ACCEPTANCE OF ASSETS OF WEST HOLLYWOOD LIBRARY FOUNDATION AND CONSIDERATION OF RELATED ASSIGNMENT AND ASSUMPTION AGREEMENT

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1 CITY COUNCIL CONSENT CALENDAR JANUARY 19, 2016 SUBJECT: INITIATED BY: PREPARED BY: ACCEPTANCE OF ASSETS OF WEST HOLLYWOOD LIBRARY FOUNDATION AND CONSIDERATION OF RELATED ASSIGNMENT AND ASSUMPTION AGREEMENT CITY ATIORNEY'S OFFICE (Michael Jenkins, City Attorney) DEPARTMENT OF FINANCE AND TECHNOLOGY SERVICES (David A. Wilson, Director)._ >,...,,! STATEMENT ON THE SUBJECT: This item recommends that the City Council accept the transfer of assets of the West Hollywood Library Foundation ("WHLF") remaining at the time of its dissolution and liquidation, and approve a related assignment and assumption agreement whereby the WHLF assigns and the City assumes the rights and obligations of the WHLF and the City indemnifies the Directors of the WHLF from future ~laims related to the dissolution. RECOMMENDATIONS: 1. Staff recommends that the City Council accept the assets of the WHLF pursuant to Resolution No., attached hereto as Exhibit 1; and 2. Approve the Assignment and Assumption Agreement attached hereto as Exhibit 2 as drafted; and 3. Authorize the City Manager and the Director of Finance and Technology Services to take any additional actions needed to receive the assets and implement the Agreement; and 4. Authorize the Director of Finance and Technology Services to budget $805, 719 in revenue in the Debt Funded Capital Projects Fund account for cash and cash equivalents transferred from the WHLF and donations received in FY BACKGROUND ANALYSIS: The WHLF was established as an independent, nonprofit 501 (c)(3) corporation to raise private funds for construction of a state-of-the-art library in the City of West Hollywood ("West Hollywood Library") and the purchase of collections and equipment for the library. WHLF's goal was to raise and contribute $10 million toward the construction of the West Hollywood Library. The West Hollywood Library opened on October 1, 2011 and is a 32,000 square foot LEED-certified building containing collections, event space, AGENDA ITEM 2.00.

2 JANUARY 19, 2016 PAGE2 a coffee shop, and serving as the site of a number of community activities and programs. Although the WHLF did not meet its fundraising goal, it has contributed over $3 million toward the $61 million project, which it raised through a number of campaigns and activities, including private donations, long-term pledges and naming rights agreements. When the capital campaign concluded, the WHLF continued to support the library's operations by sponsoring educational programming and soliciting funds from private donors to pay outstanding construction costs. The WHLF also collaborated with the City of West Hollywood and the Los Angeles County Library System to provide educational and cultural programming. However, because the WHLF's primary purpose was to fund construction of the library, in fiscal year , the WHLF began to evaluate its role in the community. The WHLF became dormant in fiscal year in order to conserve resources by minimizing expenses while continuing to collect on capital pledge payments. Rather than continuing to exist in a dormant state, on July 29, 2015, the WHLF Board of Directors adopted a resolution electing to dissolve and transfer its remaining assets to the City. On May 1, 2008, the City and the WHLF entered into a Memorandum of Understanding (amended and restated on January 27, 2009) (the "MOU"), which established rules and procedures governing the relationship between the City and the WHLF. Section 4.4 of the MOU requires the WHLF to periodically transfer excess donated funds to the City for capital improvements associated with the library. As a non-profit 501(c)(3) organization, the WHLF may transfer its assets remaining at the time of dissolution to tax-exempt organizations such as the City or another 501(c)(3). Because the MOU requires excess funds to be transferred to the City, and the funds were raised to support the library, the WHLF is transferring its remaining assets to the City for continued support of the library. The WHLF proposes to transfer approximately $1.9 million to the City, which consists of approximately $695,000 in cash and cash equivalents and $1,200,000 in pledges receivable, less any reasonable expenses incurred in connection with the dissolution of the WHLF such as the cost of preparation of a final audit and tax return. California Government Code Section authorizes the City Council to accept any gift, bequest, or devise made to the City and dispose of the property in accordance with the terms of the gift, bequest, or devise. Therefore, the City Council may accept the WHLF's remaining assets. Because the WHLF is dissolving and transferring all of its remaining assets to the City, the attached assignment and assumption agreement provides that upon receipt of the remaining assets, the City assumes all of the obligations and responsibilities of the WHLF and will indemnify the WHLF and its Directors from future claims and litigation related to the dissolution and the City's performance after transfer of the assets. The transfer of approximately $695,000 in cash and cash equivalents and $1.2 million in future payments received from pledges will be deposited into the City's Debt Funded Capital Projects Fund and used to pay the debt incurred by the Library Project. This Fund is currently running a deficit that was anticipated and would have been paid down over time as the WHLF transferred donated funds to the City. Upon assumption of the

3 JANUARY 19, 2016 PAGE3 WHLF's remaining assets, the City will directly collect the donations and deposit them into this Fund. CONFORMANCE WITH VISION 2020 AND THE GOALS OF THE WEST HOLLYWOOD GENERAL PLAN: This item is consistent with the City's Primary Strategic Goals: Move Forward on City Parks and Library and Fiscal Sustainability. This item is consistent with the City's General Plan Goal: G-2: Maintain transparency and integrity in West Hollywood's decision-making process. EVALUATION: NIA ENVIRONMENTAL SUSTAINABILITY AND HEAL TH: NIA OFFICE OF PRIMARY RESPONSIBILITY: Department of Finance and Technology Services. FISCAL IMPACT: This item authorizes the Director of Finance and Technology Services to budget $805,719 in revenue in the Debt Funded Capital Projects Fund account for cash and cash equivalents transferred from the WHLF and donations received in FY ATTACHMENTS: 1 - Resolution No. accepting transfer of the WHLF Assets 2 - Assignment and Assumption Agreement 3 - WHLF Resolution Electing to Dissolve 4-MOU

4 Exhibit 1 Resolution accepting transfer of the WHLF Assets

5 RESOLUTION NO A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF WEST HOLLYWOOD ACCEPTING THE ASSETS OF THE WEST HOLLYWOOD LIBRARY FOUNDATION THE CITY COUNCIL OF THE CITY OF WEST HOLLYWOOD DOES HEREBY RESOLVE AS FOLLOWS: SECTION 1. The West Hollywood Library Foundation ("WHLF") was established as an independent, nonprofit 501(c)(3) corporation to raise private funds for construction of a state-of-the-art library in the City of West Hollywood ("West Hollywood Library") and the purchase of collections and equipment for the library. SECTION 2. The West Hollywood Library opened on October 1, 2011 as a 32,000 square foot LEED certified building and is a widely-used community asset. SECTION 3. Recognizing that its purpose had been fulfilled, the Board of Directors of the WHLF made an election to dissolve on July 29, 2015 and transfer its remaining assets to the City. The WHLF has taken the necessary steps to dissolve the 501 (c)(3) corporation, including conducting due diligence to identify and satisfy any and all outstanding creditors, debts and liabilities. SECTION 4. Upon dissolution, the assets of the WHLF consisted of an estimated $695,000 in cash and cash equivalents and $1,200,000 in pledges receivable (collectively, "WHLF Assets"). SECTION 5. The WHLF desires to transfer, and the City desires to accept, the WHLF Assets less any reasonable expenses incurred in connection with the dissolution and have entered into an Assignment and Assumption Agreement setting forth the terms of such transfer. SECTION 6. The City Council hereby accepts the WHLF Assets. SECTION 7. The City Clerk shall certify to the adoption of this resolution and shall cause this resolution and its certification into the Book of Resolutions of the Council of this City. PASSED, APPROVED AND ADOPTED by the City Council of the City of West Hollywood at a regular meeting held this 19th day of January, 2016 by the following vote:

6 Resolution No. 16- Page 2 of 2 AYES: NOES: ABSENT: ABSTAIN: Councilmember: Councilmember: Councilmember: Council member: LINDSEY HORVATH, MAYOR ATTEST: YVONNE QUARKER, CITY CLERK

7 Exhibit 2 Assignment and Assumption Agreement

8 ASSIGNMENT AND ASSUMPTION AGREEMENT This Assignment and Assumption Agreement ("Agreement") is entered into this_ day of January, 2016, by and between the West Hollywood Library Foundation (the "WHLF") and the City of West Hollywood ("City"). RECITALS A. The WHLF was established as an independent, nonprofit 501(c)(3) corporation to raise private funds for construction of a state-of-the-art library in the City of West Hollywood ("West Hollywood Library") and the purchase of collections and equipment for the library. B. The West Hollywood Library opened on October 1, 2011, as a 32,000 square foot LEED certified building and is now a widely-used community asset. Recognizing that its purpose had been fulfilled, the Board of Directors of the WHLF made an election on July 29, 2015 to dissolve and transfer its remaining assets to the City. The WHLF has taken the necessary steps to dissolve the 50l(c)(3) corporation, including conducting due diligence to identify and satisfy any and all outstanding creditors, debts and liabilities. C. By its Resolution No., adopted on January 19, 2016, the City Council made an election to accept the assets and functions of the WHLF and assume the transfer thereof. The assignment is consistent with the Amended and Restated Memorandum of Understanding between the City and the WHLF dated January 27, 2009 ("MOU"), which requires the WHLF to transfer to the City donated funds in excess of what the Fund reasonably determines are needed to sustain its ongoing operations. D. Upon dissolution, the assets of the WHLF consisted of an estimated $695,000 in cash and cash equivalents, and an additional $1,150,000 in pledges receivable pursuant to two pledges consisting of: 1) that certain West Hollywood Library Foundation Donor Agreement dated November 10, 2010, between WHLF and Simon Mani and Daniel Mani (the "Mani Pledge") and that certain Donor Pledge Agreement between the WHLF and Arman and Mark Gabay dated March 8, 2012 (the "Gabay Pledge"). E. The Mani Pledge consisted of a total $1,500,000 and had a remaining receivable balance of $916, as of October 31, The Gabay Pledge consisted of a total $500,000 and had a remaining receivable balance of$232, as of October 31, Collectively, the WHLF's pledge receivables totaled $1,148, as of October 31, F. The WHLF's cash and cash equivalents and pledge receivables shall be referred to as the "WHLF Assets." The WHLF desires to transfer, and the City desires to accept, the WHLF Assets less any reasonable expenses incurred in connection with the dissolution. NOW, THEREFORE, with reference to the foregoing recitals and in reliance thereon and in consideration of the covenants and provisions contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, it is mutually covenanted and agreed by the Parties as follows: 1

9 1. Within thirty (30) days of the execution of this Agreement, the WHLF shall transfer the WHLF Assets as follows: a) all of the remaining cash and cash equivalents in excess of the estimated sum for wrap-up expenses, with an estimated value of approximately $695,000, shall be transferred by check or wire, as mutually agreed between the City and the WHLF and b) the pledge receivables shall be assigned by execution of an assignment agreement between the WHLF and the pledge donors as soon as the donors' consent can reasonably be obtained, authorizing the City to receive future pledge payments to which the WHLF would otherwise be entitled to receive. 2. The City and WHLF hereby agree that WHLF shall relinquish and assign its right, title and interest, and delegate all its obligations, responsibilities and duties related to the WHLF Assets to the City upon transfer of the WHLF Assets pursuant to Section 1 of this Agreement. 3. The City hereby accepts the assignment and assumes all of WHLF's obligations, responsibilities and duties related to the WHLF Assets upon transfer of the WHLF Assets pursuant to Section 1 of this Agreement. 4. The WHLF hereby warrants that it has conducted a reasonable effort to identify any and all outstanding debts, liabilities and creditors during its winding-up process as required by California Corporations Code Section 6713 and has determined that no outstanding debts, liabilities or creditors exist; therefore, all of the WHLF Assets shall be disposed of on dissolution pursuant to Corporations Code Section 6716(a) and transferred to the City pursuant to the WHLF's Articles oflncorporation and the MOU. 5. Notwithstanding Corporations Code Sections 5237 and 6719, the City agrees to defend, indemnify, protect and hold WHLF harmless from any and all claims, actions, judgments, losses, liabilities, damages, and costs (including, without limitation, reasonable attorney's fees) arising out of or in any way related to the dissolution (including claims of unknown creditors incurred prior to dissolution) and the City's performance after assignment of the WHLF Assets. To clarify, neither the WHLF nor its directors shall have financial responsibility for defending or satisfying any claim covered by this indemnification. 6. This Agreement may be executed and delivered in multiple counterparts and each counterpart so delivered which bears the original signature of a Party shall be binding to such Party, and all counterparts shall together constitute one original and the same instrument. IN WITNESS WHEREOF, the Parties have executed this Agreement on the day and year first above written. 2

10 ATTEST: Yvonne Quarker City Clerk APPROVED AS TO FORM: CITY OF WEST HOLLYWOOD By: Name: Paul Arevalo Dated: WEST HOLLYWOOD LIBRARY FOUNDATION Michael Jenkins City Attorney By: Name: Dated:

11 Exhibit 3 WHLF Resolution Electing to Dissolve

12 RESOLUTION A RESOLUTION OF THE BOARD OF DffiECTORS OF 1HE WEST HOLLYWOOD LIBRARY FOUNDATION ELECTING TO DISSOLVE. WHEREAS, the West Hollywood Library Foundation Board of Directors has determined that it is in the best interests of this corporation to be wound up and dissolved; WHEREAS, this corporation is in good standing; and WHEREAS, this corporation has no members. NOW, THEREFORE, BE IT RESOLVED that the officers or directors of this corporation are hereby authorized and directed to file the Certificate of Dissolution as required by Section 6615 of the Corporations Code of California, and to take such further actions as may be necessary or convenient i:o wind up and dissolve this corporation. APPROVED AND ADOPTED THIS 29TH DAY OF JULY, 2015 y A. eymour air, Board of Directors West Hollywood Library Foundation ~,....., <---~~. James L. Arnone Treasurer, Board of Directors West Hollywood Library Foundation

13 Exhibit 4 MOU

14 ' AMENDED AND RESTATED MEMORANDUM OF UNDERSTANDING This Amended and Restated Memorandum of Understanding ("Amended MOU'') is entered into as of January 'Z.12009, by and between the City of West Hollywood ("City"), a California municipal corporation, and the West Hollywood Library Fund ("Fund"), a nonprofit 50l(c)(3) corporation, hereinafter together referred to as "the parties." RECITALS A. The City of West Hollywood strategic plan calls for the replacement of the existing Los Angeles County library with a new, state-of-the-art library with facilities, collections and equipment better suited to the needs and demands of the greater West Hollywood community. B. The cost of LibraryPark will be funded from a combination of public and private sources. C. The West Hollywood Library Fund has been established as an independent, nonprofit 50l(c)(3) corporation to raise private funds for LibraryPark by managing The Campaign for LibraryPark (the "LibraryPark Campaign"). D. The City and the Fund desire to work collaboratively to maximize opportunities for private donations to the LibraryPark Campaign while maintaining transparency and avoiding conflicts of interest. E. The City and the Fund entered into a Memorandum of Understanding as of May 1, 2008, ("Original MOU'') the purpose of which was to establish rules and procedures governing the relationship between the City and the Fund in the pursuit of their common objective. This Amended MOU is intended to replace the Original MOU. NOW, THEREFORE, in consideration of the foregoing, the parties agree as follows: 1. Independence of the Fund 1.1 The Fund will operate independent of the City, and will be governed.by its own governing body. The responsibilities heretofore held by the West Hollywood Community Foundation with regard to fundraising for LibraryPark are hereby transferred to the Fund. 1.2 Members of the Fund's governing body will be selected by a mechanism established in its by-laws or other governing documentto assure their independence; they will not be selected or appointed by the West LA\ WS_BinaryComparison_# vl_LA_ -WeHo Library Fund-# v3_LA_ -WeHo Library Fund--MOU Amendments redlined

15 Hollywood City Council, or any City officers, subsidiary bodies or employees. 1.3 Members of the governing body of the Fund will execute a conflict of interest agreement providing in substance that they must disclose any potential arrangements with the Fund in which they have a financial interest and must refrain from participation in the determination of whether the arrangement constitutes a conflict of interest and whether the Fund may enter into the arrangement. 1.4 The Fund's governing body will establish a gift acceptance committee to review donations in order to assure that neither the donors nor any conditions attached to the donations are inconsistent with the objectives of the LibraryPark Campaign or with goals and values that uriderlie the West Hollywood Strategic Plan. 1.5 The City will continue to administer the Agreement for Services it entered into with the Metropolitan Group until its expiration on June 30, Thereafter, the Fund will have responsibility for administration of the Fund's staff support heeds. The City's Economic Development Department shall provide reasonable cooperation and assistance to the Fund as may be requested to help the Fund fulfill its mission. 1.6 If the Fund raises monies exceeding its $10 million fundraising goal by June 30, 2012, then the Fund shall reimburse the City, to the extent excess monies are available above that $10 million fundraising goal, the $320,000 that the City loaned the Fund for the Metropolitan Group Agreement for Services. 2. Role of the West Hollywood City Government 2.1 The City is responsible for planning, designing, constructing and operating (through the County of Los Angeles) the proposed new West Hollywood library. 2.2 The City may through its officials and employees communicate with the governing body of the Fund and attend its meetings as may be necessary to advocate for the project, report on the status of the project and collaborate on the parties'mutual fundraising objectives, and may participate in events and outreach conducted by the Fund to provide information about the project and the City's vision and role. 2.3 City representatives shall not have a vote on the governing body of the Fund and shall not have greater access to the Fund's records than the public at large. 3. Transparency 3.1 Donations to the Fund shall be accompanied by a signed agreement acknowledging that the donor expects no entitlement or approval from the City in return for the donation. LA\ WS_BinaryComparison_#l9333Slvl_LA_ WeHo Library Fund-# v3_LA_ WeHo Library Fund-MOU Amendments rcdlincd

16 With the exception of those donors who choose to remain anonymous, the identities of all donors to the Fund shall be regularly made available to the public. 4. Duties of the Fund 4.1 The Fund shall maintain and manage the donations in accordance with generally accepted professional standards. 4.2 The donations made to the Fund shall be used exclusively for the benefit of Library Park as it is designed, arranged and constructed by the City, for library programming, service enhancements, collections enhancements, endowments and other community programs.that advance the library's mission, and other appropriate literary, educational and cultural programs, services, collections and capital needs serving West Hollywood, and other activities that are reasonably related to or in furtherance of these charitable purposes, and for no other purpose. 4.3 With the exception of the authority to name the new library building, which shall be retained by the City, the Fund shall manage the donor recognition opportunities identified in Exhibit A to this Amended MOU. The dollar amounts enumerated in Exhibit A are to be considered targets, and the Fund shall have the discretion to make adjustments as may be necessary in its discretion to accomplish the Fund's overall fundraising objectives. The Fund will manage donor recognitions in a manner as not to jeopardize the tax exempt status of the public financing oflibrarypark. 4.4 Not later than thirty (30) days following the end of each calendar quarter this Amended MOU is in effect, the Fund shall transfer to the City donated funds in excess of what the Fund reasonably determines are needed to sustain its ongoing operations. The transferred funds shall be expended by the City for capital improvements associated with the new library project. 5. Term: Restatement Of Original MOU: Release Thereof This Amended MOU shall commence on the date and year first written above and remain in effect until the actions contemplated herein have been fully consummated. This Amended MOU replaces the Original MOU. The Original MOU is hereafter null and void and of no further effect. The City and Fund fully release each other, and any and all of their officials, employees, board members, officers, attorneys, consultants, and other representatives of any type, from any and all liabilities or potential liabilities related in any way to the Original MOU. 6. Binding Effect This Amended MOU is binding on the parties in accordance with its terms. The parties signing below represent and warrant that they have the legal authority to bind the party for whom they are signing. LA\ WS_BinaryComparison_#l933351vl_LA_. WeHo Library Fund-# v3_LA_ WeHo Library Fund-MOU Amendments redlined

17 7. Indemnity Each party agrees to indemnify, defend, and hold harmless the other party, its officers, agents and employees from any and all liabilities, claims, or losses of any nature, including reasonable attorneys' fees and costs of suit, to the extent caused by, arising out of, or in connection with, the indemnifying party's negligent or wrongful acts or omissions arising from its respective activities pursuant to this Amended MOU. 8. Governing Law This Amended MOU shall be governed by the laws of the State of California. 9. Notices. All notices permitted or required under this Amended MOU shall be in writing, and shall be deemed made when delivered to the applicable party at the following addresses (which either party may change at any ~e by giving written notice of the change to the other party) either by first class mail postage prepaid, facsimile or personal delivery: lfto City: City of West Hollywood 8300 Santa Monica Boulevard West Hollywood, CA Attention: City Manager If to Fund: LouAnne Greenwald West Hollywood Library Fund P.O. Box West Hollywood, CA Entire Agreement This Amended MOU represents the entire integrated agreement between the parties and supersedes all prior negotiations, representations or agreements, written or oral, regarding the matters described herein. This Amended MOU may be amended only by a written instrument signed by the parties. LA\ WS_BinaryComparison_#l vl_la_ - WeHo Library Fund-# I v3 _LA_ - WeHo Library Fund--MOU Amendments redlined

18 IN WITNESS WHEREOF, the parties have executed this Amended and Restated Memorandum of Understanding as of the date and year first written above. Dated: January_, 2009 CITY OF WEST HOLLYWOOD, Dated: January aj 2009 Chair on bright LA\ WS_BinaryComparison_#193335lvl_LA_ - WcHo Library Fund-# v3_LA_ - WeHo Library Fund--MOU Amendments redlincd