Inter-Departmental Correspondence

Office of the County Manager



July 23, 2003


August 5, 2003



Honorable Board of Supervisors


Paul Scannell, Assistant County Manager


ABAG Financing for Menlo School



Adopt a resolution subsequent to a public hearing approving the issuance of bonds by the ABAG Finance Authority for Nonprofit Corporations (the "Authority") for financing certain capital improvements to educational facilities and equipment at Menlo School (the "School") in the City of Atherton, California (the "City"), located in the County of San Mateo (the "County").



The School has a long history serving the education needs of the citizens of the County dating as far back as 1915. Since that time, the School has steadily grown from a small country schoolhouse with thirteen students to become an educational establishment in the County with more than 750 students. The School is continuing to improve its facilities. To accommodate such expansion, the School and the Authority contemplate the delivery and sale of revenue bonds (the "Bonds") in an amount not to exceed $15 million, the proceeds of which will be used to finance (i) the construction of two two-story buildings to house additional classrooms, laboratories facilities, faculty and staff administrative offices and a new combination lecture hall/performing arts facilities located on the School's property at 50 Valparaiso Avenue in the City, and (ii) certain costs and expenses related to the financing.



According to Federal tax law, specifically Section 147(f) of the Internal Revenue Code of 1986, as amended, "TEFRA" approval is a requirement for issuance of municipal bonds that are classified as "private activity bonds." Private activity bonds are generally municipal bonds that finance facilities with a connection to private business activity. For private activity bonds to be tax exempt, the issuance of the bonds must be approved by an elected body of a governmental unit having jurisdiction over the facilities to be financed after a public hearing following reasonable notice.


In this case, the facilities to be financed are located in the City within the County. The County is a member of the Authority, a joint powers agency that assists nonprofit corporations and other entities to obtain financing for projects located within the several jurisdictions of Authority members with purposes serving the public interest, and, thus, the County is an appropriate governmental unit to approve the issuance of the Bonds. There is no cost to the County for its membership in the Authority. The City is not currently a member of the Authority and, thus, is not able to approve the issuance of the Bonds. In order for the County to approve the issuance of the Bonds, the following events must take place:



    A notice of public hearing by the County regarding the issuance of bonds must be published in a newspaper of general circulation in the jurisdiction in which the financed facilities are located;



    The notice must be published at least 14 calendar days in advance of the public hearing; and



    The public hearing must be held and an opportunity to be heard must be given to persons wishing to comment on the financing, and the elected representatives of the County (the Board of Supervisors) must approve the financing.


To comply with these requests, a Notice of Public hearing was published on Monday, July 21, 2003 in The San Mateo County Times (please see attached affidavit of publication) advising all interested persons that a public hearing would be held on August 5, 2003 by the County for the purpose of approving the financing, and we respectfully request that the County approve the financing.



This item keeps the commitments of responsive, effective and collaborative government through goal number 22: County and local governments effectively communicate, collaborate and develop strategic approaches to issues affecting the entire County.



By holding this hearing and approving the Bonds the County does not obligate itself in any way for the payment of debt service on the Bonds. The principal and interest on the Bonds will be paid solely from the payments to be made by the School. The County is not obligated to pay, and is not liable for, the repayment of the Bonds.