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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
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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
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