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REQUEST FOR COUNCIL ACTION Date: 10/27/14 Item No.: 7.i Department Approval City Manager Approval Item Description: Set a Public Hearing to Issue Tax-Exempt Revenue Bonds on Behalf of Charter Schools Development Corporation and Hiawatha Academies. B ACKGROUND 1 Under Federal and State Statutes, municipalities are authorized to pledge their bond issuance authority to 2 non-profit groups for the benefit of non-sectarian educational facilities (or the non-sectarian portion of the 3 facility). If a municipality expects to issue or receive tax-exempt bond proceeds, either directly or 4 indirectly through separate establishments, it is required by federal law to hold a public hearing. 5 6 The debt is considered conduit debt, and does not constitute a legal or moral obligation on the part of the 7 City. The debt is repaid solely by the revenues available from the borrower. However, the City must still 8 meet all legal requirements prior to issuing any tax-exempt bonds including holding a public hearing. 9 10 Hiawatha Academies, a public charter school, leases space from the Charter School Development 11 Corporation. While they’re physically located in Minneapolis, Hiawatha Academies potentially draws 12 students from surrounding communities including Roseville. As a result, federal law permits the City of 13 Roseville to issue bonds on their behalf. 14 15 Hiawatha Academies has requested that the City of Roseville assist in the financing of improvements at 16 their College Prep Middle School facility. The total amount of financing is approximately $6.6 million 17 which will be used to construct a 38,000 square foot building that will house classrooms, 18 gymnasium/auditorium, cafeteria, and other amenities. A local financial institution has confirmed their 19 intent to purchase the bonds when issued. 20 21 The City has participated in financing arrangements for similar educational entities most recently in 2008. 22 The City’s Bond Counsel of Briggs & Morgan has reviewed the legal and financing agreements, and will 23 provide an unqualified opinion as the legality of the bonds and their tax-exempt status. 24 PO OLICYBJECTIVE 25 Generally speaking, the public policy reason for City participation in these financings is to promote greater 26 investment in the educational facilities than would otherwise occur by market factors alone. Allowing the 27 bonds to be issued tax-exempt makes the bonds more attractive to investors and results in lower borrowing 28 costs compared to traditional financing methods. This in turn, provides more available dollars for the 29 proposed project. 30 Page 1 of 2