City Council - Special Meeting

Okay, call this special city council meeting to order. We have one agenda item for this matter. Council order number 060100, public hearing and potential action on the request of Imperium on behalf of Kids Peace to prove a public finance authority revenue bond series 2026 not to exceed 153,823,000 in a public finance authority revenue bond series 2024 not to exceed 18 million. As stated in the resolution, the city's approval of the issue is very narrow for the purpose stated and is conditioned upon there being no liability or obligation by the city with respect thereto. Manager Pierce, do you want to set the scene here? Yeah.

We were approached recently last month about the requirement for the city to essentially have sign-off even though there's no fiscal liability on the city to move forward. Our deputy city manager worked with our attorneys and others and at the expense of the applicant moving forward just to make sure to confirm there's no financial liability in this It is a good project to move forward with. So it's very administrative in nature. But we figured with this meeting to discuss for our workshop that's already scheduled to bring in folks a little bit early so we can clear the decks on this and they have a deadline that's coming up. So that's the background here. Just so folks are also, tonight we'll conclude this meeting and then shut things down, re-swap out to the workshop format. for our regularly scheduled monthly workshop of the month. So that's really it for me on this one, but I know we have representatives of the organization here to maybe give a little bit more background on the actual application, et cetera, and let them come step up and talk a little bit more about it. And I know there's some folks coming online as well.

Hi, I'm Lucy. I'm an attorney in Portland and I am working with the out-of-state council who are representing the non-profit on getting this meeting scheduled essentially. And they are here on teams to answer more technical questions about the actual Oh, sorry, about the actual project. But as Charlie said, this is administrative. It's required by the Internal Revenue Code for these bonds to be issued as tax-exempt bonds.

Lucy, can you address the council?

Oh, sorry. To be issued as tax-exempt bonds, but we need to give some time for anybody who would like to make a public comment about the project, some time to do that before the resolution is considered by the city council.

Okay. Would you like any of the folks up on the screen to give any information before we have the public hearing on it?

Yes. If any of you would like some more information, we have Lynn. Andrew is the attorney for Kids Peace. Eli is the attorney for Imperium. Lynn is Bond Counsel. And I think that's it. And that's it. Okay, great. So if you have any questions, these folks are able to answer them in much greater detail than I am. Okay.

I think it might be helpful just to have someone provide like a one-minute summary of what the money is being used for and then just clarification as to how the city is not liable for any of the costs or related work. I think that would be helpful for the public to understand.

Maybe Andrew, do you want to talk a little bit, especially about the kids piece and the work you guys are doing and what this will help you all do next? Andrew, can you hear it? Andrew Burke, or? That would make sense. Everybody's looking kind of blocked. It's like, wow, they really don't want to talk. Let me talk to you. Can you hear us?

Can you hear us now?

All right, there we go. Okay.

Sorry, just to give, we were looking for, maybe Andrew, if you could talk a little bit more about Kids Peace, the work you all do, and kind of this project, you know, just how this financing can help, and then maybe from Imperium, just to talk a little bit more about the, you know, this public financing bond and the sort of administrative nature of the approval you need tonight to move forward.

Great, sir.

Elliot, do you want me to take that, or do you have it? Why don't you start with the Kids' Peace part, and then I can answer any questions about the period.

Sure.

So Kids' Peace was founded in the Lehigh Valley of Pennsylvania in 1882. It started as a home for children that lost their parents through, I believe it was some sort of epidemic, and I don't want to say which one, because it might be the wrong one. That's how Kids Peace started. Over the years, Kids Peace has turned into a behavioral health nonprofit that spans multiple states. Primarily in Maine, we have a campus in Ellsworth that you're aware of that we handle children that have autism and behavioral health issues, as well as education programming. We recently opened an education program where a larger education program in the Orono area, and have been in Maine for at least, I think the last 25 years at least, probably longer. I started with Kids Piece in about 2013, and Maine has always been a big part of Kids Piece and its program. Is that enough?

That's great. Thank you very much. I think the other question we have just before we do a public comment on this proposal is can you just clarify how the law works as it relates to any liability or obligations to the city?

Yes, I can answer that. My name is Ellie Scheinman. I am the general counsel of Imperium is the parent company now of Kids Peace that affiliated with Kids Peace effective May 1 of 2026. The financing that we're talking about here is to cover the cost of the acquisition and related capital expenditures relating to the acquisition of Kids Peace. All of the debt service on that financing is being covered by Imperium. So this is not a taxpayer burden or anything having to do with the city itself. The purpose of this hearing is really just to comply with the IRX tax provision. It requires for any of the localities, and Ling can speak to this more, the sign off of the governing authority from where the assets are located, which is the purpose of this hearing. But again, the Imperium is the one covering all of the dead surface on this.

That's correct. The federal tax code provides that certain bonds can't be tax exempt unless an elected representative in the jurisdiction in which the bond proceeds are to be spent approves the financing after a public hearing is held. And so that is the purpose of the public hearing, just to give the public an opportunity voice their opinions about the financing prior to the consideration by the city of a resolution approving the financing purely for the narrow purpose of satisfying kind of the informational requirement of the tax code. And you'll see in the resolution that's on your agenda this evening that It's very specific that the city is not responsible for any obligations relating to the bonds, that it's a narrow approval to check the bonds.

Great. Thank you. Before we open the public hearing, do any council members have any questions for the presenters? Councillor Halloran?

I'm not sure that you are responsible for answering this, but this only come across my radar today. I did see it in the Algebra of the American on Thursday, but City Hall only made me aware of it today. If this doesn't pass, do I understand this correct that it becomes a bond that is non-tax exempt? Is that really what we're talking about here?

That it's tax exempt or not tax exempt? The bonds would not be eligible to be tax exempt without the satisfaction of this TEFRA hearing and the approval by an elected representative.

What does that do to your organization, whether it's a tax-exempt bond or non-tax-exempt bond?

So a tax-exempt bond essentially is a bond where the interest on the facility is exempt for federal tax purposes. The federal government allows certain favored types of entities to benefit from a tax exemption of this sort, including nonprofit 501c3 corporations. And the impact of that is that Imperium and this organization will be able to borrow at a lower interest rate because the investors won't have to pay federal income tax on... the interest they receive on the financing or not as much income tax on a federal level. Thank you.

Any further questions? Could you provide a little more like why Ellsworth in this piece? Obviously, this is larger than this justice piece, but what's the main Ellsworth connection here?

The federal tax code requires this approval from the jurisdiction in which the issuing authority is located, and also in each jurisdiction where the proceeds of the bonds are to be spent. And Maine is one of the locations. This is a multi-jurisdictional financing. We've held these hearings in Florida, in Pennsylvania, Indiana, and one scheduled tomorrow in Wisconsin. And the proceeds of the bonds are going to be spent in each of those jurisdictions. And so we needed to go to those local governments and go through the same process with them so that their citizens are aware of these projects that are being financed in their communities.

So is this every place in Maine or is it just Ellsworth? What's the choice of Ellsworth here?

because it's the location of the facility.

Oh, the facility itself. Okay.

Okay.

Any further questions from council staff? Okay. Oh, Councillor Smith.

Well, it sounds like our purpose is to validate that the facility does exist. It's in line with what we know of Kids Peace, and that's really our only role is I'm understanding it. Is that correct?

Yes. But first, I guess, is the public hearing aspect of it. And so this would be the opportunity whenever you're ready to open it up to the public to provide any public comments if they have any. And then once you're satisfied with that, any citizen has been given the opportunity there in the room, then you close the hearing, and then that's when you would consider the resolution that's on the agenda. Okay.

All right. Well, that's helpful. With that, I think I'm going to open the public hearing on this specific matter. If anyone has any comments to provide regarding... the KidPeace bond financing. You may approach the DS, give us your name and address and provide public comment. Seeing none, I will close the public hearing and ask council how they'd like to proceed. I'll just say it seems to me that as I understand it our approval of this in no way obligates the city financially or legally to any liability and it's in effort to support a really great organization that does really great work for city's youth and other youth so I'm very much in support of adopting the recommended motion to approve the the TEFRA resolution for public financing authority revenue bonds. Would anyone entertain a motion?

I'm happy to make the motion. Move to adopt the TEFRA resolution approving the Ellsworth portion of the Public Finance Authority revenue bonds, the Imperium Project Series 2026, including the change in use and proceeds associated with the previously issued Public Finance Authority revenue bonds, Imperium Project Series 2024, solely for purposes of satisfying the public approval requirements of section 147 of the Internal Revenue Service and the Tax Equity and Fiscal Responsibility Act of 1982. Second.

Second. We have a motion and a second. Any further discussion from council? Councillor Halloran?

I'd just like to know What the difference is in the interest rate, whether you can do this tax-exempt or non-tax-exempt?

So the bonds have a... been priced yet because we're still going through these procedures. But it's not an exact size, but it's tied very closely to the corporate tax rate that's in effect, which is around 20%, because that is the amount of tax that a corporate entity investing in these bonds would need to pay. So it's roughly a 20% interest rate savings because they're tax exempt.

If you're going to save 20%, what are you paying?

About 20% of the interest rate. If the interest rates 5%, then 20% of that would be a 1% savings. And you have to understand, my answer is coming from a lawyer's response, not a financial advisor or an underwriter's perspective, which there are many finance experts on our deal team, but we don't have one on the line with us today.

Any further questions from council?

So to be clear, to Councillor O'Hallan's question, we're not talking about a 20% interest rate. You're talking about a 20% savings compared to the market rate. So that's your 5% would be discounted to 4%. Is that correct?

Roughly.

Realizing that's an estimate just because the math is easy.

Thank you. Any further questions from council? Motion to second on the tables. All those in favor of the motion? Opposed? Motion carries. Thank you very much.

I might say one more thing. I would just like to commend your community for showing up for this process. I have to say that probably 95% of the nobody that appears or shows interest. So I think that's wonderful that your community has filled the room.

Thank you very much. With that, do I have a motion to adjourn?

So moved. Second.

All those in favor? So adjourned. Thank you.