August 8, 2006

 

VIA REGULAR MAIL

Ms. Lettie Neher

Assistant to Clerk, Board of Supervisors

Albemarle County, Virginia

c/o Albemarle County Administration Building

401 McIntire Road, 4th Floor

Charlottesville, VA 22902

 

RE:     Resolution for Board of Supervisors approving and concurring with the issuance of up to $7,700,000 revenue bonds to be issued by the Economic Development Authority of Nelson County, Virginia

 

Dear Ms. Neher:

 

Attached is a proposed resolution for the Board of Supervisors to consider at its meeting on September 6, 2006 approving and concurring with the issuance of up to $7,700,000 revenue bonds to be issued by the Economic Development Authority of Nelson County, Virginia (the “Nelson Authority”) for the Kappa Sigma Endowment Fund (the “Endowment”), a Section 501(c)(3) entity formed as an Illinois Trust and Scottsville Road Holdings, LLC, a Virginia limited liability company (the “Company”, together with the Endowment, the “Borrower”), both based in Albemarle County, Virginia.  

 

The Borrower seeks to finance the acquisition, construction, equipping and furnishing of the Endowment’s new National Headquarters and Museum facility to be located in Albemarle County, Virginia and known as 1612 Scottsville Road with the issuance of tax exempt bonds in an approximate amount of up to $7,700,000.  The tax exempt bonds are expected to be sold or placed with a commercial bank.  In order for a bank to purchase this type of tax exempt bond and receive favorable tax treatment, the bond must be “bank qualified” under Section 265(b)(3) of the Internal Revenue Code (the “Tax Code”)

 

            Issuers of “bank qualified” tax exempt bonds are limited to $10 million in bond issuance during each calendar year.  Albemarle County, Virginia (the “HOST LOCALITY”), where the building is located has exceeded or is expected to exceed its $10 million limit for the year and is not able to issue “bank qualified” bonds.

 

            In order to issue a “bank qualified” bond, the Borrower must utilize an issuer that is still able to issue “bank qualified” bonds during this calendar year. 

 

Federal law and Virginia law each allow for a non-profit corporation such as the Borrower to issue a tax exempt bond through another IDA, different from the HOST LOCALITY, so long as the governing body of the HOST LOCALITY (the Albemarle County Board of Supervisors) and the IDA and governing body of the issuer both agree to the issuance.  A public hearing must be held before governmental body approval of the bond issue. 

 

We have been involved with a number of “bank qualified” bond issues over the last few years similar to this one.  For instance, New Kent County’s IDA issued tax exempt bonds for the non-profit foundation for Christopher Newport University for dormitories, Essex County’s IDA issued bonds for a new building for the Virginia Living Museum in Newport News and Lancaster County’s IDA issued bonds for a gymnasium for Cape Henry Collegiate School in Virginia Beach.

 

In 2002, the Town of Amherst IDA issued bonds for a VA CLE (Virginia Law Foundation) facility located in Albemarle County (which also went through this same process with the Albemarle Authority and the Albemarle County Board of Supervisors).

 

The procedure in this situation requires the issuing IDA to hold a public hearing, after public notice, followed by approval from the governing body (within 60 days of the IDA hearing).  Additionally, the HOST LOCALITY governing body (in this case the Albemarle County Board of Supervisors) must also approve and concur in the issuance by the IDA. 

 

The Nelson Authority approved the plan of financing for the Facility and the issuance of the Bonds following a public hearing at its meeting on August 3rd, 2006.  The Board of Supervisors of Nelson County, Virginia will approve the plan of financing for the Facility and issuance of the Bonds at its meeting on September 12, 2006.  Both the Nelson Authority and the Board of Supervisors of Nelson County, Virginia approving resolutions are contingent upon approval by the Board of Supervisors of Albemarle County, Virginia.

 

On August 10th, 2006, the Industrial Development Authority of Albemarle County, Virginia, after public hearing, will adopt its resolution recommending that the Board of Supervisors of Albemarle County, Virginia approve of, and concur with the issuance of the Bonds by the Nelson Authority as required by Section 147(f) of the Tax Code and Sections 15.2-4905 and 15.2-4906 of the Virginia Code.

 

I have enclosed a Certificate of Public Hearing for the records of the Board of Supervisors of Albemarle County, Virginia.

 

If any members of the Board of Supervisors of Albemarle County, Virginia or Albemarle County officials need any additional information, please do not hesitate to contact me using e-mail (Dsiegel@SandsAnderson.com) or through our toll-free number (800) 296-1636.

 

 

            With best regards,

 

 

 

            Daniel M. Siegel

 

 

Enclosures:

    IDA public hearing documents

    Board Resolution

 

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