MEETING DATE:
July 22, 2025
SUBJECT:
Title
RESOLUTION NO. 2025-9476 - APPROVING THE ISSUANCE OF CALIFORNIA STATEWIDE COMMUNITIES DEVELOPMENT AUTHORITY KAISER PERMANENTE REVENUE BONDS IN ONE OR MORE SERIES FROM TIME TO TIME PURSUANT TO A PLAN OF FINANCE IN AN AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $880,000,000 FOR THE PURPOSE OF FINANCING OR REFINANCING THE ACQUISITION, CONSTRUCTION, IMPROVEMENT, EQUIPPING, RENOVATION, REHABILITATION, REMODELING AND OTHER CAPITAL PROJECTS OF CERTAIN HEALTH FACILITIES AND CERTAIN OTHER MATTERS RELATING THERETO
Recommendation:
Recommendation
ADOPT resolution approving the issuance of California Statewide Communities Development Authority Kaiser Permanente revenue bonds in an aggregate principal amount not to exceed $880,000,000 for the purpose of financing or refinancing the acquisition, construction, improvement, equipping, renovation, rehabilitation, remodeling, and other capital projects of certain health facilities.
Body
Board or Commission Action
Not applicable
Relevant Council Strategic Theme
Not applicable
Relevant Department Goal
Not applicable
Introduction:
The California Statewide Communities Development Authority (the “Authority” or “CSCDA”) is a joint powers authority established by the League of California Cities and California State Association of Counties whose purpose is to provide California’s local governments with an effective tool for the timely financing of community-based public benefit projects. Federal and state laws provide the ability for cities and counties to join together under cooperative agreements to form joint powers authorities to issue tax-exempt and taxable bonds to fund projects that provide a public benefit and serve the needs of residents within the jurisdictions of the participating members. The City of San Marcos (the “City”) joined CSCDA as a Program Participant on December 13, 1988 pursuant to Resolution No. 88-3044.
Kaiser Permanente exists to provide high-quality, affordable health care services and to improve the health of its members and the communities it serves. Founded in 1945, Kaiser Permanente is recognized as one of America’s leading health care providers and nonprofit health plans. They currently serve members in 8 states and the District of Columbia. Its care model enables their teams to think and work as one, coordinating its care seamlessly, and delivering better care when it matters most.
The Borrower and the Authority have requested that the City, pursuant to the Tax Equity and Fiscal Responsibility Act of 1982 (“TEFRA”), approve a resolution in accordance with Internal Revenue Code Section 147(f) authorizing the issuance of tax-exempt bonds by the Authority in an amount not-to-exceed $880,000,0000 (“Bonds”). A TEFRA hearing is required by the Internal Revenue Code before tax-exempt debt can be issued for the benefit of a private nonprofit corporation. The hearing gives the public an opportunity to comment on the use of tax-exempt funds by the Borrower. The Authority conducted the TEFRA hearing on July 17, 2025.
Discussion:
The San Marcos Medical Center is a seven story, approximately 433,000 square foot healthcare facility, located at 360 Rush Drive, San Marcos, CA 92078, that is certified as a LEED Platinum health care facility. The facility includes a comprehensive 24-hour emergency department, 39 private treatment areas, 8 operating rooms, and capacity for 206 single interactive patient rooms and offers several new state-of-the-art technologies to support the highest quality care. Specialty services include an intensive care unit, interventional radiology, gastroenterology, endocrinology, urology, nephrology, orthopedics, a robotic surgery program, maternal child health services, and a neonatal intensive care unit. The first patient date was August 2023.
As noted above, the Borrower and Authority have requested that the City approve a resolution pursuant to TEFRA and Internal Revenue Code 147(f), authorizing the issuance of Bonds by the Authority in an amount not to exceed $880,000,000. The proceeds of the Bonds will be used by the Borrower in part to refinance the acquisition, construction, improvement, equipping of the San Marcos Medical Center in the amount of $450,000,000. The project in San Marcos was originally financed with proceeds of Kaiser’s taxable commercial paper notes, which were issued in January 2024 and January 2025. Because it was originally a taxable financing, no TEFRA hearing or approval was required. Since the taxable commercial paper will now be paid off with long-term tax-exempt bonds, a TEFRA hearing and approval is required. The remaining $430,000,000 will be used by the Borrower to finance new facilities in the cities of Fresno and Modesto. The cities of Fresno and Modesto will be conducting their own respective TEFRA hearings.
The issuance of the Bonds as tax-exempt bonds will reduce financing costs and debt service costs for the Borrower. To satisfy the requirements for the Bonds to be issued as tax-exempt bonds, an applicable governmental unit which is also a member of the Authority is required to conduct the TEFRA hearing and approve the issuance of the tax-exempt bonds in accordance with Section 147(f) of the Code. The TEFRA hearing was conducted by the Authority on July 17, 2025, following a publication of a notice of the TEFRA hearing in the San Diego Union Tribune not less than 7 days prior to the hearing. The City Council of the City of San Marcos constitutes an applicable elected representative under Section 147(f) of the Code; approving the issuance of the Bonds is the full extent of the participation and obligation of the City in this matter.
Fiscal Impact:
There is no fiscal impact to the City. The Bonds to be issued by the Authority for the Project will be the sole responsibility of the Borrower, and the City will have no financial or legal obligation, liability or responsibility for the Project or the repayment of the Bonds for the financing of the Project. Staff will seek the reimbursement of all of the costs and expenses incurred by City with respect to this proceeding, as well as an indemnification agreement with the Borrower to address any future costs and/or expenses that the City may incur with respect to the financing activities and/or the Bonds, so that the City is not required to bear the same. The proposed Resolution includes reimbursement and indemnification language.
Attachment
Resolution Approving Issuance by Authority
Prepared by: Jeffrey Jorgenson, Accounting and Treasury Manager
Reviewed by: Donna Apar, Finance Director
Approved by: Michelle Bender, City Manager