Lease Financing Summary
1. The County has determined to finance the costs of (a) the Hollymead fire station and related equipment and (b) the replacement of certain fire and EMS apparatus, through a lease financing with the EDA. The EDA is authorized under provisions of the Industrial Development Authority and Revenue Bond Act to assist the County in financing local government facilities and equipment.
2. The fact that the financing of the Project costs is really in the form of a reimbursement to the County of previously expended funds is permissible. The IRS regulations applicable to tax-exempt financings contemplate that a locality may decide to commence construction of a project (and perhaps complete the project) utilizing other funds, with the expectation that at a later date the locality will reimburse itself with proceeds of a tax-exempt financing. The only prerequisite is to have adopted a reimbursement resolution, which the Board has done. This sequence of project expenditures and then reimbursement through a subsequent tax-exempt financing is utilized frequently by Virginia localities.
3. The financing structure contemplates that the EDA will issue a lease revenue Note to the Bank and give the proceeds to the County (which will use the Note proceeds to reimburse itself for previously expended Project costs). The Note will be secured by the lease structure described below.
4. Under the lease structure, the County will initially lease the Monticello fire station to the EDA pursuant to the terms of a ground lease. As such, the County will never give up fee simple title to the property. The term of the ground lease will end upon payment in full of the Note. The ground lease will provide for a release of the Monticello fire station property and a substitution of the Hollymead fire station property once the County obtains fee simple title from the UVA Foundation.
5. The EDA will lease the property back to the County for its use pursuant to the terms of the Note Purchase and Lease Agreement. The County will then make lease payments to the EDA in amounts and at times sufficient to enable the EDA to pay debt service on the Note. The County’s payment obligations under the Note Purchase and Lease Agreement will be subject to appropriation from time to time by the Board of Supervisors of sufficient monies for such purpose. In the unlikely event of non-appropriation, the Noteholder (through the EDA) will be allowed to evict the County from the property and re-lease to other parties, but only for the term of the ground lease.
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