2014-120-Resolution No. 2014-028 Recorded 2/27/2014 VIE'
DESCHUTES COUNTY OFFICIAL RECORDS OJ 101 4'170
NANCY BLANKENSHIP, COUNTY CLERK
COMMISSIONERS' JOURNAL
LEGAL COUNSEL 02/27/2014 09.22.36 AM
I III IIIIIIIIIIIIIIIIAI
BEFORE THE BOARD OF COUNTY COMMISSIONERS OF DESCHUTES COUNTY, OREGON
A Resolution Approving Issuance of Hospital *
Revenue Bonds, Series 2014 (St. Charles * RESOLUTION NO. 2014-028
Health System) By The Hospital Facility
Authority of Deschutes County, Oregon.
WHEREAS, the Board of County Commissioners of Deschutes County, Oregon ("County")
acknowledges that The Hospital Facility Authority of Deschutes County, Oregon ("Authority") has
received a request from St. Charles Health System, Inc., a nonprofit corporation organized and
existing under the laws of the State of Oregon("Borrower")to issue Revenue Bonds, Series 2014
(St. Charles Health System), in one or more series (the"2014 Bonds"), in an aggregate principal
amount not to exceed $80,000,000; and
WHEREAS, the proceeds of the 2014 Bonds are expected to be used for the purpose of
financing all or a portion of the costs of capital construction, acquisition, development,
improvements, renovations and equipment at the healthcare facilities of the Borrower located in(i)
Deschutes County at: 2500 NE Neff Road, Bend, OR 97701, 2600 NE Neff Road, Bend, OR 97701,
2042 NE Williamson Court, Bend, OR 97701, 2084 NE Professional Court, Bend, OR 97701, 2100
NE Wyatt Court, Bend, OR 97701, 2275 NE Doctors Drive, Suite 5, Bend, OR 97701, 2542 NE
Courtney Drive, Bend, OR 97701, 2965 NE Conners Ave., Suite 127, Bend, OR 97701, 1253 NW
Canal Blvd., Redmond, OR 97756, 1541 NW Canal Blvd., Redmond, OR 97756, 1245 NW 4th
Street, Suite 101, Redmond, OR 97756, 211 NW Larch Ave., Redmond, OR 97756, 213 NW Larch
Ave., Suite B, Redmond, OR 97756, 655 NW Jackpine Ave., Redmond, OR 97756 and 630 N
Arrowleaf Trail, Sisters, OR 97759; (ii) the City of Madras, Oregon at: St. Charles Madras
(formerly Mountain View Hospital) and its outpatient clinic facilities located at 470 NE "A" Street,
480 NE "A" Street and 76 NE 12th Street, each in Madras, Oregon 97741; and (iii)the City of
Prineville, Oregon at Pioneer Memorial Hospital located at 1201 NE Elm Street, outpatient clinic
facilities located at 1103 NE Elm Street, and a new healthcare facility to be located on a 19.5 acre
parcel on the east side of SE Combs Flat Road between Fifth Street to the south and Second Street
to the north, the closest street address being 200 SE Combs Flat Road at the Ochoco Lumber
Company headquarters office, each in Prineville, Oregon 97754 (collectively,the"Projects"); and
WHEREAS, the principal of and interest on the 2014 Bonds will not constitute a debt of the
County nor shall the 2014 Bonds be payable from a tax of any nature levied upon any property within
the County nor any other political subdivision of the State of Oregon. The 2014 Bonds will be payable
only from the revenues and resources provided by the Borrower; and
Page 1 of 4—RESOLUTION NO. 2014-028 (02/26/14)
WHEREAS,the Internal Revenue Code of 1986 (the "Code")authorizes the issuance of
revenue bonds for a"qualified 501(c)(3)entity," such as the Borrower; and
WHEREAS, Section 147(f)of the Code requires that qualified 501(c)(3)bonds be approved by
the applicable elected representatives of the governmental unit having jurisdiction over the area in
which the projects are located and the Board of County Commissioners of Deschutes County are the
applicable elected representatives of the governmental unit having jurisdiction over the portion of the
projects being financed with the proceeds of the 2014 Bonds located in the County; and
WHEREAS,on February 25, 2014,the Authority adopted a Resolution authorizing the
issuance of the 2014 Bonds and the execution and delivery of an Intergovernmental Agreement
("Intergovernmental Agreement")between the Authority,the City of Madras, Oregon, and the City of
Prineville, Oregon,pursuant to ORS 190.010 which designates the Authority as the issuer of the 2014
Bonds. Such Intergovernmental Agreement will help provide cost savings to the nonprofit healthcare
facilities of the Borrower;and
WHEREAS,on February 25,2014,the Common Council of the City of Madras conducted a
public hearing and adopted a Resolution approving the issuance of the 2014 Bonds by the Authority
for the portion of the Projects located in its jurisdiction and authorizing the execution and delivery
of the Intergovernmental Agreement; and
WHEREAS, on February 25, 2014,the City Council of the City of Prineville conducted a
public hearing and adopted a Resolution approving the issuance of the 2014 Bonds by the Authority
for the portion of the Projects located in its jurisdiction and authorizing the execution and delivery
of the Intergovernmental Agreement; and
WHEREAS,on February 25,2014,the Authority conducted a public hearing, adequate notice
of this hearing having been published pursuant to Section 147(f) of the Code,to provide a reasonable
opportunity for members of the public to express their views regarding the issuance of the 2014 Bonds
and the uses and purposes of the proceeds of the 2014 Bonds; and
WHEREAS,a copy of the Public Hearing Report to the Board of County Commissioners
submitted by the Chair of the Authority is attached hereto as Exhibit"A"; and
WHEREAS, the County finds that it would be in the best interest of the County to approve
of the issuance of the 2014 Bonds by the Authority pursuant to the requirements of Section 147(f)
of the Code;
BE IT RESOLVED BY THE BOARD OF COUNTY COMMISSIONERS OF DESCHUTES
COUNTY, OREGON,as follows:
Section 1. As the applicable elected representatives of the governmental unit having
jurisdiction over the Authority and over the area in which a portion of the Projects are located, and
having concluded that a public hearing was validly held to provide a reasonable opportunity for
members of the public to express their views regarding the issuance of the 2014 Bonds and the uses
and purposes of the proceeds of the 2014 Bonds,the Board of County Commissioners of Deschutes
County, Oregon, approves of the issuance of the 2014 Bonds by the Authority.
Page 2 of 4—RESOLUTION NO. 2014-028 (02/26/14)
Section 2. This resolution is effective immediately upon passage.
Dated this 26th day of February,2014.
BOARD OF COUNTY COMMISSIONERS OF
DESCHUTES COUNTY, OR/EON
TAMM BANE Y, Chair u
ANTHONY DEBONE,Vice Chair
ATTEST:
ALAN UNGER, Commissioner
Recording Secretary
Page 3 of 4—RESOLUTION NO. 2014-028 (02/26/14)
PUBLIC HEARING REPORT TO THE
BOARD OF COUNTY COMMISSIONERS OF
DESCHUTES COUNTY, OREGON
RE: Public Hearing Regarding
The Hospital Facility Authority of Deschutes County, Oregon
Revenue Bonds
(St. Charles Health System)
Series 2014
On February 25, 2014, the undersigned Chairman of The Hospital Facility Authority of
Deschutes County, Oregon ("the "Authority") conducted a public hearing in the Boardroom at
St. Charles-Bend, 2500 NE Neff Road, Bend, Oregon, 97701 pursuant to the provisions of
Section 147(f) of the Internal Revenue Code of 1986. The Authority has designated the
Chairman as the hearings official (the "Hearings Official") to conduct such hearing for and on
behalf of the Authority.
Notice of the public hearing was published February 11, 2014 in the Bend Bulletin. The
purpose of the public hearing was to receive oral or written comments from the public regarding
the proposed issuance, sale, execution and delivery of The Hospital Facility Authority of
Deschutes County, Oregon Revenue Bonds (St. Charles Health System), Series 2014 (the "Series
2014 Bonds"), in an aggregate principal amount not to exceed $80,000,000 for the benefit of St.
Charles Health System, Inc., a nonprofit corporation organized and existing under the laws of the
State of Oregon ("Borrower"). The proceeds of the Bonds are expected to be used for the
purpose of financing all or a portion of the costs of capital construction, acquisition,
development, improvements, renovations and equipment at the healthcare facilities of the
Borrower located in (i) Deschutes County at: 2500 NE Neff Road, Bend, OR 97701, 2600 NE
Neff Road, Bend, OR 97701, 2042 NE Williamson Court, Bend, OR 97701, 2084 NE
Professional Court, Bend, OR 97701, 2100 NE Wyatt Court, Bend, OR 97701, 2275 NE Doctors
Drive, Suite 5, Bend, OR 97701, 2542 NE Courtney Drive, Bend, OR 97701, 2965 NE Conners
Ave., Suite 127, Bend, OR 97701, 1253 NW Canal Blvd., Redmond, OR 97756, 1541 NW Canal
Blvd., Redmond, OR 97756, 1245 NW 4th Street, Suite 101, Redmond, OR 97756, 211 NW
Larch Ave., Redmond, OR 97756, 213 NW Larch Ave., Suite B, Redmond, OR 97756, 655 NW
Jackpine Ave., Redmond, OR 97756 and 630 N Arrowleaf Trail, Sisters, OR 97759 ; (ii) the City
of Madras, Oregon at: St. Charles Madras (formerly Mountain View Hospital) and its outpatient
clinic facilities located at 470 NE "A" Street, 480 NE "A" Street and 76 NE 12th Street, each in
Madras, Oregon 97741; and (iii) the City of Prineville, Oregon at Pioneer Memorial Hospital
located at 1201 NE Elm Street, outpatient clinic facilities located at 1103 NE Elm Street, and a
new healthcare facility to be located on a 19.5 acre parcel on the east side of SE Combs Flat
Road between Fifth Street to the south and Second Street to the north, the closest street address
being 200 SE Combs Flat Road at the Ochoco Lumber Company headquarters office, each in
Prineville, Oregon 97754.
At 42C-a.m. the Hearings Official convened the public hearing and requested any oral
or written comments.
No comments, written or oral, were submitted to the Hearings Official. At approximately
o') a.m. the hearing was closed.
Respectfully submitted,
THE HOSPITAL FACILITY AUTHORITY OF
DESCHUTES COUNTY, OREGON
BY:
rags Offi 'al
DATED: February 25, 2014.
OHSUSA:756381814.3
Agenda
MEETING OF THE
HOSPITAL FACILITY AUTHORITY
Of DESCHUTES COUNTY, OREGON
February 25, 2014
7:30 9:00 a.m.
St. Charles Boardroom — 2nd Floor
St. Charles Health System, Inc.
2500 NE Neff Road
Bend, Oregon
Invitees:
Board Members: Alan Unger, Tom Schnell, Stacey Dodson, Craig Apregan and
Summer Sears
Others: Jim Diegel, President/CEO— SCHS
Karen Shepard, Executive Vice President of Finance/CFO - SCHS
Wayne Lowry, Deschutes County Treasurer
Douglas Goe, Partner, Orrick, Herrington & Sutcliffe LLP— Bond
Counsel and Special Council to the Authority
Greg Blond, Senior Associate, Orrick, Herrington & Sutcliffe LLP—
Bond Counsel and Special Council to the Authority
Jennifer Welander, Director of Finance - SCHS
Agenda:
• Approve Minutes of May 20, 2013 Meeting
• Election of Officers
o Chairman
o Vice-Chairman
o Secretary
• Business Update— St. Charles
• Update on Outstanding Obligations of the Authority
• TEFRA Hearing
• Financing Overview and Analysis —St. Charles
• Bond Resolution
• Other Business
StY
Char l e
HEALTH SYSTEM.
February 19, 2014
To: Board of Directors, Hospital Facility Authority of Deschutes County, Oregon
From: Karen M. Shepard, Executive Vice President of Finance/CFO, St. Charles
RE: St. Charles Health System,Inc. 2014 Debt Offering
Overview
In December 2013 the St. Charles Health System, Inc. (SCHS)Board of Directors approved the
issuance $75 million of new debt to be used to finance certain capital improvements. The form.
of debt will be a private bank placement. The issuance is intended to be on a tax-exempt basis
through the conduit issuer, the Hospital Facility Authority of Deschutes County, Oregon (the
Authority). Although a bank private placement, the issuance will be treated as hospital revenue
bonds and is solely the obligation of SCHS.
Financing History and Purpose
SCHS's most recent large-scale financing was completed in 2008 with the issuance of hospital
revenue bonds that were used primarily to refinance outstanding variable rate obligations. The
economic climate and SCHS's financial position at that time resulted in a high cost of capital and
limited SCHS's ability to access capital markets in recent years. Fiscal discipline since 2008 has
significantly improved SCHS's financial position and in December 2012 SCHS was upgraded to
a Moody's A2, stable credit rating.
As we look to the future, SCHS has various building projects planned through 2018 to improve
access to care, patient experience and healthcare value across the Central Oregon region. These
efforts could be funded from free operating cash flows however the capital markets and SCHS's
overall financial position have created the opportunity for affordable financing in the near term.
New capital will provide additional liquidity to SCHS during a time of healthcare transformation,
lower the overall cost of capital to the organization and take advantage of improved capital
market conditions.
Projects
The following capital projects, in addition to much of SCHS's routine capital spending of
approximately $30 million annually, would qualify for application of these tax-exempt financing
proceeds:
• St. Charles Prineville—A new healthcare facility, approximately 60,000 square feet in
size, with twelve inpatient beds and outpatient services including, but not limited to,
primary care, lab, radiology and imaging, emergency and physical therapy in Prineville,
Oregon. Estimated project budget of$30 million with spending occurring from winter
2013 through fall 2015.
• St. Charles Madras—Capital additions and improvements to the existing hospital and
outpatient clinic facilities in Madras, Oregon. Estimated project budget of$12 million
occurring throughout 2014 and 2015.
• St. Charles Bend—Capital additions and improvements to the existing hospital, including
a new integrated Cancer Center building, patient tower remodel and outpatient clinic
facilities in Deschutes County, Oregon. Estimated project budget of$45 million with
spending occurring from 2014 through 2016.
• St. Charles Redmond—Capital additions and improvements to the existing hospital and
outpatient clinic facilities in Deschutes County, Oregon.
Regional Approval Process
SCHS intends to utilize the financing proceeds throughout the Central Oregon region and as a
result needs approval from key governing bodies in each primary jurisdiction. The Hospital
Facility Authority of Deschutes County, Oregon will be the conduit issuer.
In order to invest financing proceeds in projects inside and outside of Deschutes County, Oregon
the Authority needs acknowledgement and approval from Deschutes County, Oregon, the City of
Prineville, Oregon and the City of Madras, Oregon in the form of resolutions and
intergovernmental agreements. As with all debt issued through the Authority SCHS is sole
obligor on the revenue bonds. The Authority, Deschutes County,the City of Prineville and the
City of Madras will have no financial obligations related to this financing. All of the debt
issuance costs and the debt obligation are the sole responsibility of SCHS and are reported in
their entirety in the books and records of SCHS.
SCHS has engaged the legal firm of Orrick,Herrington& Sutcliffe LLP(Orrick) from Portland
to assist with coordinating the tax-exempt related processes and compliance for this debt
issuance. A member from SCHS's management and a representative of Orrick will be in
attendance at an upcoming Deschutes County, Oregon Board of Commissioners,City Council of
Prineville and City Council of Madras meetings to formally present the request to approve the
financing and answer any questions.
Hospital Facility Authority of Deschutes County, Oregon
Series 2008 Bonds -Debt Service as of December 31, 2013
Payments Total
in year ending Interest debt service
December 31, Principal Rate Interest requirement
2014 1,470,000 5.250% 8,082,863 9,552,863
2015 1,570,000 5.500% 8,003,163 9,573,163
2016 1,685,000 6.000% 7,915,419 9,600,419
2017 1,815,000 6.375% 7,814,355 9,629,355
2018 1,960,000 7.250% 7,695,702 9,655,702
2019 2,080,000 7.375% 7,557,375 9,637,375
2020 2,295,000 7.375% 7,402,836 9,697,836
2021 2,480,000 7.375% 7,234,133 9,714,133
2022 2,700,000 7.375% 7,050,588 9,750,588
2023 2,945,000 7.375% 6,851,002 9,796,002
2024 3,180,000 8.000% 6,629,023 9,809,023
2025 3,455,000 8.000% 6,378,425 9,833,425
2026 3,780,000 8.000% 6,101,025 9,881,025
2027 4,110,000 8.000% 5,798,525 9,908,525
2028 4,465,000 8.000% 5,469,225 9,934,225
2029 4,875,000 8.250% 5,107,878 9,982,878
2030 5,310,000 8.250% 4,707,966 10,017,966
2031 5,760,000 8.250% 4,269,581 10,029,581
2032 6,300,000 8.250% 3,792,525 10,092,525
2033 1,835,000 8.250% 3,376,003 5,211,003
2034 2,145,000 8.250% 3,126,131 5,271,131
2035 2,500,000 8.250% 2,948,241 5,448,241
2036 10,240,000 8.250% 2,589,675 12,829,675
2037 11,085,000 8.250% 1,887,084 12,972,084
2038 12,000,000 8.250% 971,128 12,971,128
$ 102,040,000 $ 138,759,871 $ 240,799,871