HomeMy WebLinkAboutRes 028 - Hospital Facility Debt OfferingDeschutes County Board of Commissioners
1300 NW Wall St., Suite 200, Bend, OR 97701-1960
(541) 388-6570 -Fax (541) 385-3202 -www.deschutes.org
AGENDA REQUEST & STAFF REPORT
For Board Business Meeting of February 26,2014
DATE: February 14,2014
FROM: Wayne Lowry Finance 6559
TITLE OF AGENDA ITEM:
Consideration of Board Signature of Resolution No. 2014-028, Approving Issuance of Hospital
Revenue Bonds by the Hospital Facility Authority of Deschutes County
PUBLIC HEARING ON THIS DATE? No
BACKGROUND AND POLICY IMPLICATIONS:
The Hospital Facility Authority of Deschutes County was established many years ago to provide a
mechanism to allow the issuance of tax-exempt debt to fund Hospital System improvements in
Deschutes County. Board of County Commissioner Alan Unger is a member of the Hospital Facility
Board and currently serves as the Chair. Bonds issued by the Authority are not an obligation of
Deschutes County or the Authority. The bonds are solely the obligation of the St Charles Health
System.
St Charles Health System has made a request of the Authority to issue Bonds in the amount of
$80,000,000 to fund improvements in Deschutes County and in the cities of Prineville and Madras.
Because both Prineville and Madras are outside of Deschutes County, hearings were required to be held
giving citizens of those communities the opportunity to provide input on the proposed Hospital
improvements in their areas. In addition, those cities were required to pass resolutions in support of the
bonds. The Hospital Facility Authority was also required to hold a hearing on the use of the bond
proceeds within Deschutes County. All three of these required hearings were held on Tuesday,
February 25. The results of those hearings will be provided to the Board of County Commissioners as
Exhibit "A" to the resolution on February 26. The issuance of Bonds by the Authority requires
approval by the Deschutes County Board of County Commissioners. The attached resolution 2014
028 sets forth all the details relevant to the bond transaction and once approved will allow for the
issuance of the Bonds.
FISCAL IMPLICATIONS:
No fiscal implications. The Bonds will not be obligations of Deschutes County or the Hospital Facility
Authority but will be solely payable from revenues of the St Charles Health System.
RECOMMENDATION & ACTION REQUESTED:
Approve Resolution No. 2014-028, to authorize the Bond Issue
ATTENDANCE: Wayne Lowry, Deschutes County Finance
Doug Ooe, Orrick Law Firm, representative of St Charles.
DISTRIBUTION OF DOCUMENTS: Copy of signed Resolution to Wayne Lowry and Doug Ooe.
February 7, 2014
To: Wayne Lowry, Finance Director, 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 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 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 hospital 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. The Authority is
governed by an independent Board of Directors comprised of Deschutes County Commission
Alan Unger and community business leaders with financing expertise: Stacey Dodson, Tom
Schnell, Craig Apregan and Summer Sears.
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 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 meeting to formally present the request to
approve the financing and answer any questions.
If there are questions prior to the council meeting please contact Karen Shepard directly at (541)
706-7707 or kmshepard@stcharleshealthcare.org.
LEGAL COUNSEL
For Recording Stamp Only
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
ArrowleafTrail, 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 50 1 (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 ofthe 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
ofthis hearing having been published pursuant to Section 147(f) ofthe 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 ofthe 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 (02/26114)
Section 2. This resolution is effective immediately upon passage.
Dated this 26th day of February, 2014.
BOARD OF COUNTY COMMISSIONERS OF
DESCHUTES COUNTY, OREGON
TAMMY BANEY, Chair
ANTHONY DEB ONE, Vice Chair
ATTEST:
ALAN UNGER, Commissioner
Recording Secretary
Page 3 of 4 -RESOLUTION NO. 2014-028 (02/26/14)
Exhibit"A"
Public Hearing Report to the Board of County Commissioners
P~Uf~N.l46l}{ESOLUTION NO. 2014-028 (02/26114)