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HomeMy WebLinkAboutU.C. Regents Request - State Bonds ProcessW,.,. �� W7�) \ CITY OF PALM DESERT/PALM DESERT REDEVELOPMENT AGENCY STAFF REPORT REQUEST: INFORMATIONAL ITEM — U.C. REGENTS REQUEST REGARDING STATE BONDS PROCESS SUBMITTED BY: DAVE YRIGOYEN, DIRECTOR OF REDEVELOPMENT DATE: MAY 27, 2004 CONTENTS: DRAFT LETTER TO UC Construction is proceeding on the overall International Center for Entrepreneurial Management. UCR is pursuing the construction of both Phases I and II. While Phase I was funded by the $6,000,000 donated by Richard Heckmann, UCR is providing interim funds for the Phase II portion. It had always been anticipated that the Phase II portion would be funded through a State bond. The State is currently conducting their due diligence in the Bond process and has reviewed the agreement for conformance to the obligations of the Bonds. The attorney for the Regents U.C. has requested certain clarifications regarding our agreement as follows: (a) Although Section 3.4.2 of the First Amendment states that "the parties acknowledge" Heckmann II will be funded through the issuance of lease revenue bonds, the State notes Section 3.5 of the First Amendment prohibits the University from leasing the Site or any portion thereof, without the consent of the Agency. The State requests the Agency confirm it consents to the contemplated lease revenue bond financing. (b) The State is requesting confirmation that the Agency has "reviewed" the State Financing Documents, which are referred to in Section 2.4.2(b). The State has provided a set of the standard form Site Lease, Facility Lease, and Construction Agreement, which have been used by them, and the University to evidence lease revenue bond financings. These standard forms may be subject to limited modifications to address the specifics of the Heckmann Phase II transaction. Confirmation by the Agency of receipt and review of these documents is expected to satisfy the State with respect to this matter. (c) Section 3.4.2(b) provides that "if UCR operates and maintains the Phase II Center Improvements in a manner which is consistent with the requirements of the State Financing Documents, Agency shall have no rights whatsoever with respect to the Phase II Center Improvements". Despite this language, the State requests written confirmation from the Agency that the Agency's Staff Report — Informational Item U.C. Regents Request regarding State Bonds Process Page 2 of 2 May 27, 2004 reverter rights are, and at all times during the financing, will be "subordinate" to the provisions of the State Financing Documents. With respect to Item (a) above, the agreement always contemplated that the State would issue bonds for the financing of the facility. Essentially, the State is requesting that UCR lease the site to the State for the contemplated financing, and the State will in turn lease the site to UCR to operate as an educational institution. With respect to Item (b) above, the State has provided staff with the lease facility documents. Both Agency's legal counsel and the City's bond financing staff have reviewed the documents and find them acceptable, keeping in mind, that these are draft documents and are subject to modification. With respect to Item (c), we were well aware that we would have to subordinate to the State Bonds. Therefore, we inserted the language in Section 3.4.2(b) in the Agreement. Agency's legal counsel has stated that the requests made by the State are incorporated in the Document in one form or another; therefore, the letter requested by them should not be necessary. Staff is aware that when it comes to the issuance of bonds, the clarification of any ambiguity leads to a better bond issue. The draft of the letter that staff intends to forward to the State is attached for Council's review. Submitted by: Approval: Dave Yrigo Director edevelopment mh Approval: Carlos L. Ortgd-d,, City Manager i6sti McCarthy ACM Redevelop GARDA\Maria Hunt\WPDATAIYRIGOYEN\STFRPTS1052704phasellucr.doc PRIM OBIRT RIDIVIIHMINI AGENCY 73-510 FRED WARING DRIVE PALM DESERT, CALIFORNIA 9 2 2 6 0 — 2 5 7 8 TEL: 760 346—o6ii FAY: 760 341-6372 info@palm-desert.org Mr. James Maguire, Associate Director University of California, Office of the President State Capital Program Development 1111 Franklin Street, 10th Floor Oakland, CA 94607 Re: Phase II of the International Center of Entrepreneurial Management (Heckmann III Dear Mr. Maguire: We understand the State of California (State) is conducting due diligence in connection with its proposed financing of the construction of Heckmann II. As part of the due diligence process, the State has raised certain issues concerning the provisions of the First Amendment to the Disposition and Development Agreement, dated December 12, 2002, between the University and the Agency (First Amendment). This letter constitutes a clarification of certain provisions of the First Amendment and is provided to the University to facilitate the University's efforts to secure interim and permanent financing from the State with respect to Heckmann II. The Agency has reviewed the form of State Financing Documents (as defined in the First Amendment) delivered to the Agency under the University's letter to the Agency dated May 5, 2004. The State Financing Documents consist of a form of Site Lease, Facility Lease and Construction Agreement. As contemplated under Section 3.4.2 (b) of the First Amendment, the Agency confirms that it consents to the University entering into financing documents substantially similar to the State Financing Documents previously reviewed by the Agency in order to allow the State to finance the design and construction of Heckmann II. This consent fulfills the requirements of Section 3.5 of the First Amendment. Mr. James Maguire University of California, Office of the President , 2004 Page 2 of 2 The Agency confirms that the Agency's right of reverter under the First Amendment and the exhibits attached thereto with respect to the Phase II Parcel and the Phase II Center Improvements shall at all times be and remain subordinate to all of the rights and remedies of the State pursuant to the lease revenue bond financing transaction. The Palm Desert Redevelopment Agency, a public body, corporate and politic 21 Carlos L. Ortega Title: Executive Director ATTEST: By: Rachelle D. Klassen, Secretary PRIM DESERT RIOIVELOPMENT AGENCY GARDAWaria HUnt1WPDATAIYRIGOYEN1ucrl maguire051204ltr.doc �w PAI M0 RHY11-PAPER