REPORT TO THE CITY COUNCIL
FROM: RUTH F. QUINTO, C.P.A., Interim Finance Director/City Controller
Finance Department
BY: PHILLIP HARDCASTLE, Principal Accountant - Debt Administration
Finance Department
SUBJECT
Title
TEFRA HEARING - To hear and to consider information concerning the proposed issuance of tax-exempt Health Facility Revenue Bonds by the Michigan Finance Authority for the purpose of financing, or refinancing to the Borrower, the cost of acquisition, construction, improvement, and equipping of health care facilities in the City of Fresno. Proceeds of the Bonds will be loaned to Trinity Health Corporation, an Indiana nonprofit corporation, and the sole corporate member of Saint Agnes Medical Center, a California nonprofit corporation.
1. ***RESOLUTION - To Approve the issuance Revenue Bonds (Trinity Health Credit Group), by the Michigan Finance Authority, in one or more series, in an aggregate principal amount not to exceed $900,000,000, for the purpose among other things, of financing or refinancing the costs of acquisition, construction, improvement, and equipping of health care facilities owned and operated by Saint Agnes Medical Center and certain other matters relating thereto. (Subject to Mayor’s Veto.)
Body
RECOMMENDATION
Staff recommends the Council first hold the 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 (the “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) finance or refinance the costs of acquisition, improvement, furnishing, and equipping of hospitals or other health care facilities owned and operated by Trinity Health (Saint Agnes Medical Center), and (ii) pay certain expenses incurred in connection with the issuance of the Bonds.
EXECUTIVE SUMMARY
Trinity Health Corporation (the “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 $900,000,000 (the “Bonds”) pursuant to a plan of finance for various capital facilities, including an amount not to exceed $25,000,000 with respect to capital facilities located in the City of Fresno. The proceeds with respect to capital facilities in the City of Fresno would be utilized for (i) the proposed “California 2022 Project” which consists of the financing or refinancing of not more than $25,000,000 relating to additions and improvements to, and equipment for, hospitals and other healthcare facilities owned and operated by Trinity Health at the following location: 1303 E Herndon Avenue, Fresno, California, and other related acquisitions, improvements, equipment, construction and reconstruction located thereon.
As required by Section 147(f) of the Internal Revenue Code, the Council must hold a public hearing under the provisions of the Tax Equity and Financial Responsibility Act (“TEFRA”) within the Internal Revenue Code 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.
Should the City authorize the issuance of Bonds, the City would have no obligation or liability associated with this facility or with these Bonds.
BACKGROUND
The City has received a request by the Applicant to hold a public hearing regarding a proposed bond issuance (the “Bonds”), and to authorize the Issuer to proceed with issuance of the Bonds in an aggregate principal amount not to exceed $900,000,000, pursuant to a plan of finance of the Applicant for various capital facilities, including capital facilities, located in the City of Fresno and identified as various Saint Agnes Medical Center facilities (the “Issuance”).
The Issuance includes an amount not to exceed $25,000,000 to finance or refinance projects related to facilities of St. Agnes Medical Center located at 1303 East Herndon Avenue, in the City of Fresno, California. The property is located in City Council District 6.
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 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 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 Internal Revenue Code requires the local legislative body (the City Council) to hold a public hearing before it considers authorizing the issuance of such bonds. The purpose of this staff report is to facilitate the Applicant’s request for holding the hearing. The attached resolution, if approved by the Council, will provide authorization to the Issuers to issue hospital revenue and refunding bonds.
The first subject item calls for the Council to hold a “TEFRA” hearing. TEFRA requires the local legislative body of a proposed project to notice and conduct a public hearing. The Council will need to hold this hearing and call for any public testimony regarding the proposed project financing.
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 approval is not a project for the purposes of CEQA Guidelines section 15378.
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
Notice