HomeMy WebLinkAboutAgenda Statement 1985/10/03 Item 13 COUNCIL AGENDA STATEMENT
Item 13
Meeting Date 1085
ITEM TITLE: Resolution /Z/9%; Authorizing the issuance of $3 million principal
amount of bonds of the City of Chula Vista to provide financing for
commercial facilities to be developed by Home Depot, Inc.
SUBMITTED BY: Community Development Director ) (4/5ths Vote: Yes No X )
I'
REVIEWED BY: City Manager
It is the opinion of our bond counsel , Jones Hall Hill & White, that the proposed bond
issue for the Home Depot project, located at I-805 and H Street, should be judicially
validated in the San Diego County Superior Court under Sections 860 and following
sections of the Civil Procedure Code. These sections require that the validation pro-
ceeding be filed within 60 days following the authorization of bonds. The attached
resolution authorizes the issuance of bonds , and is therefore the necessary first step
towards the validation proceedings which will take from 45 to 60 days to complete.
The City Council passed a similar resolution on July 2, 1985. However, after adoption
of that resolution, negotiations between Home Depot and Security Pacific National Bank
concerning a letter of credit to secure the financing broke down. Recently, Home Depot
has secured a letter of credit from an Eastern bank. Since the sixty-day period to file
validation proceedings under the old resolution has expired, the City Council is
requested to adopt a new resolution at this time.
Once all the financing documents are in final form, they will be returned to the City
Council for review, public hearing, and final approval . The sole purpose of the
attached resolution is to permit the initiation of the validation so that further
processing of the bond documents may proceed.
RECOMMENDATION: That the City Council approve the resolution authorizing the issuance
of $3 million principal amount of bonds of the City of Chula Vista to provide financing
for commercial facilities to be developed by the Home Depot, Inc.
BOARDS/COMMISSIONS RECOMMENDATION: On March 2f, 1985, the City Council approved an
inducement resolution for the Home Depot for $2.5 million. This amount was increased
to $3 million at the City Council meeting of May 7, 1985.
DISCUSSION:
Home Depot wishes to finance its proposed project through the issuance of tax exempt
industrial revenue bonds under the City' s procedural ordinance (Chapter 3.48 of the
Municipal Code) . This financing can only be done under this chapter because the
project is not located within a redevelopment project area which would permit the
Redevelopment Agency to undertake the financing under the Community Redevelopment Law.
Since this project is not a manufacturing facility, it cannot be financed under the
authority of the California Industrial Development Financing Authority law.
4lthough the City has previously issued industrial revenue bonds under Chapter 3.48
for Bay General Hospital and for the surgical center, the Home Depot financing would
be the first "commercial" project under this chapter. Bond Counsel in California has
traditionally required that commercial or industrial financing under Charter City
)rm A-113 (Rev. 11/79)
Page 2, Item 13
Meeting Date 10/1/85
procedural ordinances be validated in Superior Court. The Bay General and
surgical center financings were not validated because they were health facilities
and clearly authorized for Charter City action. Since Home Depot is a commercial
facility, bond counsel strongly recommends that the City validate the bonds at this
time.
FINANCIAL IMPACT:
The City of Chula Vista has been authorized to issue up to $4,649,000 in private
activity bonds for 1985. The Home Depot project will use $3 million of that
capacity.
The City receives a fee of one-eighth of one percent for the issuance of industrial/
commercial development bonds. The proposed $3 million bond issue would result in
fees to the City totaling $3,750.
10-3
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Chula VET«,
Dated