CITY OF ELK GROVE Incorporated July 1, 2000  MINUTES OF THE CITY COUNCIL Wednesday, August21,2019  SPECIAL MEETING  CALL TO ORDER/ROLL CALL  Mayor Ly called the special City Council meeting of August 21, 2019 to order at Present: Mayor Ly, Vice Mayor Hume, and Council Members Detrick and Nguyen.  6:01 p.m.  Absent: Council Member Suen. CLOSED SESSION None. PUBLIC COMMENT  With the aid of a visual presentation (filed), Mark Graham presented proposed additions to the zoning code amendments to regulate placement of cell antennas to Michael Monasky and Staci Anderson stated their opposition to approving the issuance of bonds to provide for the financing of the California Northstate University (CNU) Medical Center Campus Project Hospital. Speakers voiced their distrust of CNU as a private business entity and as a prospective operator of a hospital facility, and questioned the ability, financing, and experience of the Northern California Melinda Robinson opposed the CNU Medical Center Campus Project Hospital citing that the project would displace existing businesses, negatively impact the Stone Lakes National Wildlife Refuge, create negative impacts to the community (crime, traffic, noise, congestion, and reduced property values), and the location was in a 200-year flood plain. She believed a hospital facility should be more centrally located in the City. Ms. Robinson did not believe CNU was effectively reaching out to the community and local businesses, and CNU was withholding information on  be discussed at the regular meeting of August 28, 2019,  Health Services and Research Foundation, Incorporated.  land acquisition and plans for the area.  PUBLIC HEARING  Agenda Item No. 4.1: A Public Hearing to consider a resolution approving the issuance of Hospital Revenue Bonds in an amount not to exceed $900 Million by the California Public Finance Authority for the California Northstate Medical Center  Elk Grove City Council Special Meeting, August 21, 2019 Page 1 of7    Campus Project Hospital to be repaid by Northern California Health Services and  Research Foundation, Incorporated (CEQA Exempt). Staff recommends the City Council of the City of Elk Grove:  RECOMMENDATION  1) Conduct a public hearing under the requirements of the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) and the Internal Revenue Code of 1986, as amended, in connection with the proposed issuance of one or more series of tax-exempt revenue bonds in an amount not to exceed $900 Million 2) Adopt a resolution approving the issuance of the Bonds by the California Public Finance Authority for the benefit of Northern California Health Services and Research Foundation, Incorporated, a California non-profit public-benefit corporation and an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, to provide for the financing of the California Northstate University Medical Center Campus Project Hospital. Such adoption is solely for the purposes of satisfying the requirements of TEFRA, the Internal Revenue Code, and California Government Code Section 6500 (and following), and does not constitute a Project approval by,  by the California Public Finance Authority; and  ori indebtedness of, the City of Elk Grove.  With the aid of a visual presentation (filed), Brandon Merritt, Finance Analyst, provided an overview of the staff report and recommended action. In response to Vice Mayor Hume, Mr. Merritt provided the example of the Bow Street Apartments project from 2017 in which a TEFRA hearing was held by the City regarding $5 million in bonds for an affordable housing project (the TEFRA hearing for that project occurred prior to final approval of the project). Mr. Merritt confirmed the obligation to pay the bonds was on the applicant, and if the project entitlements (which would be considered at a future date) were not approved, it would be unlikely Mayor Ly observed that if bonds were authorized the market response to invest in  that bonds would then be issued.  the bonds could provide an indication of the feasibility of the project.  Mayor Ly declared the public hearing open.  PUBLIC COMMENT  Dan Branton, Ken Fong, Reggie Balderas, Onassis Mcfarlane, Norm DeYoung, Forrest Johnson, Patrick Foy, Tim Slape, Gary Peifer, Kevin Ferreira, Stan Sala, Judy Sala, Dale Mahon, Glenn Snyder, Doyle Radford, Jr., Shawn Atha, and David Cano spoke in support of the staff recommendation. Speakers cited support by various labor groups, benefits of increased hospital health access and improved emergency response services, opportunities for continuing education and apprenticeship and/or internship programs, provision of a local job center, creation of construction jobs (for initial construction and on-going maintenance and  Elk Grove City Council Special Meeting, August 21,2019 Page 2of7    improvements at a hospital facility), integrating school district training opportunities with local businesses, capacity for an academic medical center to add choice alternatives for healthcare (including options for Medicare patients or underserved segments of the community with little or no healthcare insurance), and the benefits of a hospital amenity to meet the growth needs of the City and contribute to the Aaron Imura, Daisy Hughes, Donna Soppeland, Carl Rhodes, Jennifer Toy, Mathew Weaver, Nancy Xu, James Knapp, Peter Cepeda, and Dwight Zuck opposed the CNU Medical Center Campus Project Hospital. Speakers cited the project would displace existing businesses, was contrary to the master plan of the surrounding residential community, created negative impacts to the Stone Lakes National Wildlife Refuge, created negative impacts to the community (traffic, noise, and congestion), and the location was in a 200-year flood plain. Speakers expressed general support for a hospital facility but believed such a facility should be more centrally located in the City, they did not believe CNU was effectively communicating to the community and local businesses, and speakers voiced preference for a hospital operated by a healthcare provider already operating successfully in the region. Speakers also opposed approval on the issuance of bonds as the proposed bond amount and size of facilities did not seem to be feasible in scale or scope, the project required approvals that may take years (long beyond the timing for authorization of a bond issuance at this time), the environmental analysis for the project had not been completed (the Environmental Impact Report (EIR) was still in process), the project plans were not finalized or yet approved, the District 1 council member representative (where the project was proposed to be located) was not present to consider this matter, and there was little tono information on Northern California Health Services and Research Foundation, Incorporated regarding the non-profit's assets, financial history, or capacity to Mr. Weaver stated CNU refused to lease short term space at the Stonelake Landing Shopping Center, and the effect was increased rents by neighboring commercial space owners. Mr. Weaver suggested any bonds considered should be required to set funding aside to assist relocating businesses being displaced by the project. Val Chinn, Melinda Robinson, and Staci Anderson read a statement from Neighbors Ensuring Sincere Transparency (NEST) (filed), believing the City should defer on any consideration of bonds until the EIR was completed and project entitlements had been secured. Speakers cited the project was incompatible with neighboring residences, the Stone Lakes National Wildlife Refuge, existing businesses, and would be located in a 200-year flood plain. They noted previous statements from CNU described the project would be privately financed, bringing into question the recent creation of the non-profit entity and need for a public bond issuance, and questioned the financial history and experience of the applicants seeking $900  local economy.  design, build, and operate a hospital facility.  million in funding for a project still early in the planning stages.  Elk Grove City Council Special Meeting, August 21, 2019 Page3of7    Brian Holloway, representing the Northern California Health Services and Research Foundation, Incorporated (the Foundation) and CNU, noted the focus of the TEFRA hearing was to determine if there was a public benefit to the City to have a hospital in the jurisdiction. The Foundation was working on financing in parallel with pursuing project approvals, the prior non-profit associated with CNU was specifically for the pharmacy school, whereas the Foundation non-profit provided for the ability tos seek TEFRA financing and serve the community with a new hospital option that would bring the benefits of a hospital facility. He noted if the City Council approved the action tonight, the California Public Finance Authority would likely hear the matter at their next meeting to make a determination. Mr. Holloway stated CNU had re-initiated outreach efforts to meet with the leadership of NEST, had scheduled a meeting with Stonelake Homeowners Association, and had established an Jennifer Ring and Phyllis Baltz, representing Methodist Hospital and Dignity Health, affirmed the organization's commitment to build a hospital in Elk Grove at Elk Grove Boulevard and Waymark Drive with an opening planned in 6-7 years (a Phase 1 build out of a 100-bed hospital providing emergency services, additional healthcare services, and a teaching hospital). Ms. Ring noted her experience in assessing area conditions to support a hospital (noting current hospital models sought to provide more ambulatory care), and she encouraged the City to use her as a resource to inquire on particulars of any hospital proposal. Ms. Baltz noted their project had all entitlements and zoning, and they expected the architectural plans to proceed through the Office of Statewide Health Planning and Development (a Michael Monasky stated his opposition to the staff recommendation, believing the issuance of the bonds would be use of public financing for a for-profit entity. He believed traditional hospital facilities were facing issues to remain solvent, the process to build such facilities could take decades, and a hospital facility should not Nathan Champion voiced general support for a hospital, but if a project was publicly funded he suggested including requirements for the provision of public benefits such as a commitment to assist those seeking care that did not have health insurance, and to include in the project an upgraded helipad that could accommodate a Blackhawk helicopter to improve regional emergency response DeAna Melilli stated her opposition to the staff recommendation, stating that TEFRA regulations had changed effective April 1, 2019 requiring a timing interval of public approval and bond issuance that must occur within one year that the issuance approval was given, and she did not believe the project would attain approvals within one year's time. Ms. Melilli did not believe this action was fiscally  informational website.  process that could take a few years to complete).  be located in a 200-year flood plain.  readiness.  Elk Grove City Council Special Meeting, August 21, 2019 Page 40 of7    responsible, she raised concerns that TEFRA hearings can cost up to $10,000, and she understood that tax-exempt bonds do not pay local taxes (inquiring if there was a financial impact to the City due to this hearing or the tax-exempt status of the Mark Graham suggested locating the project at the vacant mall site at State Route 99. Mr. Graham believed the City Council should abstain on the matter until there was more information on the sources and application of the funds (the benefits to the community, the scope and scale of the project, and who were the Alvin Cheung voiced support of the staff recommendation, and speaking on behalf of CNU, he stated the cost differential of tax-exempt versus taxable bonds was estimated at a $27 million annual savings on the life of the bond when tax-exempt,  bonds).  investors and beneficiaries of the project).  which would reduce the cost of construction financing. Mayor Ly declared the public hearing closed.  The City Council asked questions of staff which were responded to as follows:  The California Public Finance Authority (CPFA) served as the conduit issuer for the bonds, due diligence would be conducted by investors and underwriters of the bonds, and the bond underwriters would likely be associated with an investment bank working in collaboration with the CPFA; The bond guarantors would be the Northern California Health Services and Research Foundation, Incorporated non-profit, the non-profit may have securities to call on through potential revenue of the hospital or partnership with assets of CNU (such examples were possible securities), ultimate Bonds could be structured with capitalized interest, sO there could be no initial payments for a certain amount of time, but that would be a decision Ifb bonds were issued but the project was ultimately not approved, the responsibility would be on the non-profit. Staff believed investors would take such a factor into consideration prior to investing money to purchase bonds; Regarding the change in regulations that bonds be issued one year from approval, staff believed the starting time would be the date of the TEFRA hearing, but it was possible that date could be the date of the CPFA hearing; Bonds were not subject to local taxes, a taxable bond was subject to income tax from the federal government, and the City did not receive any portion of federal income tax. Tax-exempt bonds were exempt from federal income tax, sO the market accepted a lower interest rate earning compared to a taxable bond, but there would be no fiscal impact to the City regarding tax-  responsibility was on the borrower, the non-profit; made at the time of the bond issuance;  exempt bonds; and  Elk Grove City Council Special Meeting, August 21,2019 Page 5of7    There was no cost to the City to hold the TEFRA hearing, and such hearings  were not on the City fee schedule.  The City Council asked questions of CNU representatives Brian Holloway, Mike  Lee, and Alvin Cheung, who responded as follows:  Ift the issuance of bonds was not approved CNU would pursue private financing, the tax-exempt bonds were being evaluated as an option for The bond not-to-exceed amount of $900 million was a total distribution limit, CNU had initiated discussions with the Office of Statewide Health Planning and Development (OSHPD), understood the specifications and requirements, and planned to design the project to OSHPD standards of review; Regarding displaced businesses, offers were extended to tenants in the Stonelake Landing Shopping Center to relocate them. CNU representatives stated they had received an update that businesses utilizing brokers had not had the offers relayed from the broker to the tenants, sO those offers were Inc communications with real estate brokers, numerous requests were made by the brokers that were non-negotiable, and though communications had The decision to form the non-profit was to create the eligibility to consider and apply for tax-exempt bonds as a means for cost and resource savings. CNU planned to pursue both financing and entitlements at same time; and The occupancy rate at the Stonelake Landing Shopping Center prior to CNU ownership was at less than 50%, and though there was some increase since ownership the current occupancy was around 50% and declining. The project pursued by CNU was intended to repurpose the use of the property. The City Council deliberated on the matter, noting the action to approve the issuance did not place any financial obligation on the City, and provided the applicant a means to explore financing options in parallel with seeking project Vice Mayor Hume noted, based on the comments of the interactions between businesses and the CNU owners of the Stonelake Landing Shopping Center, that improved communication was needed regarding statements and offers to those business tenants. Mr. Hume questioned the ability to attract investors in the near term with sO many elements still unknown (noting entitlements and designation processes appeared to require a substantial time commitment over a period of years to bring a hospital to fruition), and he encouraged the CNU representatives to improve their outreach and communication efforts with the community.  project savings;  the project would likely need less than that amount;  now being made direct to the business owners; stalled, CNU was willing work to relocate businesses;  entitlements.  Elk Grove City Council Special Meeting, August 21,2 2019 Page 6of7    Mayor Ly believed CNU representatives needed to renew efforts to reach out and Motion: M/S Ly/Detrick to adopt Resolution No. 2019-165 approving the issuance of the Bonds by the California Public Finance Authority for the benefit of Northern California Health Services and Research Foundation, Incorporated, a California non-profit public-benefit corporation and an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, to provide for the financing of the California Northstate University Medical Center Campus Project Hospital. The motion passed by the following vote: Ayes: 5 (Ly, Hume, Detrick, and  engage the community.  Nguyen); Noes: 0; Absent: 1 (Suen).  ADJOURNMENT  With no additional business to conduct, the August 21, 2019 special City Council  meeting was adjourned at 8:25 p.m.  Rly JASON LINDGREN, CITY CLERK  ATTEST: STEVE   LY, MAYOR  Elk Grove City Council Special Meeting, August 21, 2019 Page 7of7