California conduit races to approve non-profit financings ahead of tax bill deadline

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LOS ANGELES — The California Infrastructure and Economic Development Bank approved $321 million in 501(c)(3) conduit bond financing for four non-profit projects this week.

The IBank added an extra meeting this month to approve issuance that has been pushed up ahead of the Dec. 31 deadline embedded in the GOP tax bills, said Teveia Barnes, IBank's executive director.

With private activity bonds and advance refundings threatened by the bills, Barnes said the IBank is receiving requests to speed up approval on sales of bonds, particularly from nonprofit borrowers.

IBank was created in 1994 to finance public infrastructure and private development in California and has the authority to issue tax exempt and taxable revenue bonds, make loans, provide credit enhancement and leverage state and federal funds.

On Nov. 28, IBank approved $215 million in tax-exempt revenue bonds for the Campus Facilities Improvement Association to finance a new 170,000 square foot clinical, training and research facility at UC San Francisco. The new building will house the Child, Teen and Family Center as well as the Department of Psychiatry.

It also approved, at that meeting, a $78 million refunding of tax-exempt revenue bonds for Segerstrom Center for the Arts in Costa Mesa; an $18 million refunding of two series of variable-rate bonds into fixed-rate for The Roessler-Chadwick Foundation Group to make improvements at Palos Verdes Peninsula middle school, including a new classroom building and a performing arts center; and refunding of $10 million in variable rate demand revenue bonds issued by the California Statewide Community Development Authority in 2003 for The Painted Turtle, a non-profit co-founded by the late actor Paul Newman. Proceeds from the Painted Turtle refunding will be used to lower debt on previous bonds used for year-round camps for children with life-threatening diseases.

None of the refundings approved on Tuesday were advance refundings, but IBank is seeing more requests from not-for-profits to speed up bond sales even on current refundings that were originally slated to close in first quarter 2018, Barnes said.

All four conduit bond sales that were approved by IBank’s board on Tuesday could be threatened by the GOP tax bill, as they are 501(c)(3) sales, Barnes said.

Though UCSF can issue government bonds, the $215 million bond sale supports a research facility that does private research, so it is a 501(c)(3), Barnes said.

All four bond sales approved by the board fall under categories that would be threatened under the GOP tax bills, she said.

“The Painted Turtle sale was accelerated, it would have come in the next couple of months,” Barnes said. “We have been working with UCSF for a while.”

“All of the bonds approved on Tuesday would normally have had six months to close after approval by IBank’s board,” Barnes said. “Normally, 501(c)(3) bonds sell within two weeks to two months of board approval, but in this case they are looking to close before Dec. 31 of this year.”

IBank has had so much interest from 501(c)(3) entities to move their deals up to beat the Dec. 31 deadline that the board decided to add a Dec. 19 meeting in addition to its regularly scheduled Dec. 13 meeting.

The agency's employees and the underwriters and bond attorneys it works with are working long hours and weekends through December to try to get all the work done.

“I have the most amazing staff,” Barnes said, “before we planned the additional special board meeting on Dec. 13, so we could take on additional deals, I sat down with the executive staff and we all agreed that this was important to do.”

Employees at IBank have rearranged vacations, doubled-up on their work-load and they split up the deals to review, Barnes said.

“We are all working around the clock to make sure this happens – we are committed to this community,” Barnes said.

Most of the requests have been from 501(c)(3)’s, not the industrial bond developers also served by the IBank, and also facing the possible elimination of private activity bonds, Barnes said.

“How can you eliminate a vehicle for small manufacturing in this country?" she said.

Among issuers trying to sale before the Dec. 31 cut-off is the Los Angeles County Museum of Art, which will be requesting approval on a $228 million refunding from IBank’s board Dec. 13. LACMA wants to refund the outstanding principal on $343 million in refunding bonds issued on 2008 bonds used to pay to finance construction on the museum’s west campus.

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Revenue bonds Primary bond market Refunding bonds Tax reform California Infrastructure and Economic Development Bank California