION 4. The City Clerk shall certify to the adoption of this Resolution. PASSED, APPROVED, AND ADOPTED this day of , 2009. ATTEST: CITY CLERK MAYOR STATE OF CALIFORNIA ) COUNTY OF LOS ANGELES ) ss. CITY OF SANTA CLARITA) I, Sharon L. Dawson, MMC, City Clerk of the City of Santa Clarita, do hereby certify that the foregoing Resolution was duly adopted by the City Council of the City of Santa Clarita at a regular meeting thereof, held on the day of , 2009, by the following vote: AYES: COUNCILMEMBERS- NOES: COUNCILMEMBERS- ABSENT: COUNCILMEMBERS: CITY CLERK STATE OF CALIFORNIA ) COUNTY OF LOS ANGELES ) ss. CITY OF SANTA CLARITA ) CERTIFICATION OF CITY COUNCIL RESOLUTION I, Sharon L. Dawson, City Clerk of the City of Santa Clarita, do hereby certify that this is a true and correct copy of the original Resolution 09- adopted by the City Council of the City of Santa Clarita, California on , 2009, which is now on file in my office. Witness my hand and seal of the City of Santa Clarita, California, this day of , 2009. Sharon L. Dawson, MMC City Clerk By Susan Caputo, CMC Deputy City Clerk 0 0 0 a� J� J �^ JPO O 41 G 1.s f AL I y \ , r � � t , 2 x a Ncoa �. vlj- -- �'�� " N -gyp co OM 0 0 0