HomeMy WebLinkAbout2000-11-28 - AGENDA REPORTS - TEFRA RESPONSIBILITY ACT (2)PUBLIC HEARING
DATE:
SUBJECT:
DEPARTMENT:
CITY OF SANTA CLARITA
AGENDA REPORT
City Manager
Item to be presented
November 28, 2000
TAX EQUITY AND FISCAL RESPONSIBILITY ACT (TEFRA)
HEARING FOR HENRY MAYO NEWHALL MEMORIAL HOSPITAL
Administrative Services
RMONIM-M•�
City Council open the public hearing, receive testimony, close the public hearing, and adopt
Resolution, approving the issuance by the California Statewide Communities Development
Authority (CSCDA) of not to exceed $55 million aggregate principal amount of insured
health facility revenue bonds for use by Henry Mayo Newhall Memorial Hospital
(HMNMH).
BACKGROUND
Henry Mayo Newhall Memorial Hospital has asked the CSCDA to act as issuer in
connection with the issuance of tax exempt bonds for the purpose of acquisition,
construction, rehabilitation, improvement of property, and restructuring of debt in
connection with their acute health care facility. This request requires the City Council to
hold a public hearing, take public testimony on the proposed project, and approve a
resolution authorizing the issuance of bonds by CSCDA. There is no financial or legal
obligation/liability to the City of Santa Clarita.
The bond proceeds are going to be used for restructuring debt and capital projects. No funds will
be used for operating expenses. By refinancing current obligations at a lower interest rate (81/a%
to 6%), the Hospital will realize a net saving that will be used to retire existing debt. The funds
will also allow the Hospital to roll a $10 million credit line from a private bank into the bond for
seismic retrofit construction performed after the earthquake. As a result, RAINNMH will be the
first Hospital in the State of California to be in seismic compliance with SB 1953.
This TEFRA hearing will allow HMNMH to take advantage of the current interest rates as they
exist today prior to January 2001. By adopting tonight's Resolution, the Council will be assisting
HMNMH in meeting their timelines for a December sale of bonds.
The CSCDA is a Joint Powers Authority (JPA) established by the California State
Association of Counties and the League of California Cities in 1987 to serve as a
public conduit issuer of 'private entities, such as manufacturers, nonprofit agencies, and
Adopted:_ands ltem:..f
TEFRA HEARING FOR
HENRY MAYO NEWHALL MEMORIAL HOSPITAL
November 28, 2000 - Page 2
low-income housing providers, all of which are eligible for tax-exempt financing. Currently,
the JPA has over 240 participants, one of which is the City. CSCDA assumes the legal and
administrative responsibility for financing, as an alternative to a City or County serving as
the conduit issuer. A conduit issuer acts as a pass-through, which enables an agency to
receive the tax-exempt status. This process is similar to the TEFRA hearings the City did
for the YMCA in 1993 and the Bouquet Canyon Seniors Housing project in 1997, and most
recently for the Child and Family Center.
In order for CSCDA to complete the financing, the City, as the local jurisdiction, has been
requested to hold a Tax Equity and Fiscal Responsibility Act (TEFRA) hearing and adopt a
Resolution of support. The Internal Revenue Code requires that a public hearing be held
concerning the proposed financing. The required hearing must be preceded by a notice
published at least 14 days in advance of the hearing. Notice of the proposed hearing was
published in accordance with these requirements.
ALTERNATIVE ACTION
City Council may choose not to approve the issuance of bonds by CSCDA
FISCAL IMPACT
There is no financial or legal obligation/liability to the City. Henry Mayo Newhall
Memorial Hospital is responsible for all payments of the bends. The following is a
summary of the Hospital's intended use of the funds:
$55 million (not to exceed)
$33 million (refinancing current debt at lower interest rate from 81/% to 6%)
$10 million (line of credit from bank rolled into the bond for seismic retrofit)
$10.7 million (issuance costs, bond reserve replenishment, capitalized interest)
$53.7 million (actual amount needed)
ATTACHMENTS
Resolution Approving Tax Exempt Bonds
Letter from Henry Mayo Newhall Memorial Hospital
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Newhall Memorial Hospital "°�'"'�°MS DEPAIIINSANTA
23845 McBean Parkway Valencia California 91355-2083 Telephone (661) 253-8000
Henry Mayo Newhall Memorial Hospital
Bond Refinancing Application
Executive Summary for the Santa Clarita City Council
Purpose:
The purpose of this bond application is for Henry Mayo Newhall Memorial Hospital to
continue its strategic business turnaround plan by restructuring debt and completing a
State -mandated seismic repair and remediation project.
Protect Description:
Henry Mayo Newhall Memorial Hospital will use the bond proceeds to accomplish the
following tasks:
1) Refinance its existing Office of Statewide Health Planning and Development
insured debt (1988 Series A Bonds) with an outstanding balance in the amount
of $33,710,000. The interest rates on the bonds range from 7.5% to 8% and
mature on October 1, 2018. This refinancing will result in net present value
savings of $4.7 million or 14%.
2) Refinance two uninsured bridge loans issued by Imperial Bank for the purpose
of completing our earthquake repairs and seismic retrofit project. Two Imperial
Bank loans were made for a total of $10 million. Although Federal Emergency
Management Agency funds of $13.5 million were made available to Henry Mayo
Newhall Memorial Hospital, along with $9.5 million in insurance proceeds, these
amounts fell considerably short of the more than $35 million needed to complete
earthquake repairs and seismic retrofits.
3) Fund current earthquake repair and seismic remediation project outstanding
payables of approximately $3 million.
4) Fund the Debt Service Reserve Fund, original issue discount, costs of issuance,.
Office of Statewide Health Planning And Development premiums and fees, and
capitalized interest.
Project Readiness:
The refinancing of Henry Mayo Newhall Memorial Hospital's debt will take place at
closing. The Advisory Loan Committee of Cal -Mortgage, a division of the Office of
Statewide Health Planning and Development, unanimously approved our refinancing
application at their hearing held on October 18, 2000, and agreed with our efforts to
proceed with refinancing prior to December 31, 2000, in order to save additional costs
of issuance expense associated with a second bond issue in 2001.
Page i of 3
Excellence
ere ou ive
Application of Bond Proceeds:
Item
Amount
Retire existing debt
$33,710,000
Retire Imperial Bank loans
$10,000,000
Outstanding earthquake repair/seismic remediation payables
$3,000,000
Debt Service Reserve Fund, original Issue discount, costs of issuance,
Office of Statewide Health Planning And Development premiums and fees,
and capitalized Interest
$6,990,000
TOTAL
$53,700,000
Service area ppulation growth:
Henry Mayo Newhall Memorial Hospital is the only hospital in the Santa Clarita Valley,
providing medical care to a service area of 450 square miles, the largest in terms of
geographic size in all of Los Angeles County. Henry Mayo Newhall Memorial
Hospital's utilization has increased substantially over the past four years, as evidenced
in the chart below:
Total population in the Santa Clarita Valley is expected to grow by 242% from 1998 to
20301. The total demand for inpatient beds in the Santa Clarita Valley is projected to
'"Population Projections, Demographic Analysis and Healthcare Services Demand
Forecast for the Santa Clarita Valley," prepared by Chi Systems in 1999, and updated 7/00.
Page 2 of 3
Percent
Increase
Fiscal Year Ending September 30
Hospital utilization
1996-1999
1999
1998
1997
1996
Emergency visits
17.9%
27,945
25,881
24,405
23,707
Outpatient surgeries
44.6%
2,942
2,415
2,179
2,035
Outpatient surgery
minutes
84.5%
220,351
189,335
160,986
119,455
Inpatient discharges
9.9%
9,066
8,951
8,575
8,253
Inpatient bed days
10.9%
50,518
50,548
50,268
45,557
Average length of stay
.9%
5.57
5.65
5.86
5.52
Acute occupancy
13.9%
77.45%
78.4%
76.8 1
71.8%
Total population in the Santa Clarita Valley is expected to grow by 242% from 1998 to
20301. The total demand for inpatient beds in the Santa Clarita Valley is projected to
'"Population Projections, Demographic Analysis and Healthcare Services Demand
Forecast for the Santa Clarita Valley," prepared by Chi Systems in 1999, and updated 7/00.
Page 2 of 3
grow from 420 in the year 2000 to 903 by the year 2030, based on the population
growth and the aging of the population.
Highlights of tumaround strategy,
Henry Mayo Newhall Memorial Hospital must prepare to respond to this growth by
successfully accomplishing Its business plan and turnaround strategy that has been
developed which includes the following tasks:
A) Review and renegotiation of existing insurance payer contracts;
B) Improvement in physician practice patterns, with a particular focus on reduction,
where appropriate, in the Average Length of Stay for Medicare patients;
C) Expense reductions in supplies and purchased services;
D) Changes in departmental leadership;
E) Debt restructuring.
Henry Mayo Newhall Memorial Hospital is proud to be among California's first hospitals
to be fully structurally compliant with the seismic requirements of Senate Bill (SB)1953.
Although SB 1953 compliance, coupled with our earthquake repair costs, has severely
compromised our financial position, we believe a financial turnaround is likely, and the
expeditious completion of this bond refinancing is vital to this process.
Page 3 of 3
CITY OF SANTA CLARITA
NOTICE OF PUBLIC HEARING
TO CONSIDER ISSUANCE OF SPECIAL TAX BONDS
BY CALIFORNIA STATEWIDE
COMMUNITIES DEVELOPMENT AUTHORITY
OF ITS TAX-EXEMPT OBLIGATIONS
IN AN AGGREGATE PRINCIPAL AMOUNT
NOT TO EXCEED $55,000,000
PUBLIC NOTICE IS HEREBY GIVEN:
A Public Hearing will be held before the City Council of the City of Santa Clarita to consider
issuance of special tax bonds by California Statewide Communities Development Authority
(Insured Health Facility Revenue Bonds) of its tax-exempt obligations in an aggregate principal
amount not to exceed $55,000,000. Proceeds of the obligations are to be made available to
Henry Mayo Newhall Memorial Hospital, a California non-profit public benefit corporation,
which has applied for the financial assistance of the Authority in the financing and refinancing
of certain acquisitions, construction, rehabilitation, remodeling and other capital improvements
with respect to the Hospital's acute health care facility. The Project will be located at 23845
McBean Parkway, Valencia, California 91355-2083. The Project will be owned and operated by
the Hospital.
The public hearing is intended to comply with the public approval requirements of Section
147(f) of the Internal Revenue Code of 1986.
The hearing will be held by the Santa Clarita City Council in the City Hall Council Chambers,
23920 Valencia Blvd., 1st Floor, on the 28th day of November 2000, at or after 6:30 p.m.
If you wish to challenge this action in court, you may be limited to raising only those issues you
or someone else raised at the public hearing described in this notice, or in written
correspondence delivered to the City Council, at, or prior to, the public hearing.
Proponents, opponents, and any interested persons may appear and be heard on this matter
at that time. Further information may be obtained by contacting the Administrative Services
Department at (661) 255-4371, Santa Clarita City Hall, 23920 Valencia Blvd., Suite #301,
Santa Clarita, CA.
Dated: November 13, 2000
Sharon L. Dawson, CMC
City Clerk
Publish Date: November 14, 2000
council \ HMNMH-Nond.doc