Title
Resolution Approving the Issuance of Tax Exempt Revenue Bonds by the Economic Development Authority of Montgomery County, Virginia for the benefit of Virginia Tech Foundation, Inc.
Purpose
PURPOSE/BACKGROUND:
The Virginia Tech Foundation, Inc. (the "Foundation") requested that the Economic Development Authority of Montgomery County, Virginia ("Montgomery County EDA") issue certain revenue bonds to assist the Foundation with the financing and refinancing of various projects throughout the Commonwealth. A portion of the Bonds are expected to be issued as tax-exempt, qualified 501(c)(3) bonds as defined by the Internal Revenue Code. A portion of the tax-exempt bond proceeds ($7 million, of an estimated $104 million) may be used for the acquisition, construction, equipping, and development the new Seafood Agricultural Research and Extension Center ("AREC") facility to be located on Rudd Lane, which will be owned by the Foundation and used by Virginia Tech. While those bonds will not be issued by the City or the Economic Development Authority of the City of Hampton, Virginia ("Hampton EDA"), and will not constitute a debt or pledge of the faith and credit of the City or the Hampton EDA, the Internal Revenue Code requires the governing body in each jurisdiction where the tax-exempt bond proceeds will be expended to consider an approval resolution after a public hearing has been conducted and the Virginia Code requires the approval of the host jurisdiction to any financing done by any economic development authority located outside its jurisdiction.
The Montgomery County EDA held a public hearing on this proposed issuance of the tax-exempt bonds on June 18, 2019, after which it adopted an inducement resolution (included in this agenda package). The Montgomery County Board of Supervisors was further expected to conduct a public hearing and opine on this request at its July 8, 2019 meeting, with the Hampton City Council then expected to act on July 10, 2019. However, that Montgomery County action was tabled until the August meeting, and final action was not taken until that Board met on August 12, 2019, at which time that Board approved the Foundation's request. The Hampton EDA met on August 20, 2019, and the Montgomery County EDA, adopted a resolution (also included in this agenda package) requesting the City Council hold a public hearing and consider a resolution approving the bonds for purposes solely related to the requirements of the Internal Revenue Code and the Virginia Code.
Discussion:
See Purpose/Background.
Impact:
The primary purpose of the borrowed funds is relocate and construct a state-of-the-art Seafood AREC facility on the Downtown Waterfront, a facility that is anticipated to have a national impact through its research and enhancements to the development of aquaculture.
Recommendation:
Rec
Conduct a public hearing and approve the Resolution.
Body
WHEREAS, the Economic Development Authority of Montgomery County, Virginia (the "Issuing Authority") is empowered by the Industrial Development and Revenue Bond Act (the "Act") to issue its revenue bonds for the purposes of, among other things, financing or refinancing facilities for use by organizations (other than institutions organized and operated exclusively for religious purposes) that are exempt from taxation pursuant to Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the "Code"), thereby promoting the safety, health, welfare, convenience, and prosperity of the residents of the Commonwealth of Virginia (the "Commonwealth");
WHEREAS, the Issuing Authority has received a request from Virginia Tech Foundation, Inc., a Virginia nonstock corporation (the "Foundation"), whose address is 902 Prices Fork Road, Suite 4000, Blacksburg, Virginia, for the issuance by the Issuing Authority of its revenue bonds in an amount not to exceed $104,120,000 (the "Bonds") to assist the Foundation with the financing and refinancing of various projects, including without limitation the following project (the "Project"): (1) the acquisition, construction, equipping and development a new Seafood Agricultural Research and Extension Center ("AREC") facility, which will be located at Rudd Lane and King Street, in Hampton, Virginia near the Hampton downtown waterfront, which is expected to house approximately 15,000 square feet of usable lab and office space, and which will consist of approximately two stories plus parking beneath the occupied space; and (2) capitalized interest on the Bonds, a debt service reserve fund for the Bonds and costs of issuance related to the issuance of the Bonds, working capital, routine capital expenditures at the facilities described above and other related costs;
WHEREAS, the maximum principal amount of Bonds expected to be issued for the Project is $7,000,000 plus amounts described in (2) above;
WHEREAS, the Project is expected to be owned by the Foundation and is expected to be used by the Virginia Polytechnic Institute and State University ("Virginia Tech") and the Foundation;
WHEREAS, the Project will be used in furtherance of Virginia Tech's and the Foundation's mission;
WHEREAS, the Foundation is exempt from income taxation under Section 501(c)(3) of the Code and is not organized and operated exclusively for religious purposes;
WHEREAS, because the Project is located in the City of Hampton, Virginia, Section 147(f) of the Code and Sections 15.2-4905 and 15.2-4906 of the Act require that the Foundation obtain the approval of the City Council of the City of Hampton, Virginia (the "Council") to the issue the Bonds and concur with an inducement resolution adopted by the Issuing Authority on June 18, 2019 (the "Montgomery Inducement Resolution");
WHEREAS, a copy of the Inducement Resolution has been provided to the Council;
WHEREAS, prior to the consideration of the Inducement Resolution, the Issuing Authority held a public hearing on the issuance of the Bonds, following reasonable notice, as required by, and in compliance with, Section 147(f) of the Code and Section 15.2-4906 of the Act;
WHEREAS, copies of the Foundation's fiscal impact statement, the Inducement Resolution, the Issuing Authority's Summary of Public Hearing, which included a reasonably detailed summary of the comments expressed at the Issuing Authority public hearing, were presented to the Board of Supervisors of Montgomery County, Virginia (the "Montgomery Board") on August 12, 2019;
WHEREAS, the Montgomery Board approved the issuance of the Bonds by the Issuing Authority in accordance with Section 147(f) of the Code and Section 15.2-4906 of the Act on August 12, 2019;
WHEREAS, the Economic Development Authority of the City of Hampton, Virginia met on August 20, 2019 adopted an inducement resolution similar to the Montgomery Inducement Resolution (the "Hampton Inducement Resolution"); and
WHEREAS, the Council held a public hearing on the issuance of the Bonds on September 11, 2019, following reasonable public notice, as required by, and in compliance with, Section 147(f) of the Code and Section 15.2-4906 of the Act.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF HAMPTON, VIRGINIA that:
1. It approves the issuance of the Bonds by the Issuing Authority for the benefit of the Foundation, as required by Section 147(f) of the Code and Section 15.2-4906 of the Act, to permit the Issuing Authority to assist in the financing and refinancing of the Project;
2. It concurs with the Montgomery and Hampton Inducement Resolutions;
3. The approval of the issuance of the Bonds does not constitute an endorsement to a prospective purchaser of the Bonds of the creditworthiness of the Foundation or the Project.
4. As required by Section 15.2-4909 of the Act, the Bonds shall provide that neither the Issuing Authority, Montgomery County, nor the City of Hampton shall be obligated to pay the Bonds or the interest thereon or other costs incident thereto except from the revenues and moneys pledged therefor, and neither the faith and credit nor the taxing power of the Commonwealth of Virginia nor any political subdivision thereof, including the Issuing Authority, Montgomery County, and the City of Hampton, shall be pledged thereto; and
5. This resolution shall take effect immediately upon its adoption.