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TEFRA Hearing for Orange County School of the Arts and The Legacy Fund <br /> June 2, 2026 <br /> Page 2 <br /> DISCUSSION <br /> The Borrower has requested the City of Santa Ana ("City") to conduct a Tax Equity and <br /> Fiscal Responsibility Act ("TEFRA") hearing. The tax-exempt bonds to be issued are the <br /> sole responsibility of the Borrower. The City bears no financial or legal liability for the <br /> project(s) or bond repayment and incurs no indebtedness. Additionally, the City was <br /> provided a draft resolution, a draft notice, a draft staff report, and a TEFRA Hearing Fee <br /> of$820 was required per the City's Miscellaneous Fee Schedule for the City to conduct <br /> the TEFRA hearing. <br /> A TEFRA hearing is a public hearing required by the Internal Revenue Service (IRS) for <br /> certain types of tax-exempt bond issuances, particularly those involving private activity <br /> bonds (PABs) or bonds issued by nonprofit organizations. The hearing is mandated <br /> under the Tax Equity and Fiscal Responsibility Act of 1982 and is a prerequisite for the <br /> interest on these bonds to be excluded from gross income for federal tax purposes. <br /> The primary purpose of a TEFRA hearing is to provide the public with an opportunity to <br /> comment on the proposed use of tax-exempt bond proceeds. This process ensures <br /> transparency and accountability in the allocation of public financial benefits, such as tax <br /> exemption, to private projects or nonprofit borrowers. <br /> In order to provide for tax-exempt financing under IRS regulations, the borrower <br /> (Orange County School of the Arts) needs approval by a local public agency where the <br /> financed project is located following the holding of a Tax Equity Fiscal Responsibility Act <br /> (TEFRA) public hearing. OCSA and The Legacy Fund (which is a non-profit foundation <br /> supporting OCSA) has requested the City's approval of its plans to enter into certain <br /> loans to finance and refinance certain capital improvements and working capital <br /> expenditures at its Santa Ana campus. <br /> Project Description <br /> OCSA and the Legacy Fund plan to refinance certain outstanding loans with Farmers <br /> and Merchants Bank (F&M) and to finance certain capital improvements to its Santa <br /> Ana campus. OCSA and The Legacy Fund plan to enter into new loan agreements with <br /> CEDA and F&M pursuant to which CEDA will loan the proceeds of the F&M loan to <br /> OCSA and The Legacy Fund pursuant to one or more loan agreements to: <br /> a. refinance the outstanding amount of the California Enterprise Development <br /> Authority 2016 Tax-Exempt Loan (Orange County School of the Arts) Series A, <br /> California Enterprise Development Authority 2016 Tax-Exempt Loan (Orange <br /> County School of the Arts) Series B, California Enterprise Development Authority <br /> 2016 Tax-Exempt Loan (Orange County School of the Arts) Series C, California <br /> Enterprise Development Authority 2016 Tax-Exempt Loan (The Legacy Fund) <br /> Series A, California Enterprise Development Authority 2016 Tax-Exempt Loan <br /> (The Legacy Fund) Series B, and California Enterprise Development Authority <br /> 2016 Tax-Exempt Loan (The Legacy Fund) Series C (the "2016 Bonds") which <br /> were issued to finance and refinance capital educational facilities and equipment <br />