CC SR 20230307 04 - RPV Foundation Staff Report
CITY COUNCIL MEETING DATE: 03/07/2023
AGENDA REPORT AGENDA HEADING: Regular Business
AGENDA TITLE:
Consideration and possible action to authorize proceeding with the necessary steps to
form a City nonprofit foundation.
RECOMMENDED COUNCIL ACTION:
(1) Affirm that the City’s nonprofit foundation is to be a public benefit foundation;
(2) Affirm that the City Council is to serve as the board of directors for the foundation;
(3) Authorize Staff and the City Attorney to prepare and file the necessary organizing
documents to form the nonprofit foundation; and
(4) Select a name for the City’s future nonprofit foundation.
FISCAL IMPACT: The fiscal impact for the development and implementation of the
foundation is approximately $6,100 and is funded by various
accounts in the current FY 2022-23 operating budget. No additional
appropriation is needed.
Amount Budgeted: N/A
Additional Appropriation: N/A
Account Number(s): Various Accounts
ORIGINATED BY: Karina Bañales, Deputy City Manager
REVIEWED BY: Same as above
APPROVED BY: Ara Mihranian, AICP, City Manager
ATTACHED SUPPORTING DOCUMENTS:
A. December 20, 2022 Staff Report
BACKGROUND:
At the December 20, 2022 City Council meeting, Staff presented options for establish ing
a donor program to stimulate philanthropic giving as a way to alleviate costs incurred by
the City including, but not limited, to building new facilities (i.e. City Hall), improving roads,
street median beautification, tree removal or tree planting requests, supporting recreation
programs, and promoting citizen contributions and donations to enrich the quality of life
in the City (Attachment A).
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RANCHO PALOS VERDES
The options presented to the City Council included:
A. Forming a tax-exempt nonprofit foundation (Staff preferred option);
B. Adopting a new City Council policy or expanding Policy No. 37, Naming of Public
Facilities and Placing of Monuments and Other Memorials, to include donor
guidelines; or
C. Developing stand-alone donor guidelines
After considering the three options, the City Council selected Option A, authorizing Staff
to work with the City Attorney’s Office to form a nonprofit foundation, that meets the
qualifications for tax-exempt status under Internal Revenue Code § 501(c)(3).
Additionally, the City Council directed Staff to return at a later date with detailed
information about forming a nonprofit, inclusive of a fiscal impact, for City Council
consideration.
This evening, Staff is presenting the City Council with the next steps to proceed with the
nonprofit formation and requests direction on the following:
• Affirm the type of nonprofit foundation;
• Identifying the foundation’s incorporators;
• Filing the necessary organizing documents to form the nonprofit foundation; and
• Determining the name of the foundation.
DISCUSSION:
The following section discusses in detail each of the steps listed above and provides the
corresponding recommended City Council actions.
Affirm the Type of Nonprofit Foundation
There are three general types of nonprofit foundations in California: public benefit,
religious benefit, and mutual benefit.
Public Benefit– Public benefit foundations are formed for a public or charitable purpose.
Most public benefit corporations are organized for scientific, literary or educational
purposes which benefit the public or charitable purposes which qualify for tax exempt
status under Section 501(c)(3) of the IRS Code.
Religious Benefit– Religious purpose organizations qualify as religious organizations as
well as more formal religious groups.
Mutual Benefit– Mutual benefit corporations are formed to benefit their members. These
organizations typically include trade associations, automobile clubs and social groups.
Based on the descriptions above and the City Council’s discussion at the December 20,
2022 meeting, Staff recommends the City Council affirm that the City foundation to be
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formed should be designated a “public benefit” foundation since it will be formed for
charitable and public purposes.
Affirm the Foundation’s Incorporators
The City Council needs to affirm who will be signing the foundation’s Articles of
Incorporation. Based on the City Council’s discussion at the December 20, 2022 meeting,
Staff recommends the City Council affirm its position to act as the corporation’s governing
body, and that all five Councilmembers are intended to act as incorporators.
Filing the Necessary Organizing Documents to Form the Nonprofit Foundation
Having determined the intent of the foundation and identifying its incorporators, the City
Council will next need to authorize Staff and the City Attorney to file the associated
necessary paperwork. These governing documents will establish the entire City Council
as the governing body, will require the governing body to comply with the California open
meeting laws, and will establish the meetings of the governing body concurrently with
meetings of the City Council.
As discussed at the December 20, 2022 City Council meeting, the foundation will run
similar to the Pepper Tree Foundation formed in the City of Rolling Hills Estates. These
meetings run concurrently with their city council meetings.
Determining the Name of the Foundation
The foundation’s legal name must be registered with the Secretary of State and will be
accepted if the name is not the same as or confusingly similar to an existing foundation’s
name and the name is not misleading to the public. In that regard, Staff seeks City Council
direction regarding the selection of a name of this new nonprofit corporation. Examples
are provided below:
• Rancho Palos Verdes Foundation
• Rancho Palos Verdes Community Foundation
• RPV Community Foundation
• Friends of the City of Rancho Palos Verdes
• Friends of RPV
• RPV Together Foundation
Once the name is selected, the City Attorney’s Office will ensure the name is available
for use and is reserved for the City of Rancho Palos Verdes.
ADDITIONAL INFORMATION:
Foundation Operational Cost
The foundation will not require additional funding for personnel as the oversight will fall
under the City Manager’s Office by a current staff member. However, there are a few
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costs associated with operating the foundation. This includes city attorney fees , operating
costs, and staff time. Below is a cost analysis for creating and operating the City’s
foundation.
Description Operating Cost
City Attorney Fees $5,000
Filing Processing Fee $30
Name of Nonprofit Filing Fee $50
Operating Costs $1,000
Total $6,080
The City Attorney fees include costs associated with ensuring the proper paperwork is
completed and submitted to the California Secretary of State. Staff has verified with the
City Attorney’s Office an estimated amount of $5,000 to complete this filing. It is important
to note that Governor Newsom waived the processing fee for submissions filed between
July 1, 2022 - June 30, 2023 (Senate Bill No. 154). To ensure the City remains eligible
for this benefit, the filing must occur before June 30, 2023. If the filing occurs after the
June 30, 2023, the cost to file is $30.
The liaison for the foundation will be the Deputy City Manager. The operating costs o f
$1,000 include associated supplies and potential training for staff and meetings. Staff
hours committed to the foundation will be based on frequency of receiving donations to
the City for distribution. Staff will post agendas, write staff reports and pre sent before the
City Council before its regularly scheduled City Council meetings. The first year of
operation is estimated to require approximately 80 hours of staff time. Staff will report
back, if needed to the City Council for actual hours spent at the conclusion of the next
fiscal year.
Post-Filing Next Steps
Once these governing documents have been prepared, there will be a few more steps
that must be presented to City Council for authorization:
• Review and approve draft by-laws, and a conflict-of-interest policy
• Authorize Staff to obtain Federal 501(c)(3) tax-exempt status, by applying for
recognition to the Internal Revenue Service (Form IRS 1023). This would be
followed by obtaining California tax-exempt status, by applying for recognition form
the State Franchise Tax Board (California Exempt Organization Annual
Information Return Form 199 or 199N & 3500A).
• Prepare and submit to the state its Initial Report within 90 days of incorporation
(Form SI-100).
• Before commencing the solicitation of donations to the foundation, the corporation
will be required to register with the California Attorney General (Form CT-1;
Government Code §§ 12580 et seq.).
• Lastly, the foundation will need to obtain an employer identification number should
there be any members of staff designated as “employees” of the corporation (Form
IRS SS-4).
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Staff will work with the City Attorney’s Office and present these items before the City
Council at a future City Council meeting for review and execution. Once approved and
executed by the City Council, the Articles of Incorporation must be filed Secretary of State
(Form ARTS-PB-501(c)(3)).
CONCLUSION:
Staff recommends the City Council (1) Affirm that the nonprofit foundation is to be a
public benefit foundation; (2) Affirm that the City Council is to serve as the foundation’s
board; (3) Authorize Staff and the City Attorney to prepare and file the necessary
organizing documents to form the nonprofit foundation; and (4) Select a name for the
City’s future nonprofit foundation.
ALTERNATIVES:
In addition to the Staff recommendation, the following alternative actions are available for
the City Council’s consideration:
1. Do not authorize Staff and the City Attorney to proceed with formation of a nonprofit
foundation.
2. Further discuss the “opportunities and constraints” for forming a nonprofit
foundation.
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