REPORT TO THE CITY COUNCIL
January 15, 2015
FROM: MICHAEL LIMA, Controller/Finance Director
Finance Department
BY: PHILLIP HARDCASTLE, Principal Accountant-Debt Administration
Finance Department
SUBJECT
Title
TEFRA HEARING - To hear and to consider information concerning the proposed plan of finance providing for the issuance of health facility revenue bonds (the "Bonds") by the Michigan Finance Authority for improvements at St. Agnes Medical Center
1. ***RESOLUTION - Approving the issuance of the Michigan Finance Authority Revenue Bonds (CHE Trinity Health Credit Group), in one or more series, for the purpose, among other things, of refinancing the acquisition, construction, improvement and equipping of health care facilities owned and operated by Saint Agnes Medical Center and certain other matters relating thereto
Body
RECOMMENDATION
Staff recommends that the Council first hold the Tax Equity and Financial Responsibility Act (TEFRA) public hearing and then approve the accompanying resolution approving the plan of finance and related issuance of Health Facility Revenue Bonds by the Michigan Finance Authority (Issuer) on behalf of Trinity Health Corporation, an Indiana nonprofit corporation. Trinity Health Corporation is the sole corporate member of Saint Agnes Medical Center, a California nonprofit corporation. The proposed purpose of the issuance is to (i) refinance bonds issued to improve, furnish, and equip Saint Agnes Medical Center and associated facilities, and (ii) pay certain expenses incurred in connection with the issuance of these bonds.
EXECUTIVE SUMMARY
Trinity Health Corporation (Applicant) is requesting that Council consider information concerning the proposed plan of finance providing for the issuance of one or more series of hospital revenue bonds in an aggregate principal amount not to exceed $1,100,000,000 (Bonds) pursuant to a plan of finance for various capital facilities located in the City of Fresno. The proceeds with respect to capital facilities in the City of Fresno would be utilized for the proposed "Project" which consists of refinancing bonds issued for the previous construction, furnishing and equipping of various hospitals or other health care facilities owned and operated by Trinity Health (St. Agnes Medical Center) located at 1303 East Herndon Avenue; 1111 East Spruce Avenue; 1201 East Herndon Avenue; 1245 East Herndon Street; 1360 East Herndon Avenue; 7130 North Millbrook Avenue; 7202 North Millbrook Avenue; and 1313 E. Herndon Street, all located in the City of Fresno, California. The resolution would also authorize the payment of certain expenses incurred in connection with the issuance of these bonds.
As required by Section 147(f) of the Internal Revenue Code, the Council must hold a public hearing under the provisions of the TEFRA to receive any public testimony regarding the project before it considers authorizing the issuance of bonds for this purpose. Should the City authorize the issuance of bonds, the City of Fresno would have no obligation or liability associated with the financing of these projects.
BACKGROUND
The City has received a request by the Applicant to hold a public hearing regarding a proposed bond issuance, and to authorize the Issuer to proceed with issuance of the Bonds in an aggregate principal amount not to exceed $1,100,000,000, pursuant to a plan of finance of the Applicant for capital facilities located in the City of Fresno and identified as various Saint Agnes Medical Center facilities.
The Issuance includes an amount not to exceed $20,000,000 to refinance projects related to facilities of St. Agnes Medical Center located at 1303 East Herndon Avenue; 1111 East Spruce Avenue; 1201 East Herndon Avenue; 1245 East Herndon Avenue; 1360 East Herndon Avenue; 7130 North Millbrook Avenue; 7202 North Millbrook Avenue; and 1313 E. Herndon Street, all located in the City of Fresno, California (Project). The financing will assist Saint Agnes Medical Center in the continuance of quality health care to the residents of Fresno and the surrounding service area.
The Bonds will be limited obligations of the Issuer, payable only from loan repayments to be made by the Applicant to the Issuers from certain funds and accounts established by or pursuant to the bond indenture(s) under which the Bonds will be issued. The Bonds will not constitute a debt or liability to the City.
The Internal Revenue Code requires the local legislative body to hold a public hearing before it considers authorizing the issuance of such bonds. As the appropriate elected public body with jurisdiction over the Project, the Council must hold a public hearing under the provisions of TEFRA to receive any public testimony regarding the Project before the Council considers authorizing the issuance of the Bonds for this purpose. The Council will need to hold this hearing and call for any public testimony regarding the proposed project financing. No written testimony either for or against the proposal has been received as of today.
Once public testimony has been heard, the attached resolution will need to be voted upon by the Council. If approved by the Council, the resolution will provide authorization to the Issuers to issue hospital revenue and refunding bonds.
The financing cannot proceed without the City of Fresno's approval of the financing. The Issuer has the requisite authority to assist in the financing of facilities for nonprofit organizations, including facilities located outside their respective state.
ENVIRONMENTAL FINDINGS
This item is not a project of the City of Fresno and as such, for purposes of this hearing, the California Environmental Quality Act requirements are not applicable.
LOCAL PREFERENCE
Local preference was not considered because this resolution does not include a bid or award of a construction or service contract.
FISCAL IMPACT
The City has no obligation or liability associated with this financing. The Bonds will not constitute an indebtedness or obligation of, and will not involve a pledge of the good faith and credit of the City. The Bonds will be limited obligations of the Issuer payable only from loan repayments to be made to the Issuer from certain funds and accounts established by or pursuant to the bond indenture(s) under which the Bonds will be issued. The Issuer has no taxing power and the issuance of the Bonds will not obligate the State of California or any political subdivision of the State to levy or pledge any form of taxation for the Bonds or to make any appropriation for the payment of the Bonds.
Attachment: Resolution