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HomeMy WebLinkAboutItem 09b - Approving Methodist Hospital Bonds DATE: July 17, 2018 TO: Honorable Mayor and City Council FROM: Dominic Lazzaretto, City Manager By: Michael Bruckner, Assistant to the City Manager Laena Shakarian, Management Aide SUBJECT: RESOLUTION NO. 7226 APPROVING THE ISSUANCE OF THE CALIFORNIA STATEWIDE COMMUNITIES DEVELOPMENT AUTHORITY HOSPITAL REVENUE REFUNDING BONDS (METHODIST HOSPITAL OF SOUTHERN CALIFORNIA), SERIES 2018 IN AN AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $300,000,000 FOR THE PURPOSE OF FINANCING AND REFINANCING THE ACQUISITION, CONSTRUCTION, IMPROVEMENT AND EQUIPPING OF VARIOUS HEALTHCARE FACILITIES AND CERTAIN OTHER MATTERS RELATING THERETO Recommendation: Approve SUMMARY Methodist Hospital of Southern California (“Methodist”) has applied to the California Statewide Communities Development Authority (“CSCDA”) for the issuance of up to $300 million of tax-exempt revenue bonds for its medical facility located at 300 W. Huntington Drive in the City of Arcadia. Methodist is now seeking a credit rating which will permit it to issue tax-exempt revenue bonds to pay off a 2015 taxable loan. The refinancing will result in debt service savings and operating flexibility for Methodist Hospital. The tax-exempt bonds are issued per the Tax Equity and Fiscal Responsibility Act (“TEFRA”) and a public hearing is required as part of this process. Therefore, it is recommended that the City Council conduct a public hearing pursuant to TEFRA and adopt Resolution No. 7226 approving a tax-exempt bond financing in the amount of $300 million issued by the California Statewide Communities Development Authority for Methodist Hospital of Southern California. TEFRA Hearing for Methodist Hospital Bonds July 17, 2018 Page 2 of 3 DISCUSSION The California Statewide Development Authority is organized through a joint powers agreement, with the City of Arcadia being one of more than 500 cities, counties, and special districts in California that participate in the program. CSCDA is authorized under its joint powers authority to provide financing of community-based public benefit projects. Among other roles, CSCDA helps local governments build community infrastructure, provide affordable housing, create jobs, and make access available to quality healthcare and education. In 2015, Methodist was issued a ta xable Ginnie Mae loan that was processed through the Federal Housing Authority (“FHA”) under the Department of Housing and Urban Development (“HUD”). The proceeds were used to refinance prior financings that were used to construct a 134-bed patient tower, a 346-stall parking garage, an upgrade to the central plant, and the removal of certain facilities at the hospital. The previous project was based on a number of factors, including physical limitation to the existing facility, increased demand for emergency and other hospital services, and compliance with California Senate Bill 1953 requiring all hospitals to meet certain seismic requirements. Methodist is now seeking a credit rating which will permit it to issue tax-exempt, private activity revenue bonds to pay off the 2015 taxable FHA loan. Pursuant to CSCDA and TEFRA, this type of financing requires the approval of the elected body of the governmental entity having jurisdiction over the area where the project to be financed is located. A TEFRA hearing is mandated by the IRS to provide a reasonable opportunity for interested individuals to express their views, either orally or in writing, on the issuance of bonds and the nature of the improvements and projects for which the bonds will be allocated. The TEFRA notice of public hearing was published on July 2, 2018, in the Arcadia Weekly, exceeding the minimum 14 day noticing requirement. In addition to TEFRA, in order for the CSCDA to issue such bonds, the City must (1) conduct a public hearing allowing members of the public to comment on the proposed Project, and (2) approve of the CSCDA’s issuance of bonds on behalf of the proposed financing. Although the CSCDA will be the issuer of the tax-exempt revenue obligations for Methodist Hospital, the financing cannot proceed without the City of Arcadia’s approval of the financing. Since the City of Arcadia is serving as a host for the issuance of the tax-exempt funds, no official opinion letter is required by the City Attorney. It is important to note that the City of Arcadia has no financial obligation and incurs no financial liability in the issuance of the tax-exempt revenue bonds issued by the CSCDA. The issuance of revenue bonds to pay off the existing loans will provide substantial savings to Methodist, increasing its fiscal solvency in the opportunities for providing quality medical care to the community. TEFRA Hearing for Methodist Hospital Bonds July 17, 2018 Page 3 of 3 Based on the foregoing, it is recommended that the City Council conduct a public hearing pursuant to TEFRA and adopt Resolution No. 7226 approving a tax-exempt bond financing in the amount of $300 million issued by the California Statewide Communities Development Authority for Methodist Hospital of Southern California. ENVIRONMENTAL IMPACT The proposed action does not constitute a project under the California Environmental Quality Act (“CEQA”), and it can be seen with certainty that it will have no impact on the environment. Thus, this matter is exempt under CEQA. FISCAL IMPACT There is no impact to the City of Arcadia. The adoption of the Resolution is merely expressing the City’s support for the CSCDA’s issuance of the bonds to refinance existing capital improvements. It does not commit the City or Arcadia to any financial responsibility or liability in the transaction. RECOMMENDATION It is recommended that the City Council conduct a public hearing pursuant to TEFRA and adopt Resolution No. 7226 approving the issuance of the California Statewide Communities Development Authority Hospital Revenue Refunding Bonds (Methodist Hospital of Southern California), Series 2018 in an aggregate principal amount not to exceed $300,000,000 for the purpose of financing and refinancing the acquisition, construction, improvement and equipping of various healthcare facilities and certain other matters relating thereto. Attachment: 1. Resolution No. 7226 2. Published Public Hearing Notice 3. Appendix A: Detailed Application Background Appendix B: Description of Project and Each Facility to be Refinanced Appendix E: Project Costs 4. Appendix F: Distribution List NOTICE OF PUBLIC HEARING PUBLIC NOTICE IS HEREBY GIVEN that a public hearing will be held by the City Council of the City of Arcadia, California (the “City”) on Tuesday, July 17, 2018, commencing at 7:00 p.m., at the Arcadia City Hall Council Chamber, 240 W. Huntington Drive, Arcadia, California, regarding the proposed issuance by the California Statewide Communities Development Authority of its Hospital Revenue Refunding Bonds (Methodist Hospital of Southern California), Series 2018 (the “Bonds”), to be issued in an aggregate principal amount not to exceed $300,000,000, in one or more series as part of a plan of financing. The proceeds of the Bonds will be loaned to Methodist Hospital of Southern California (the “Borrower”), a nonprofit public benefit corporation organized and existing under the laws of the State of California and an organization described under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, to refinance all or a portion of certain outstanding debt of the Borrower issued in 2015 (the “2015 Loan”) and to finance costs associated with the issuance of the Bonds and the refinancing of the 2015 Loan. The proceeds of the 2015 Loan were used to finance and refinance costs of acquisition, construction, improvement, and equipping of hospital and other health care facilities owned and/or operated by the Borrower (collectively, the “Project”), located at 300 W. Huntington Drive, Arcadia, CA 91007. The facilities are owned and/or operated by the Borrower. The Bonds and the obligation to pay principal of and interest thereon and any redemption premium with respect thereto do not constitute indebtedness or an obligation of the City, the Authority, the State of California or any political subdivision thereof, within the meaning of any constitutional or statutory debt limitation, or a charge against the general credit or taxing powers of any of them. The Bonds shall be a limited obligation of the Authority, payable solely from certain revenues duly pledged therefor and generally representing amounts paid by the Borrower. This public notice is published pursuant to the requirements of Section 147(f) of the Internal Revenue Code of 1986, as amended. Any interested persons may attend or send written comments and make known their view with respect to the Bonds and the location and nature of the Project. Any written comments must be sent to the City Clerk’s Office, 240 W. Huntington Drive, P.O. Box 60021, Arcadia, California, 91066-6021, and clearly marked “Re: California Statewide Communities Development Authority Hospital Revenue Refunding Bonds (Methodist Hospital of Southern California), Series 2018.” Written submissions must be mailed or delivered in sufficient time to be received on or before the public hearing on July 17, 2018. In compliance with the Americans with Disabilities Act, if you need special assistance to participate in a City meeting, contact the City Clerk’s Office at (626) 574-5455 at least three (3) working days before the meeting or time when such special services are needed. This notification will help City staff in making reasonable arrangements to provide you with access to the meeting. /s/ Lisa Mussenden Lisa Mussenden, Chief Deputy City Clerk/Records Manager Publish Date: Monday, July 2, 2018 $250,580,000 (estimated) California Statewide Communities Development Authority Methodist Hospital of Southern California Series 2018 Refunding Bonds CSCDA Appendix A & B &E 06/14/2018 1 Appendix A: Detailed Applicant Background Methodist Hospital of Southern California (MHSC) is a Calfornia not-for-profit general acute care hospital providing a range of inpatient and outpatient services in the San Gabriel Valley in northeastern Los Angeles County. Methodist Hospital of Southern California was founded in 1903 by the Women's Home Missionary Society of the Methodist Church. Having been founded in one of the busiest parts of the country, their full-service hospital has grown significantly in the last 100 years. MHSC currently has 348 licensed beds, are a Medicare 5-Star rated hospital, and treat more than 50,000 patients in the Emergency Department each year. The facility is outfitted with advanced diagnostic technology like the 320-slice CT scanner and high-definition MRI. They also manage state-of-the-art catheterization labs, electrophysiology, and neuro-interventional radiology. Mission, Vision & Values It is the mission of Methodist Hospital to provide high-quality healing services while caring for the patient's emotional and spiritual needs and enabling them to achieve health for life. From our hospital's outset, it was our vision to provide an exceptional patient experience through compassionate care and create lifelong relationships by changing the way health and healthcare are delivered in our community. To meet these goals we instill core values into our staff that keep us focused on the excellent care we aim for. Core values: • INTEGRITY: We are open, honest and trustworthy. We live our values. • RESPECT: We treat each other with dignity and value the ideas and perspectives each individual brings. • ACCOUNTABILITY: We take full ownership of our actions and their outcomes. • INNOVATION: We embrace new ideas and thinking to improve what we do. • SAFETY: We put safety first, for our patients, their families and all who work here. • EXCELLENCE: We advance health through the continuous pursuit of evidence-based, coordinated care. A Full-Service Hospital The facility is equipped to handle virtually every medical situation. Their services range from obstetrics to complex neurosurgery, and several of our departments have been recognized as Centers of Excellence. Appendix B: Description of Project and Each Facility to be Refinanced KeyBanc Capital Markets is proposing a refinancing of the Hospital’s 2015Taxable Ginnie Mae loan. The 2015 Taxable Ginnie Mae loan was processed through the Federal Housing Authority (“FHA”). $250,580,000 (estimated) California Statewide Communities Development Authority Methodist Hospital of Southern California Series 2018 Refunding Bonds CSCDA Appendix A & B &E 06/14/2018 2 Appendix E: Project Costs (Estimated Sources & Uses) Sources of Funds* Series 2018 $250,580,000 Methodist Hospital Par Amount 250,580,000 Premium 23,496,492 Total Sources 274,076,492 Uses of Funds Refunding Amount 271,017,854 Costs of Issuance 3,058,639 Total Uses 274,076,492$ *Preliminary, subject to change $250,580,000 California Statewide Communities Development Authority Methodist Hospital of Southern California Series 2018 Refunding Bonds Distribution List As of 06/12/2018 * Indicates individuals to receive regular working group mailings 1 Borrower Methodist Hospital of Southern California 300 W Huntington Drive Arcadia, CA 91007 *William Grigg Phone: (626) 821-2310 Chief Financial Officer Email: bill.grigg@methodisthospital.org *Katherine Knorr Phone: (626) 574-3401 Controller Email: Katherine.Knorr@methodisthospital.org *Cliff Daniels Phone: Chief Strategy Officer Email: cliffordr.daniels@methodisthospital.org *Pat Trevino Phone: (626) 574-3724 Assistant to Cliff Daniels Email: Pat.Trevino@methodisthospital.org Borrower’s Counsel Davis Wright Tremaine 1201 Third Avenue, Suite 2200 Seattle, Washington 98101-3045 Janet Murphy Phone: (206) 757-8110 Of Counsel Email: janetmurphy@dwt.com Issuer California Statewide Communities Development Authority 1700 North Broadway, Suite 405 Walnut Creek, CA 94596 Jon Penkower Phone: (925) 476-5887 Managing Director Email: jpenkower@cscda.org $250,580,000 California Statewide Communities Development Authority Methodist Hospital of Southern California Series 2018 Refunding Bonds Distribution List As of 06/12/2018 * Indicates individuals to receive regular working group mailings 2 James Hamill Phone: (925) 476-5644 Managing Director Email: jhamill@cscda.org Issuer’s Counsel Orrick, Herrington & Sutcliffe, LLP 400 Capitol Mall # 3000 Sacramento, CA 95814 Brendan LaFountain Phone: (916) 329-4915 Associate Email: blafountain@orrick.com Financial Advisor Warbird Municipal Advisors, LLC 600 Galleria Pkwy, Suite 1400 Atlanta, GA 30339 *Jordan Melick Phone: (713) 231-6366 Managing Director Email: jmelick@warbirdcp.com *Bruce Deskin Phone: (404) 606-1192 Director Email: bdeskin@warbirdcp.com Bond Counsel Squire Patton Boggs (US) LLP 275 Battery Street, Suite 2600 6200 Chase Tower 600 Travis Street San Francisco, California 94111 Houston, Texas 77002 *Robyn Helmlinger Phone: (415) 954-0223 Partner Email: robyn.helmlinger@squirepb.com *John Hutchinson Phone: (713) 437-5603 Partner Email: johnny.hutchinson@squirepb.com $250,580,000 California Statewide Communities Development Authority Methodist Hospital of Southern California Series 2018 Refunding Bonds Distribution List As of 06/12/2018 * Indicates individuals to receive regular working group mailings 3 *Catrina Kohn Phone: (415) 954-0231 Senior Associate Email: catrina.kohn@squirepb.com Underwriter Cain Brothers, A Division of KeyBanc Capital Markets 1 California Street 277 Park Avenue 227 West Monroe Street Suite 2400 40th Floor Ste. 1700 San Francisco, CA 94111 New York, NY 10172 Chicago, IL 60606 *Zachary Kau Phone: (415) 486-3422 Managing Director Mobile: (415) 722 9263 Email: zach.kau@key.com *James Kim Phone: (917) 368-2242 Director Mobile: (347) 200-6764 Email: james.kim@key.com *Natalie Curreri Phone: (312) 730-2707 Vice President Email: natalie.curreri@key.com *Andre Ospital-Cone Phone: (415) 733-2476 Associate Email: andre.ospital-cone@key.com *Eugene Colucci Phone: (212) 297-2729 Analyst Email: eugene.colucci@key.com Underwriter’s Counsel Greenberg Traurig, LLP One International Place Boston, MA 02110 $250,580,000 California Statewide Communities Development Authority Methodist Hospital of Southern California Series 2018 Refunding Bonds Distribution List As of 06/12/2018 * Indicates individuals to receive regular working group mailings 4 *Jean DeLuca Phone: (617) 310-6271 Shareholder Email: delucaj@gtlaw.com *Ben McGuire Phone: (617) 310-6256 Shareholder Email: mcguirebe@gtlaw.com Underwriter’s Counsel for FHA Tiber Hudson LLC 1900 M Street, N.W., Suite 400 Washington, DC 20006 *Rod Owens Phone: (202) 973-0102 Shareholder Email: rdo@tiberhudson.com Auditor KPMG 550 South Hope St, Suite 1500 Los Angeles, CA 90071 Julie Redkar Phone: (949) 885-5570 Partner Email: josredkar@kpmg.com Trustee & Trustee Counsel TBD TBD TBD Place Holder Phone: Title Email: