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Home My WebLink About02. Bonds Solar Energy-Kohl's AGENDA MEMO DATE: April 27, 2010 TO: Mayor and Members of the City Council FROM: Office of the City Manager By: Brian Saeki, Community Development Director SUBJECT: PUBLIC HEARING REGARDING ISSUANCE OF RECOVERY ZONE FACILITY REVENUE BONDS FOR SUNEDISON TO FUND SOLAR ENERGY PANELS AT THE KOHLS STORE IN STONEWOOD CENTER RECOMMENDATION Staff recommends that the Downey City Council conduct a public hearing and adopt the attached resolution approving the issuance of recovery zone facility bonds for the Kohl’s Department at Stonewood Mall solar energy project. BACKGROUND/DISCUSSION In early April, SunEdison Corporation contacted the City of Downey (“City”) regarding a solar energy project in Downey. SunEdison is a solar energy firm that provides solar energy solutions to government, commercial, and utility customers. To date, Sun Edison has more than 327 solar installations worldwide. Recently, SunEdison entered into an agreement with Kohl’s Department Stores to install solar panels on rooftops of Kohl’s locations throughout the U.S., particularly in the Arizona and California markets. The SunEdison/Kohl’s arrangement works in the following way: SunEdison pays for the solar panels and installation, and then sells the electricity generated to Kohl’s on a 20-year contract with the price pegged at or below the cost of grid power. This arrangement means that Kohl’s does not have to incur the cost of installing and maintaining the solar panels, but still receives a dedicated source of solar-generated energy that has predictable long-term pricing. To finance the solar system installations, SunEdison partnered with the California Statewide Communities Development Authority (“CSCDA”) to obtain an allocation of Recovery Zone Facility Revenue Bonds (“Recovery Bonds”). The Recovery Bonds were authorized by the American Recovery and Reinvestment Act (“ARRA”) of 2009. Recovery Bonds are a new type of taxexempt and private-activity bond that dramatically broaden financing opportunities for corporate/forprofit borrowers to finance capital infrastructure projects not traditionally eligible for taxexempt financing. The SunEdison/Kohl’s solar initiative qualified for the Recovery Bond program and is currently being implemented by SunEdison and Kohl’s. On a local level, Macerich, the owner of the Stonewood Center, sent to the City a letter that supports the Kohl’s solar energy project. Additionally, before installation occurs, staff will review for compliance with current City guidelines, the solar panel installation at the Kohl’s store. Beyond this, the primary role of the City for the Kohl’s/SunEdison transaction is to be a financing conduit for the tax-exempt bonds. SunEdison and CSCDA have already obtained the necessary allocation of bonds, but per federal CITY OF DOWNEY, CALIFORNIA regulations they are required to work with local jurisdictions to implement the actual issuance of these tax-exempt bonds. For the SunEdison/Kohl’s transaction, the City of Downey provides several valuable things to move the project forward. First, the City provides the authority to issue tax-exempt bonds, which neither SunEdison nor Kohl’s has. Second, the City carries out the public noticing requirements and holds a public hearing pursuant to the Tax Equity and Fiscal Responsibility Act of 1982 (“TEFRA”). It is important to note that the City is not financially liable for repayment of the bonds for the project; instead, SunEdison is required to repay these bonds. The City is just providing the mechanism for the financing that will facilitate this project. In sum, staff members recommend approval of this item because it is a cost-effective way for the City to facilitate the development of solar energy systems in Downey. FISCAL IMPACT There will be no fiscal impact from this project. Attachment: Resolution Page 2 of 2 RESOLUTION NO. ____________ A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF DOWNEY APPROVING THE ISSUANCE BY THE CALIFORNIA STATEWIDE COMMUNITIES DEVELOPMENT AUTHORITY OF RECOVERY ZONE FACILITY REVENUE BONDS FOR THE SUNEDISON CALIFORNIA PORTFOLIO WHEREAS, the California Statewide Communities Development Authority (the “Authority”) is authorized pursuant to the provisions of California Government Code Section 6500 et seq. and the terms of an Amended and Restated Joint Exercise of Powers Agreement, dated as of June 1, 1988 (the “Agreement”), among certain local agencies throughout the State of California, including the City of Downey (the “City”), to issue revenue bonds for the purpose of promoting economic development in the State of California; and WHEREAS, SunEdison, LLC or related entities, has requested that the Authority adopt a plan of financing providing for the issuance of recovery zone facility revenue bonds (the “Bonds”) in one or more series issued from time to time, including bonds issued to refund such revenue bonds in one or more series from time to time, and at no time to exceed $1,000,000 in outstanding aggregate principal amount, to finance the construction of solar energy facilities located at the following address in the City and generally known as SunEdison California Portfolio (the “Project”): Kohl’s Department Store at 300 Stonewood Street, Downey, California; and WHEREAS, the Bonds or a portion thereof will be “private activity bonds” for purposes of the Internal Revenue Code of 1986 (the “Code”); and WHEREAS, pursuant to Section 147(f) of the Code, prior to their issuance, private activity bonds are required to be approved by the “applicable elected representative” of the governmental units on whose behalf such bonds are expected to be issued and by a governmental unit having jurisdiction over the entire area in which any facility financed by such bonds is to be located, after a public hearing held following reasonable public notice; and WHEREAS, the members of this City Council (this “City Council”) are the applicable elected representatives of the City; and WHEREAS, there has been published, at least 14 days prior to the date hereof, in a newspaper of general circulation within the City, a notice that a public hearing regarding the Bonds would be held on a date specified in such notice; and WHEREAS, such public hearing was conducted on such date, at which time an opportunity was provided to interested parties to present arguments both for and against the issuance of the Bonds; and WHEREAS, the Authority is also requesting that the City Council approve the issuance of any refunding bonds hereafter issued by the Authority at no time to exceed $1,000,000 for the purpose of refinancing the Bonds which financed the Project (the “Refunding Bonds”), but only in such cases where federal tax laws would not require additional public hearings, consideration or approval by the City Council; and Page 3 of 2 WHEREAS, it is intended that this resolution shall constitute the approval of the issuance of the Bonds required by Section 147(f) of the Code and Section 9 of the Agreement; NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF DOWNEY AS FOLLOWS: Section 1. The above recitals are true and correct. Section 2. The City Council hereby approves the issuance of the Bonds and the Refunding Bonds by the Authority. It is the purpose and intent of the City Council that this resolution constitute approval of the Bonds for the purposes of (a) Section 147(f) of the Code and (b) Section 9 of the Agreement. Section 3. The officers of the City are hereby authorized and directed, jointly and severally, to do any and all things and to execute and deliver any and all documents that they deem necessary or advisable in order to carry out, give effect to and comply with the terms and intent of this resolution and the financing approved hereby. Section 4. The Clerk of the City Council shall forward a certified copy of this Resolution and a copy of the affidavit of publication of the hearing notice to: Justin Cooper, Esq. Orrick, Herrington & Sutcliffe LLP 405 Howard Street San Francisco, California 94105 Section 5. This resolution shall take effect immediately upon its passage. ADOPTED by the City Council of the City of Downey at a regular meeting of said Council held on the 13th day of April, 2010, by the following vote: AYES: NOES: ABSENT: Mayor ATTEST: City Clerk Page 4 of 2