MFP ITEM #2
October 4, 2010
Worksession
MEMORANDUM
TO:
FROM:
SUBJECT:
Management and Fiscal Policy Committee
Amanda Mihill, Legislative
AnalYstsJtv~
Worksession
#2: Bill 34-10, Finance
Public Facilities
Private Projects
Bill 34-10, Finance - Public Facilities
Private Projects, sponsored by Councilmembers
Leventhal, Knapp, and EIrich, was introduced on May 18,2010. A public hearing was held on
June 22 at which several speakers, including a representative of the County Executive, opposed
Bill 34-10. The Committee held a preliminary worksession on Bill 34-10 on July 12.
As introduced, Bill 34-10 would amend the definition of public facilities to specifically exclude
the construction, reconstruction, extension, acquisition, improvement, enlargement, alteration,
repair, or modernization of any privately owned building or facility.
Background
In his recommended FY11-16 Capital Improvements Project, the County Executive
recommended funding certain projects with general obligation (GO) debt, including the Olney
Theater, Ivymount School (to assist with renovation and expansion of Annex Building), and CHI
Centers (to assist with renovation of MacDonald Knolls facility). During the Council CIP
worksessions, Councilmembers learned that while many private projects could not be funded by
GO bonds, the County's bond counsel advised that, under existing laws and regulations, GO
bonds could be used to fund the Ivymount School project.
Use of general obligation debt for private projects in the County.
At the public hearing,
Councilmember Leventhal directed Council staff to research whether the County has used GO
bonds to fund nonprofit organizations' capital projects in the past. After reviewing the cost­
sharing CIP project, Council staff is unaware of any other time that GO debt has been used to
fund private organizations' projects. A review of past PDFs of the cost-sharing project shows
that the only GO bond funded component in that PDF was for the Old Blair Auditorium (see
©11-12 for the FY09-14 CIP PDF).
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Use of general obligation debt in other jurisdictions.
At the public hearing, Councilmember
Trachtenberg directed staff to provide information about the use of GO bonds for private projects
in other jurisdictions. Attached on ©13-l5 is a memorandum from Council Grants Manager
Peggy Fitzgerald-Bare to the Health and Human Services Committee discussing the use of GO
bonds in other jurisdictions, including the use of Maryland state bond bills. This staff
memorandum noted that local jurisdictions do not generally use GO proceeds to fund capital
projects of private entities; however, Baltimore City gives GO money under its economic
development program, and Charles and St. Mary's Counties fund hospitals and nursing homes
with bonds backed by a GO pledge.
Issues for Committee Discussion
1.
How much should the use ofgeneral obligation bonds for private facilities be restricted?
The primary question that the Committee must answer is whether to further limit the use of GO
bonds for private projects. At the public hearing, Finance Director Jennifer Barrett opposed Bill
34-10 because it limits the County's flexibility in acquiring and upgrading buildings and
facilities for governmental functions. Ms. Barrett argued that existing County law and IRS
regulations already limit the use of GO bonds and that the Council could limit undesired uses of
GO bonds through the adoption of the capital budget and bond authorization bills (see her
testimony, ©5-6). Although existing County law and federal regulations may already limit the
use of GO bonds, as bond counsel noted (see ©7-9), some projects (such as the Ivymount
School) could still be funded with GO bonds.
If Committee members wish to limit the County's authority to use GO bonds for purely private
projects, County law can be tightened to do so. Bill 34-10 was introduced for that purpose but,
as Ms. Barrett pointed out, was drafted too broadly because it could preclude the County from
using GO bonds to buy or renovate buildings from private owners for County government use,
such as the GE Tech building. At the July 12 Committee worksession, Council member
Leventhal indicated his intent to work with Council staff and Finance staff to offer amendments
to better reflect the sponsor's intent. That amendment is attached on ©23. In sum, the
amendment would:
• Revise the definition of public facilities related to schools to limit the definition to only
public schools. In this way, GO bonds could not be used to fund private school capital
projects (such as with the Ivymount School project).
• Revise the definition of public facilities to allow the use of GO bonds for facrade
easements related to a community revitalization project.
• Remove language that specified that GO bond funding could not be used for a variety of
capital related projects for nonprofit or for profit buildings. The attached bill draft would
instead specify that GO bond funding could not be used to fund any project that does not
meet the definition of public facility.
• Make clarifying technical corrections to §20-15 that are not intended to affect the
substance of the bill.
Council staff has shared this amendment with staff from Finance who will be prepared to
comment on the revisions at the worksession.
2
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2. Should general obligation bonds be issued for leased private facilities?
As drafted, Bill 34-10 would prohibit the use of GO bonds to construct, repair, or acquire a
building owned by a private entity.
If
Committee members endorse the general purpose of Bill
34-10, you should discuss whether to amend the Bill to also prohibit the use of GO bonds in
situations where a private entity leases a building (including a County-owned building). If
Committee members concur, Council staff will draft revised language that reflects this
recommendation.
3. Should there be an exception for critical capital projects?
At the public hearing, Alan Lovell, speaking for CHI Centers, urged that an exception to any GO
bond restriction be made for needed renovations and repairs to day program facilities and
residential facilities (see testimony, ©10). If Committee members concur with Mr. Lovell's
request and supports the amendment on ©23, Council staff recommends the following
amendment:
[[Any such]] General obligation serial maturity bonds may be issued [[under the
authority of this division and]] for the purposes enumerated in [[the preceding
section]] Section 20-14 at any time, within the limitations provided by law.
Bonds must not be used to fund
@y
project that is
not~
public facility as defined
in Section 20-14. unless
th~
Council finds that
i~§uing
bonds is necessary to serve
a public purpose.
Council staff notes that this type of amendment would broaden, not restrict, current County law.
Even if the Committee adopts the language above, the County would still be limited in its
issuance of bonds by the IRS regulations.
This packet contains:
Bill 34-1 0
Legislative Request Report
Fiscal Impact Statement
Select testimony and related materials
Jennifer Barrett, Finance Director
Memo from Bond Counsel
Alan Lovell, CHI Centers
FYll-16 CIP Project No. 720601 (Cost Sharing: MCG)
Memorandum and attachments from Peggy Fitzgerald-Bare
Amendments to Bill 34-10
F:\LAW\BILLS\I 034 Finance - Public Facilities - Private Projects\MFP Memo 10-4-1O.Doc
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Bill No.
34-10
Concerning: Finance - Public Facilities ­
Private Projects
Revised:
5/14/2010
Draft No. _1_
Introduced: _ _ _ _ _ _ _ __
Expires: _ _ _ _ _ _ _ _ __
Enacted: _ _ _ _ _ _ _ _ __
Executive: _ _ _ _ _ _ _ __
Effective: _ _ _ _ _ _ _ _ __
Sunset Date:
...;N:..:;o~n.!.!:e:..._
_ _ _ _ __
Ch. _ _ Laws of lVIont. Co. _ __
I
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
By: Councilmembers Leventhal and Knapp
AN
ACT to:
(1 )
(2)
amend the definition of public facilities to specifically exclude the construction,
reconstruction, extension, acquisition, improvement, enlargement, alteration, repair,
or modernization of any privately owned building or facility; and
generally amend the county finance law.
By amending
Montgomery County Code
Chapter 20, Finance
Section 20-14
Boldface
Underlining
[Single boldface brackets]
Double
underlining
[[Double
boldface
brackets]]
* * *
Heading or defined term.
Added to existing law by original bill.
Deletedfrom existing law by original bill.
Added by amendment.
Deleted from existing law or the bill by amendment
Existing law unaffected by bill.
The County Council for Montgomery County, Maryland approves the following Act:
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BILL
No. 34-10
1
Sec. 1. Section 20-14 is amended as follows:
20-14. Definition of "public facilities."
2
3
4
As used in this Chapter,
public facilities
means:
*
extension,
acquisition,
improvement,
*
*
alteration,
repaIr,
or
5
However,
public facilities
does not include the construction, reconstruction,
enlargement,
~
6
7
modernization of any building or facility owned
Qy
private for-profit or non-profit
8
entity, excluding any fire, rescue, and emergency medical service facility subject to
Chapter 21.
Approved:
9
Nancy Floreen, President, County Council
Date
Approved:
Isiah Leggett, County Executive
Date
This is a correct copy o/Council action.
Linda M. Lauer, Clerk of the Council
Date
@laW\biIlS\1034 finance - public facilities - private projects\bill 1.doc
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LEGISLATIVE REQUEST REPORT
Bill 34-10,
Finance
DESCRIPTION:
Public Facilities
-
Private Projects
Bill 34-10 amends the definition of public facilities in Chapter 20 to
exclude the construction, reconstruction, extension, acquisition,
improvement, enlargement, alteration, repair, or modernization of any
privately owned building or facility.
County law could be interpreted to allow the use of general obligation
bonds to fund private projects that meet the definition of public facilities
in §20-14.
PROBLEM:
GOALS AND
OBJECTIVES:
To clarify County law such that private projects are not eligible to be
funded by general obligation bonds.
COORDINATION:
Department of Finance
FISCAL IMPACT:
To be requested.
ECONOMIC
IMPACT:
To be requested
SOURCE OF
INFORMATION:
Amanda Mihill, Legislative Analyst, 240-777-7815
APPLICATION
WITHIN
MUNI CIPALITIES:
To be researched.
PENALTIES:
None.
F:\LawIBilIs\1034 Finance - Public Facilities· Private Projects\LrrDoc
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OFFICE OF MANAGEMENT AND BUDGET
Isiah Leggett
County Executive
Joseph
F.
Beach
Director
MEMORANDUM
June 23, 2010
TO:
FROM:
SUBJECT:
Nancy Floreel.),
prCSidc~ouncil
Joseph F. Beach,
Directo~
..
Bill 34 - 10, Finance- Public Facilities- Private Projects
The
purpose of this memorandum is to transmit
a
fiscal and economic impact statement
to
the
COllncil on
the
subject legislation.
L.It:GISLAnON SUMMARY
This legislation amends Chapter
20,
Finance Section
20-14
of the Montgomery County
Code with respect to amending the definition of public facilities to specifically exclude the construction,
reconstruction, extension, acquisition, improvement, enlargement, alteration, repair, or modernization of
any privately owned btlilding or facility.
FISCAL AND ECONOMIC SUMMARY
Since the subject legislation prohibits,
but
does not mandate certain actions that would
have been taken in
the future
it does not have a direct, quantifiable fiscal impact. As the Bill is presently
written,
the
County Government would not
be
able to
purchase
privately owned buildings or facilities for
governmental purposes;
with the exception
of any
fire, rescue, or emergency medical service facility.
This could limit ilexibility and hinder opportunities to achieve considerable savings or co!>1 avoidance
compared to new facility design and construction. For example, this
bill
as written, would prohibit the
purchase of the GE Tech facility.
The
following contributed to and concurred with this analysis: David Platt and Glenn
Wyman, Depaltment of Finance; and Bryan Hunt, Office of Management and Budget.
JFB:bh
c:
Kathleen Boucher, Assistant Chief Administrative Officer
Dee
Gonzalez, Offices of the County Executive
Jennifer Barrett, Director, DepmtmentofFinance
David Platt, Depaltment of Finance
Glenn
Wyman, Department of
Finance
John Cuff, Office of Management and Budget
Bryan
Hunt, Office of Management
and Budget
Office of the Director
10 I
''''''''''N
Street,
14th Floor • Rockville, Maryland 20850 • 240-777-2800
www.montgomerycountymd.gov
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Testimony: Bill 34-10, Finance - Public Facilities
Private Projects
Good afternoon, I am Jennifer Barrett, Director of the Department of Finance,
and I am here to testify on behalf of County Executive Isiah Leggett on Bill 34-10
Finance Public Facilities Private Projects. The County Executive does not support
Bill 34-10 because it unnecessarily limits the County's flexibility in acquiring and
upgrading buildings and facilities for governmental functions.
I understand that the bill's intent is to modify the defmition of public facilities
under section 20-14 ofthe Montgomery County Code and specifically restrict the use
of the County's general obligation bond proceeds for the construction, acquisition or
alteration of any building or facility owned by a private for-profit or non-profit entity.
Our primary concern has to do with so general a restriction on acquisition or
renovation of a building or facility owned by a private entity.
In
fact, the proposed
restrictions are in conflict with the Council's adopted Capital Improvements Program
as well as prior funding decisions by the Council that have proved to be wise
investments.
There are instances in which it is most economic to acquire an existing,
privately owned building rather than leasing or building a facility. For example, in
1987, the County acquired 401 Hungerford Drive to house governmental offices,
including those ofHHS. The County acquired 1301 Piccard Drive in 1996 for use for
other HHS functions. While funded with Revenue Authority bonds, the County had
the option of using GO bonds and could have done so under current code.
The County is now set to purchase the GE Tech Park building for the Public
Safety Headquarters, and the Council approved the use of GO bonds to fund a portion
of the renovation costs of the building while it is still privately owned. Bill34-10
would conflict with the Council's own actions on the CIP in that regard.
In addition, based on the County's bond counsel's review of the proposed
legislation, it appears that the restrictions cited go far beyond just the acquisition or
renovation of privately owned buildings. Bond counsel has noted concerns with the
potential for broad interpretation of the limitations. Counsel notes that: "While the
word "facility" is not defmed, its common meaning could apply to most of the capital
facilities that are acquired with the County's bonds since most are acquired from
private parties.
It
could be applied to prevent the County from acquiring office
buildings, park land, equipment, facade easements and agriculture easements from
private entities. As a result, the County would lose flexibility regarding the funding of
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projects that serve a public function if the project entails the acquisition, construction
or improvement of a privately owned building or facility."
Although Bill 34-10 preserves the ability to finance certain fire, rescue, and .
emergency medical service facilities with general obligation bonds, the bill diminishes
the County's flexibility to fund other categories of projects that the County may
determine serve a public function. The events of this spring have illustrated that the
existing provisions of Chapter 20, combined with restrictions on private use and
private payment in the IRS regulations, provide ample limits on the uses of General
obligation bond proceeds. Consistent with prior discussions with the HHS
Committee and full Council, IRS restrictions on the use of tax-exempt bond proceeds
have proved to be even more restrictive than existing Chapter 20 provisions, limiting
the use of general obligation bonds even on County-owned buildings when there is
private use and private payment in violation of the IRS regulations on tax exempt
bonds.
The County Executive shares the Council's belief that general obligation bond
proceeds should be used judiciously. Notwithstanding the limitations noted above,
the Council can limit undesired uses through the adoption of the capital budget and
bond authorization ordinances.
I urge the Council to oppose Bill 34-10 as its good intentions are far
outweighed by inherent problems, specifically unnecessary limitations on the County
Council's legislative discretion, additional hurdles to achieving the County's goals,
and specific conflicts with existing law and the approved CIP.
Thank you for your time.
June 22,2010
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MCKENNON SHELTON
&
HENN LLP
401 East Pratt Street, Suite 2315
Baltimore,
Maryland
21202
(410) 843-3500
(410) 843-3501 (fax)
MEMORANDUM
To:
From:
Date:
Re:
Jennifer Barrett
Glenn Wyman
Paul D. Shelton
June 11,2010
Use of GO Bond Proceeds
Bill
No. 34-10 was recently introduced in the County Council of Montgomery
County, Maryland (the "County Council").
The
following summarizes the effect of
Bill
No. 34-10.
Article IV of Chapter 20 of the Montgomery County Code (the "Code") sets forth
terms and conditions pursuant to which Montgomery County, Maryland (the "County")
can borrow money to finance public facilities when the County is authorized by law to
borrow on its full faith and credit. The County must evidence such borrowing by the
issuance of the County's general obligation serial maturity bonds. Bonds authorized by
Article IV of Chapter 20 of the Code constitute an irrevocable pledge of the full faith and
credit and unlimited taxing power of the County to the payment of the maturing principal
and interest on such bonds as and when the same respectively mature. The County
Council must authorize the issuance of County general obligation bonds together with the
categories of public facilities authorized to be funded with the proceeds of such bonds.
Section 20-14 of the Code defines "public facilities" to mean, among other things, the
construction and improvement of (a) public school buildings and buildings for school
purposes,
(b)
public roads, sidewalks, free bridges and storm water drainage systems for
the County, (c) structures to house any of the functions of or for the use of the County
government or administration, (d) transit facilities, (e) off-street parking lots and facilities
for the parking of automobiles and other vehicles within certain designated parking lot
districts,
(f)
public housing and housing for persons of low, moderate or eligible incomes
and (g) water systems and facilities and sewerage systems and facilities.
In each portion of the definition of public facilities there are requirements that the
project be (a) a public function,
(b)
or under the control of the County, (c) or used by the
County or for a function that is typically a governmental function such as transit facilities
and mass transit. In addition to these definitional restrictions, the County Council must
enact an ordinance to authorize the debt and the projects must be in the capital budget
with proper appropriation.
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Memo to Jennifer Barrett, et a1.
June 9,2010
Page 2
Bill
No. 34-1
I)
wou1d amend the definition of public facilities to, among other
things, exclude the acquisition, modernization. construction or improvement of any
privately owned building or facility whether owned by a for
profit
or nonprofit entity.
This exclusion would not apply to any fire. rescue and emergency medical service facility
subject to Chapter 21 of the Code. The
Bill
does not provide an exception for agriCUlture
easements or fac;ade easements. This legislation as the most current would overturn the
recent amendment that allowed agriculture easements to be purchased with general
obligation debt. A literal reading of the proposed language would bar the County from
acquiring any building or facility privately owned by a for-profit or non-profit entity
using general obligation debt.
Section 20-14 of the Code generally permits the County to use the proceeds of
general obligation bonds for projects that serve a public purpose. The enactment of
Bill
No. 34-10 would generally preclude the County from using proceeds of general
obligation bonds to tinance and refinance County projects involving the extension,
acquisition, improvement construction or any building or facility owned by a private for·
profit or non-profit even
if
the County wishes to acquire a facility to serve a public
purpose or that involve government utilized facilities. While the word "facility" is not
defined, its common meaning could apply to most of the capital facilities that are
acquired with the County's bonds since most are acquired from private parties.
It
could
be applied to prevent the County from acquiring office buildings, park land, equipment,
facade easements and agriculture easements from private entities. As a result, the County
would lose flexibility regarding the funding of projects that serve a public function
if
the
project entails the acquisition, construction or improvement of a privately owned building
or facility. Although
Bill
No. 34-10 preserves the ability to finance certain fire, rescue
and emergency medical service facilities with general obligation debt, Bill No. 34-10
diminishes the County's flexibility to fund other categories of projects that the County
may detennine serves a public function.
The Council can currently limit the use of general obligation debt through the
adaptation of the capital budget and bond authorization ordinances. The enactment of
Bill 34·10 would greatly restrict the current use of general obligation and
limit
the
County from exercising its legislative discretion.
The proposed Bill would force the County to attempt to fund acquisitions from
private entities with debt that is not supported by its full faith and credit This
will
likely
result in lower ratings from the national rating agencies and higher borrowing costs for
the County. Since most capital acquisitions are from private entities and given the
uncertainty of what is or is not a facility, it is likely that a substantial amoWlt of the
County's capital program will be subject to the higher borrowing costs and lower ratings.
We are not aware of any Maryland jurisdiction that has a similar restriction on the
use of general obligation debt for the acquisition, construction, or improvement of
Memo concerning Bill No 34-10 (04061810-8).DOC
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Memo to Jennifer Barrett. et al.
June 9,2010
Page 3
buildings and facilities owned by private persons. The most restrictive provision is the
prohibition on the acquisition of privately owned facilities. We recommend that the
County carefully consider the implication of this restriction.
Memo concerning Bill No 34-10 (04061810·8),DOC
(j)
..............•.
--_
...
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c ·
H ·
I Centers Inc.
Supporting people with disabilities since 1948
Harold
Blank
D.D.s.
President
Alan Lovell, Ph.D.
Chief Executive Officer
June 22, 2010
Testimony of CHI Centers with Regard to Bi1l34-10
CHI Centers is a non-profit agency serving over 1000 individuals with developmental
disabilities. Currently CHI Centers operates day progra.IIJ.S from five different facilities
and twenty-eight residential sites. Of the five day program facilities, CHI Centers leases
one from a commercial operation, owns one, and leases three from the Montgomery
County Department of Facilities that are former elementary schools that have been closed
by the Montgomery County Board of Education. .
CHI Centers has had a good track record of obtaining state of Maryland bond funds either
through the legislative bond process or through the bond program administered by the
Department of Health and Mental Hygiene. County funds and agency fund raising
dollars were used to match the state of Maryland bond funding. CHI Centers has
completely renovated the former Lone Oak Elementary School and the Hillandale
Elementary school. Important aspects of the renovation projects were to bring the
building up to current county and state building codes, making need adaptations for
people with disabilities and creating an environment for adults rather than for children.
CHI Centers
has
obtained 1.6 million dollars in state bond funds to renovate the third
county-owned facility known as the former MacDonald K.nolls Elementary School
located in Silver Spring. CHI Centers will lose $200,000,bfthese funds if they are not
matched and committed in fiscal year 2011. CHI Centers requested funding from the
county in its fiscal year 2011 budget which was partially granted by the County
Executive and was not supported by members ofthe County Council.
As CHI Centers understands the legislation being created in Bi1l34-1 0, renovation
funding would be restricted with the use of county bond funding. CHI Centers would
like to see some means where funds can still be obtained from the county to make needed
renovations and repairs to both day program facilities and residential facilities that are
either owned by the non-profit corporation or have a long term lease. The state of
Maryland determines that a long term lease is at least fifteen years.
In today's tight economy, non profits'across our county are having a very difficult time
just with their operating budgets. Many difficult decisions are being made to reduce
operations without impacting on the people that are served by the non-profit agency.
With both the state and the county, bond funding is a separate funding stream and cannot
be used for operating purposes. State and county funds received for operating purposes
cannot be used for capital expenses. Therefore CHI Centers would request a mechanism
be developed to assist non-profit with needed renovation projects.
10501 New Hampshire Avenue, Silver
Spring,
MD 20903-1122
Te1301.445.3350 Fax 301.439.8117 TDD
301.439.5366
www.CffiCenters.org Emaillnfo@CmCenters.org
The Rehabilitation Accreditation Commission (CARF)
United
Way
Agency
#8059
Combined Federal
(.'arn.vaif;?n
#27098
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Cost Sharing: MCG -- No. 720601
Category
Subcategory
Administering Agency
Planning Area
Culture and Recreation
Recreation
Recreation
Countywide
Date last Modified
Required Adequate Public Facility
Relocation Impact
Status
June 04, 2008
No
None.
On-going
Cost Element
Plannina, Desian and Supervision
Land
Site Improvements and Utilities
Construction
Other
Total
Current Revenue: General
G.O. Bonds
Economic uevelopment Fund
Long-Term Financing
Total
Total
882
0
4
EXPENDITURE SCHEDULE ($000)
Total
Thru
Est.
FY07
582
0
4
FY08
300
0
0
6 Years
0
0
FY09
0
0
0
0
FY10
0
0
0
0 .
1.400
FY11
I~
01
FY14
0
0
·6,875
6,875
1,925
0
8,419
0
0
586
9,305
3,915
FUNDING SCHEDULE ($000)
586
U
~~
~
··0~1
Oi
o
i
01
0
0
0
0
0
0
0
0
0
..
0
0
0
0
0
0
0
0
0
0
~
0
0
0
0
0
0
0
0
5.4~
5,47
0
0
0
O.
0
0
1,400
0
0
1,400
0
140
1,400
3,850
0
0
586
9,305
1,404
14u
0
300
1,844
~
1,925
0
!
0
3,bbU
3,550
6,875
5,475
0
0
0
0
0
0
0
\)
u
0
1.400
0
0
0
0
DESCRIPTION
This project provides funds for the development of non-government projects in conjunction with public agencies or the private sector. County
participation leverages private and other public funds for these facilities. Prior to disbursing funds, the relevant County department or agency and
the private organization will develop a Memorandum of Understanding which specifies the requirements and responsibilities of each.
COST CHANGE
Increase represents County's contribution to match the State's funding for the music venue in Silver Spring and the County's partiCipation in CASA
of Maryland, CHI Centers, Jewish Council for the Aging, Montgomery General Hospital, YMCA of Metropolitan Washington - Youth and Family
Services Branch, Boys and Girls Club of Greater Washington, Institute for Family Development - Centro Familia, Nonprofit Village, Inc., and Aunt
Hattie's Place.
JUSTIFICATION
The County has entered into or considered many public-private partnerships, which contribute to the excellence and diversity of facilities serving
Cou nty res idents.
OTHER
For FY09, County partiCipation is anticipated for the follOWing projects in these amounts:
CASA of Maryland. Inc: $150,000
CHI Centers: $50,000
Jewish Council for the Aging: $250,000
Montgomery General Hospital: $500,000
YMCA of Metropolitan Washington and Youth and Family Services Branch: $200,000
Boys and Girls Club of Greater Washington: $250,000
Institute for Family Development Inc., doing business as Centro Familia: $75,000. The organization must demonstrate to the County's satisfaction
that it has commitments for the entire funding needed to construct the project before the $75,000 in County funds can be spent.
Nonprofit Village. Inc.: $200.000
Aunt Hattie's Place: $250,000. FY09 funds for this item must only be spent on construction. Also, the organization must demonstrate to the
County's satisfaction that it has commitments for the entire funding needed to construct the project before the $250,000 in County funds can be
spent. Disbursement of FY09 County funds is conditioned on the owner of the property giving the County an appropriate covenant restricting the
use of the leased property to a foster home for boys for a period of ten years from the time the facility commences to operate as a foster home.
Music venue in Silver Spring: $3,550,000 ($150,000 was expended out of the Economic Development Fund in FY07 for a feasibility study for
a
music venue, and $300,000 will be expended in FY08, bringing the total County match to the State to $4,000,000)
APPROPRIATION AND EXPENDITURE DATA
Date First A ro nation
Firs! Cost Estimate
FY06
COORDINATION
Private organizations
State of Maryland
Municipalities
Montgomery County Public Schools
Community Use of Public Facilities
Department of General Services
Department of Economic Development
FYoe
Appropriation Request
Appropriation Request
Est.
FY09
FY10
1,400
Supplemental AppropriaUon Request
o
Transfer
Cumulative Appropriation
o
5,440
Expenditures
I
Encumbrances
•Unencumbered
Balance
Partial Closeout Thru
FY06
FY07
New
Partial Closeout
Total Partial Closeout
17-7
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_ _ _ _ _ _ _ _
-"c=o=s=t=S.:..:;ha=r'-'-'in~g~:--"M=C=G
--
No.
720601
(continued)
For FY10, County participation is anticipated for the following projects in these amounts:
Adventist HealthCare: $1,400,000
Funds for the music venue in Silver Spring will not be expended until an agreement is reached between the development partners and the County,
which includes Council review and approval of the general business terms. The County will own the facility and will fund its contribution with
short-term financing proceeds consistent with the terms of the lease agreement with the operator of the music venue.
The Adventist HealthCare Project provides incentive funding to assist with the construction of a medical office building at 8702 Flower Avenue in the
Long Branch community. With the announced departure of Washington Adventist Hospital from Takoma Park, construction of this site underscores
the County's commitment to access to health care in the Long Branch area. The County initially committed to fund the project with $700,000 for
each of the three years from FY07-FY09 for a total of $2,100,000. During FYOB, the project was substantially delayed due to legal proceedings.
The previously programmed $1,400,000 has been deferred to FY10 and the additional $700,000 will be
programmedin'later~years,~
Based'on the
~
current project time line, the County's funding schedule will not have any material impact on the project. EDF funds will not be expended until there
is an agreement between Adventist HealthCare, the property owner, and the County Executive which includes specific performance requirements.
The requirements should address the length and terms of the lease; public use of the garage, the use of the building for medical-oriented
businesses, and other EDF requirements including fiscal analysis and job generation. OED, the property owner, and Adventist HealthCare will keep
the Council informed of modifications to the project and the status of litigation.
The Old Blair Auditorium Project (a private, non-profit organization) received State bond bill funding of $600,000 for the renovation of the Old Blair
High School Auditorium. The County is providing $190,000 as a partial match for the State funds with $50,000 in current revenue in FY06-FY07 for
DPWT to develop a Program of Requirements and cost estimate for the project, and a programmed FY06-FY07 bond funded expenditure of
$140,000 to pay for part of the construction. The Council will consider appropriating the $140,000 after: a) facility planning is complete and the full
cost of the renovation is known; b) the County, MCPS. and the Oid Blair AuditOrium Project resolve issues about management of the renovation
project, operation of the facility, and parking for the facility; and c) the Old Blair High School Auditorium project raises the remaining $410,000
required to match the State funding. MCPS has included funds for a feasibility study for the auditorium in its Facility Planning project (No. 966553).
During the study, MCPS will
work
with the community to develop a new program of requirements for the auditorium.
OTHER DISCLOSURES
- A pedestrian impact analysis will be performed during design or is in progress.
17-8
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=
MEMORANDUM
May 13,2010
TO:
FROM:
SUBJECT:
Health and Human Services Committee
Peggy
FitZgerald-BJi'~uncil
Grants Manager
State and Other Jurisdictions/ Use of General
Obligation Bonds
CIP Amendment: Cost Sharing: Montgomery County Government
State Match Community Grants
On Apri121 the Committee reviewed the County Executive's recommended nonprofit
capital project Community Grants contained in the Cost Sharing CIP and the Executive's
proposed use of General Obligation bonds for three projects (CHI Centers,
Ivyrnount School, and Olney Theatre). Councilmember Trachtenberg asked for follow-up
infonnation on the State of MaryIand's criteria and practices for State bond bills for
nonprofit capital projects, and also whether other local jurisdictions in Maryland use
General Obligation bonds to fund nonprofit capital projects.
State of Maryland State Bond Bills
I have attached portions of a document,
Guidelines for the Submission ofIndividual Bond
Bill Requests to the Maryland General Assembly,
prepared by the Dept. of Legislative
Services. Ibis document provides guidance and instructions to applicants seeking State
Bond Bills. The complete document
can
be found at:
http://mlis.state.md.us/Other/Bond bill/Bond Bill Submission quidelines,Ddf.
Highlights from
the document include the following infonnation:
Basic Eligibility Criteria:
• Project must be capital in nature. Can include land acquisition as well as
construction.
• Project must have a useful life of 15 years. A group leasing land or a structure
related to a proposed capital project must demonstrate that the lease will extend
for 15 years or more.
• Project must not be used for religious purposes.
• Certain structures may be subject to historic easement
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Evaluation Criteria include:
• Has the organization explored alternative funding sources, including other State
capital grant and loan programs?
• What priority does the County delegation place on the project?
• The organization should provide matching funds for the project. The specific
bond bill may require either a "hard" (cash in hand) or "soft" (real property, in­
kind contributions, or funds expended for project prior to bond bill effective date)
match. The required match is typically equal to the State contribution, but can be
greater than, equal to, or less than the State contribution.
• Organizations showing a history of adequate fundraising or documentation of
adequate future funding are given priority, i.e., the 'readiness' factor.
• Local projects serving a wide spectrum of the community or the State as well as
an important public purpose are preferred.
Staff also spoke with staff in the State Dept. of Budget and Management who indicated
that there are several references in State law to capital grant programs administered by
State agencies to provide grants to local governments and non-profit organizations.
In
addition, the general authority in the State Finance and Procurement Article describes the
powers of the General Assembly to borrow money for public purposes, issue State bonds,
and discusses the content ofthe Capital Budget, referencing "other special projects." The
other special projects category refers to local government and non-profit capital projects
funded by the State. Each bond bill is submitted as legislation and has a finding of a
''public purpose" in authorizing the appropriation to a private entity.
Practices in other Maryland jurisdictions:
According to Finance Department staff they surveyed local jurisdictions, bond counsels,
and financial advisory firms conducting business in the State. They contacted ten local
government officials, three bond counsels, and a few financial advisory firms.
The Finance Department notes that only a limited number ofloca1 jurisdictions regularly
issue general obligation debt so the universal ofpotentiaJ respondents is small.
Below are some of their general findings.
"Local jurisdictions, not including the State, generally do not use general obligation
proceeds to fund capital projects of private, non-profit or for-profit entities. Harford,
Fr~erick,
Prince Georges, Charles, Anne Arundel, and Carroll counties are included in
that group. There are some exceptions, including the State. The State gives its general
obligation bond proceeds to private entities as part of it annual grants program. This is
done through the State's "Bond Bills" and usually involves matching funds on behalf of
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the grantee. The City of Baltimore also gives general obligation money away under its
economic development program. Charles County and St. Mary's County continue to
fund their hospitals and nursing homes (typically non-profit entities) with bonds backed
by a general obligation pledge.
Most local jurisdictions facilitate funding private entities via their conduit bond/economic
development bond programs. Via these programs, the county issues tax-exempt bonds
and lends the proceeds to the private entity.
In
almost every financing, the private entity
is a non-profit, but there are some very limited opportunities to lend to for-profits.
Montgomery County has had a conduit/economic development bond program for many
years and issued bonds and lent the proceeds to. a range of entities such as Holy Cross
Hospital, Riderwood Village, Sidwell Friends School, and Imagination Stage. The State
has a similar program run by MHHEFA (Maryland Health and Higher Education
Financing Authority). Under such programs, the conduit debt is an obligation ofthe
borrower and not the County or State; therefore, the conduit debt does not compete with
the County or State's ability to issue its own debt."
Attachment: Bond Bill Submission Guidelines
(pp.
1-3) ©6-12
F:\Communlty GrantslFYl1 Grantli lnformationlcolit sharingfollaw up md bond hill criteria.doc
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Guidelines for the Submission of
Individual Bond Bill Requests to the
Maryland General Assembly .
Department of Legislative Services .
Office of Policy ADalysis
Annapolis, Maryland
November 2007
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For further information concerning this document contact:
Library and Information Services
Office ofPolicy Analysis
Department ofLegislative Services
90 State Circle
Annapolis, Maryland 21401 .
Baltimore Area: 410-946-5400. Washington 'Area: 301-970-5400
Other Areas: 1-800-492-7122, Extension 5400
TDD: 410-946-5401 .301-970-5401
Maryland Relay Service: 1
7
800-735-2258
E-mail:
libr(a).rnHs.state.md~us
Horne Page: mHs.state.rnd.us
The Department of Legislative Services does not discriminate on the basis ofrace, color, national
origin, sex, religion, or disability in the admission or access to its programs or activities. The
department's Information Officer has been designated to coordinate compliance with the
nondiscrimination requirements contained in Section 35.107 of the United States Department of
Justice regulations. Requests for assistance should be directed to the Information Officer at the
. telephone numbers shown above.
ii
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=
Introduction '
The
Guidelines for
the
Submission of Individual Bond Bill Requests to
the
Maryland
General Assembly
is published by the Department of Legislative Services (DLS) to assist those
requesting funding from the General Assembly for capital projects through the submission of
bond bills. The manual provides a summary of the basic eligibility requirements and evaluation
criteria, the legislative process, and the schedule for bond bill consideration by the General
i\ssembly.
'
Before a bond bill may be scheduled for a hearing, the potential applicant must provide
additional information by preparing a "Bond Bill f'act Sheet." These fact sheets provide
important information concerning an organization's grant request - information required at the
time of the bond
bill
hearing. Since the start of the
2005
session, DLS
staff
has coordinated the
"Bond Bill fact Sheet" process. The manual provides an outline of the DLS process
as
well
as
copies of all forms necessary for a bond bill to be scheduled for
a
hearing. This
manual
is also
available in electronic format at http://mlis.state.md.us/bQndbillsub.htm.
Comments
and
suggestions directed at improving future editions of the
Guidelinesfor the
Submission ofIndividual Bond Bill Requests to the Maryland General Assembly
are welcome.
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Contents
Introduction......... ......... ...... .................. ................................ ................ ........................ ..............
iii
Guidelines for the Submission of Individual Bond Bill Requests to the Maryland
General Assembly
Overview of State Funding of Local Projects Bond Bills.........................................................
Eligibility ......................................................................................................................:..
Strategies fol' Achieving Success ..:....................................................................... ,..........
Process .............................................................................................................................
Instructions.................................................. ;............... ................... .............................. .............
Applicant's Proposal ............................
~
...........................
~...............................................
SponsorshiplDraftinglIntroduction ofthe Bill.................................................................
Department ofLegislative Services Assistance ...............................................................
Approval Notifications....................................................................................... ..............
1
1
2
3
5
5
5
6
6
Attachment I
Bond Bill Project Request Form........ .............. ............... ............................ .......
8
Attachment II
Sample Senate Bill....................................................................................................................
Sample House Bill .....
~..............................................................................................................
9
11
Attacbment
ill
Instructions for Completing the State of Maryland Bond Bill Fact Sheet.................................
Introduction ............. .... ...... ..................... ....... ................ ...................................................
Explanation of Fields .......................................................................................................
State of Maryland Bond Bill Fact Sheet ...................................................................................
13
13
14
16
Attachment IV
State Capital Grant and Loan Programs: Potential Sources of Funding for Bond Bill
Requests.. ............... ......... ..... ....... ....... ......... ....... ..... ......... ................. ..........
21
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Guidelines for the Submission of Individual Bond Bill
Requests to the Maryland General Assem bly
The capital budget is funded through several sources. These include bond bills, general
funds, special funds, and federal funds. Bond bills include the Maryland Consolidated Capital
Bond Loan, revenue bonds, and legislative initiatives.
Legislative initiatives are used to fund individual bond bill requests. They are bond
authorization bills filed by members of the General Assembly to support specific local or
non-state-owned capital projects. These projects include, but are not limited to, health facilities,
historic preservation projects, museums, and sports and recreational facilities. Legislative
initiativ'es are not submitted as part of the Governor's capital budget. However, as they have an
impact on State finances, the Department of Legislative Services (PLS) reviews them in
accordance with procedures established by the Governor and the General Assembly.
The following instructions and attachments provide guidelines to applicants seeking State
.
grants through the submission of individual bond bills.
Overview of State Funding of Local Projects Bond Bills
This document is intended to provide basic information on eligibility and priority for
State funding of local capital projects (bond bills). Any group may request funding from the
General Assembly for a capital project. As a practical matter, the number and type of projects
funded by the General Assembly is limited - requests for funding greatly exceed available
resources each year. In some years, the total amount requested for local capital projects has
exceeded by 10 times the available resources. Thus, after ascertaining a project's· basic
eligibility, the General Assembly must assess the project's level of priority among the total
number of projects requested.
Eligibility
,.'.
A project must be capital in nature to be eligible for bond bill consideration. A
capital project deals with land and/or structures. Capital projects do not include items
such as employee salaries, benefits, expendable equipment (automobiles, for example), or
operating costs.
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A project must have a useful life of 15 years. Items such as automobiles and
computers do not have a useful life of 15 years. A group that is leasing land and/or a
structure relating to the proposed capital project must demonstrate that the lease will
extend for 15 years or more.
A project must not be used for religious purposes. For example, State funds may not
be used to construct a building in which religious services, Sunday school, or religious
education will
be
held, regardless of other non-religious uses planned for the building.
Certain structures may be subject to an internal and/or external historic easement.
The applicant must grant the easement to the Maryland Historical Trust as a condition for
State funding.
Strategies for Achieving Success
After the General Assembly evaluates the eligibility of a project, all of the projects are
evaluated based upon several criteria, including the following:
Alternative Funding
Groups should show that they have explored alternative, sources of funding. In addition
to requesting alternative funding from agencies, corporations, etc;, a group may be asked to show
whether a potential revenue source, such as entrance
fees,
membership fees, or concession profits
could cover the cost of the capital project. Please refer
to
Attachment IV of this document for
infonnation on potential alternative sources of funding for bond bill requests through State
capital grant and loan programs.
Delegation Support
The General Assembly will consider the priority a county delegation places upon a
project.
Matching Funds
Groups should provide a matching fund for their projects. Matches may be dassified as
"hard" or "soft." A "hard" match is "cash in hand" and may include money from any source,
other than State sources. A "soft" match MAYbe made up of real property, in-kind
contributions, (donated services or materials) or funds expended for the project prior to the
effective date of the bond bill, June 1 of the year the bill is passed. A "soft" match may consist
of a combination of the abovementioned elements, including cash.
A matching fund MAY also be greater than, equal to, or less than the State contribution,
though at least an equal match is preferred. Among those projects with unequal matching funds,
an applicant providing an unequal matching fund that shows that
at the time ofthe request,
the
group holds or has letters of commitment totaling 25 percent or more of the matching fund will
be given priority.
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Project Readiness
Groups will be required to supply the General Assembly with
a
detailed funding analysis
prior to the hearings on their bills. Projects that show a history of adequate fundraising or groups
that can provide documentation of adequate future funding
(e.g.,
letters of commitment) will be
given priority.
State or Local Purpose
Local projects that serve a wide spectrum of the community or the State as well
important public purpose are
p~eferred.
as
an
Process
Sponsors,
Organizations seeking funding must contact a senator and a delegate to sponsor a bond
bill that requests funding for their project. Bond bills must be introduced in both the House and
the
~enate,
known as cross-files,. so organizations
.
must arrange for a sponsor in each house.
,
Required Information
DLS needs certain information before drafting a bond bill. The "Bond Bill Project
Request Form" identifies the required information and is available on the Maryland General
Assembly web site at http://mlis.state.md.uslbondbillsub.htm. An organization requesting
funding should ensure that their sponsors have the required information when their sponsors
request that a bond bill be drafted
Bond bills must contain certain technical information to legally permit funds to be
disbursed. Therefore, after DLS
drafts
a bond bill, the sponsor and
requ~sting
organization
s,hould refrain from altering the language in the bilL If a change is necessary, please' contact
DLS at
(410)946-53501
(301)970-5350 to request the change.
The most important form is the "Bond Bill Fact Sheet." This form provides background
information needed by the budget committees at the time of the bond bill hearings. Legislators
use this information as they make their funding decisions and the failure to complete and submit
a Fact Sheet may result in the Legislature not funding the bond, bill project request. After DLS
drafts a bond bill, the applicant will receive an email from DLS that provides a
link
and accesS to '
the applicant's specific Fact Sheet for completion. It is important that the applicant retain the
DLS email as the provided link can
be
used at any time by the applicant to gain access to their
Fact Sheet up until the time that
it
is formally submitted by the applicant .through the provjded
toolbar.
Applicants
should
ensure
that
they
can
receive
email
from
bondbillapp@MLIS.state.md.us. The fact sheet form and instructions for completion are
provided as a sample (Attachment
III).
3
,(ji)
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AMENDMENT
To Bill 34-10, Finance
Public Facilities
Private Projects
Beginning on page
1,
line
1,
change Section 20-14 and 20-15 to read:
1
Sec. 1. [[Section]] 20-14 [[is]] and 20-15 are amended as follows:
20-14. Definition of "public [[facilities]] facility."
As used in this
Chapter,public [lfacilities]]jacility
means:
(a)
The construction, reconstruction, improvement, extension, alteration,
repair, purchase, conversion! and modernization of public school
buildings or buildings for public school purposes, including the sites
therefor, the cost of acquiring any such buildings or sites, architectural
and engineering services, including preparation of plans, drawings and
specifications for such schools or the conversion or modernization
thereof and the development of the grounds, and all customary
permanent appurtenances and recreational and pedagogical equipment
for such schools;
2
3
4
5
6
7
8
9
10
11
12
13
14
*
(g)
*
*
The planning, acquisition, construction, improvement, repair." and
extension of water systems and facilities and sewerage systems and
facilities; [[and]]
15
16
17
(h)
The purchase of agricultural easements as defined in Article 3 of
Chapter 2B [[.]]; and
purcha~e
18
19
ill
The
oim facade easements necessary to implement a
20
21
22
community revitalization project.
[[However,
public
facilities
does
not
include
the
construction,
reconstruction, extension, acquisition, improvement, enlargement, alteration,
repair, or modernization of any building or facility owned
Qy
~
private for-profit or
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1
non-profit entity, excluding any fire, rescue, and emergency medical servIce
facility subject to Chapter 21.]]
20-15. Borrowing money and issuing bonds-Authority.
2
3
4
5
W
[[With regard to]] For any County borrowing authorized by law on the
full faith and credit of the County to finance the public facilities
defined in [[the preceding section]] Section 20-14, the County must
evidence that borrowing or indebtedness by [[the issuance of its]]
issuing general obligation serial maturity bonds. Subject to the terms
and conditions in this Section, the County Executive must determine
the terms and conditions of any such bonds, the interest payable
thereon~
6
7
8
9
10
11
and the advertising for their sale.
12
13
14
15
(hl
[[Any such]] General obligation serialI11aturity bonds may be issued
[[under the authority of this division and]] for the purposes
enumerated in [[the preceding section]] Section 20-14 at any time,
within the limitations provided by law. Bonds must not be used to
fund any project that is not a public facility as define<i in Se9tion 20­
14.
16
17
18
W
[[All]] Any action taken [[pursuant to]] under this Article must be
[[taken]] by order of the County Executive. The County Executive
must ([cause]] send a correct copy of every such order to [[be filed
with]] the Clerk of the County Council, who must keep a permanent
record of [[all of such orders; and certification]] each order.
Certification by the Clerk is evidence of the authenticity of [[any
such]] each order.
19
20
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22
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