HomeMy WebLinkAboutAgenda Statement 1983/08/30 Item 8 COUNCIL AGENDA STATEMENT
Item -et 8
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Meeting Date 8/ 3183
ITEM TITLE: Ordinance c-- ' S Amending Ordinance 1970 relating to the
financing of Industrial and Commercial development
SECOND READING AND ADOPTION
SUBMITTED BY: Community Development Directo ths Vote: Yes No
REVIEWED BY: City Manage
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The City of Chula Vista has authority to issue certain types of financing
instruments for entities other than the City under its Charter powers or
through its Industrial Development Authority. Bay General Community Hospital
has requested that the City sponsor a Revenue Anticipation Note. The
authority for the City to participate in such an issue that is tax exempt to
the holder is from IRS Section 501(C) (3) relating to non-profit institutions.
The letter request is attached hereto as Exhibit 1 . Should the Council desire
to participate in such an undertaking, the Ordinance relating to financing of
industrial and commercial development must be changed. No guarantees and/or
liability of the City is required for sponsorship.
RECOMMENDATION:
1 . That Council place Ordinance on its first reading to enable Bay General
Hospital to take advantage of the financing as requested.
2. That Bay General submit a program that illustrates how the cost savings
will be passed on to the public prior to City consideration of the actual
issue.
BOARDS/COMMISSIONS RECOMMENDATION: Not applicable.
DISCUSSION:
There is definitely a fine line between the City's participation in financing
for various entities and possible competition with traditional private sector
sources. Under the City's sponsorship, tax exempt issues are less costly to
an institution, and thus a great advantage to the recipient because of the
lower financing costs. Thus, there is a distinct advantage for institutions
requesting the City's backing. The City assumes no financial liability in
such undertakings, therefore, the question that the City must pose is whether
this is a proper function of its Charter powers.
Bay General Community Hospital has stated that by utilization of this
financing method, they will be able to provide and continue "cost effective
medical and other community health activities, programs for the benefit of the
citizens of Chula Vista."
Inasmuch as the Internal Revenue Service allows the issuance of such tax
exempt issues and the State of California, through Charter Cities, allows for
participation, approval is recommended. Bay General is an important community
asset, and any cost saving measures that are undertaken by the facility can
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Meeting Date 8/23/83 0e/F3
only serve to benefit the entire citizenry. Therefore, it is proposed that in
exchange for the City's involvement, the hospital submit a program to the City
that illustrates how the cost savings will be passed on to the general
public. To assist the City in evaluating the program, the San Diego Employers
Health Cost Containment Coalition will be asked to review and comment on the
program. Signe Thorsen, City Personnel Director, is on the Board of Directors
of the Coalition and is confident that such a program and evaluation would be
most beneficial . Approval by the City Council of the hospital ' s cost savings
program would precede consideration of the issuance of the securities. A
brochure describing the activities and memberships of the San Diego Employers
Health Cost Coalition is provided as Exhibit 2.
By placing the Ordinance on its first reading, Bay General will then be aware
of the City' s willingness to sponsor such an issue. After the final reading
and validation period, the hospital will present the details of the issue to
the Council for consideration and authority to sell the securities. Members
of the hospital administration and representatives of the proposed security
underwriters will be present to respond to any questions the Council may have
with this regard.
FISCAL IMPACT: The City, for its processing of documents, receives
one-quarter of one percent of the proceeds as a participation fee. Said
amount will be deposited in the Industrial Development Bond Fund account.
City services charged toward the processing of this application will be
charged against such funds.
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