Hearing on up to $12,025,000 in bonds for Kirby Preparatory School

In plain English

Georgiana Bruce Kirby Preparatory School, a nonprofit K–12 college preparatory school at 425 Encinal Street, wants to borrow money through the California Municipal Public Financing Authority by issuing tax-exempt revenue bonds of up to $12,025,000. The money would pay off the school's outstanding 2013 bonds and pay for improvements to its campus. Federal tax law requires the elected body of the city where the buildings sit to hold a public hearing and approve the borrowing before the bonds can be tax-exempt, so the Council would hold that hearing and adopt a resolution of approval. A yes vote is only that federal tax approval: the city would lend nothing, guarantee nothing, and sign none of the financing documents.

The school and its families are the direct parties, since the bonds are repaid solely from the school's own funds; staff say the financing lets the school improve its existing campus and keep operating in the city rather than relocate outside it.

Key facts

Bonds would total no more than $12,025,000, issued by the California Municipal Public Financing Authority as Series 2026
The school is a nonprofit public benefit corporation operating a K–12 campus at 425 Encinal Street, Santa Cruz (District 5)
Proceeds would refund and refinance the outstanding ABAG Finance Authority Series 2013 Bonds and finance certain improvements to the facilities
Approval expires if the bonds are not issued within one (1) year of the resolution date
Notice of the hearing was posted on the city's official website at least seven (7) calendar days before the meeting; no newspaper publication is required
Staff state there is no General Fund impact, no budget adjustment and no ongoing expenditure commitment; the bonds are the sole responsibility of the school

Reasons to support

Federal law (Section 147(f) of the Internal Revenue Code) requires approval by the elected body where the buildings are located, and without the hearing and resolution the bonds cannot be tax-exempt.
The city takes on no financial, legal or contractual obligation; financing documents will state the bonds are not obligations of the city or the State of California and are paid solely from school funds.
Staff say the financing supports improvements to an existing K–12 school so it can keep operating in the city instead of relocating to a facility outside Santa Cruz.

Reasons to oppose or change it

Tax-exempt status means the interest paid to bondholders is not taxed, so the benefit to a private nonprofit school comes at a cost to federal (and potentially state) tax revenue rather than to the school's lenders.
Public notice was given only by a posting on the city's website for seven days, with no newspaper publication, which limits how many residents are likely to learn about the hearing in time to comment.
The resolution asks the Council to sign off on borrowing for a private school's campus improvements without the Council reviewing or being party to any of the financing documents, and the specific improvements are not itemized.

Official wording

Georgiana Bruce Kirby Preparatory School – Tax and Equity Fiscal Responsibility Act (TEFRA) Public Hearing and Resolution (ED) LOCATION: District 5 Motion to: 1) Conduct a public hearing under the requirements of TEFRA and Section 147(f) of the Internal Revenue Code of 1986, as amended (the “Code”); and, 2) Adopt a resolution providing for the issuance by the California Municipal Public Financing Authority (“CalMuni PFA” or the “Authority”) of revenue bonds in an aggregate principal amount not to exceed $12,025,000 (the “Bonds”) for the benefit of Georgiana Bruce Kirby Preparatory School

Official agenda

Summary written by claude-opus-5 from the agenda and the Staff report (agenda packet, pages 367-372). It can contain mistakes. The official documents govern.