The Chippewa County Board of Commissioners met in Special
Session on
Present: Commissioners Ted Postula, Don Cooper, Scott Shackleton, Richard Timmer, Bernard LaJoie, Jim Moore and Chairman Earl Kay
Also Present: Marilyn
McDonald,
PUBLIC COMMENTS: None
NEW BUSINESS:
David Jahn, CEO, War Memorial Hospital, and addressed the Board to explain the financing structure that War Memorial Hospital has worked out concerning the issuance of a series of bonds for equipment and renovations to said facility.
Mr. Jahn stated that in 1988 the Hospital built a new addition and at that time the County Hospital Financing Authority was created which was a vehicle, according to State Law, you could have in order to sell bonds and give the hospital the tax exempt financing. The Board has been dormant since about 1998. Mr. Jahn was asking that this Board be reactivated.
Kevin Kalchik, CFO, War Memorial Hospital, explained the information provided to the
Commissioners is to address the request and needs of The Chippewa County War Memorial Hospital to
obtain tax-exempt financing allowable under The Hospital Finance Authority Act,
1969 Public Act 38. This will require
certain actions of the Chippewa County Board of Commissioners in similar nature
to the requirements to issue the Hospital Series A and B Bonds of 1997. The issuance of bonds through a County
Hospital Finance Authority is common financing structure and is used often to
provide less expensive forms of financing to hospitals throughout the State of
1.
the
Hospital?
No. The County Hospital Finance Authority is organized pursuant to 1969 Public
Act 38. The Act specifically provides that the Authority is a public body corporate
and the authority is a separate legal entity from the County. Bonds issued by the
Authority are limited obligations of the Authority and not debt of the County
2. Does Chippewa County pledge its full faith
and credit for the bonds or
guarantee the payment of the principal
or interest of the bonds?
No. The County “does not” pledge its full faith and credit for the bonds or guarantee
the payment of the principal of or interest on the bonds. The debt service on the
bonds is payable by the Hospital pursuant to its obligation to make payment under
the loan agreement.
3. Does the issuance of such bonds limit the
amount of bonds that can be issued by
the County in the future?
No. As a result of the bonds not being obligations of the County, the issuance of
Bonds by the Authority will not have any impact on the ability of the County to issue
bonds for normal County purposes, such as bonds to finance new county buildings
or bonds to finance infrastructure in the County.
4.
issuance of these bonds?
No. The Hospital understands that there are costs
associated with the bond issuance
and that this should not be a cost to the County. The Hospital requests that the
County work cooperatively with the Hospital to minimize any costs associated with
the bond issuance. One example of this would be to utilize joint legal counsel.
However, the Hospital understands the need for the County to have its own legal
Counsel review any and all correspondence, therefore, the Hospital will also pay a
fee to the County for this issuance equal to the legal costs incurred by the County for
independent counsel.
5. What type of time commitment will be
required of the Board of Commissioners
and those appointed to the Hospital
Finance Authority?
Limited. The time commitment of the Board of Commissioners is primarily met by
the authorization and appointment to the Hospital Finance Authority. Those
appointed to the Hospital Finance Authority will have a large time commitment;
however, even this time commitment is expected to be very limited.
Hospital Request to
the Chippewa
1. Adopt
“Resolution Regarding Issuance of Bonds by the
Authority for
the Benefit of
2. Appoint members to the County Hospital Finance Authority
Term Sheet Summary
(Preliminary):
Interest Rates: 4.25% to 4.85% depending on collateral and term
Use
of Proceeds:
.
Renovation & Construction of
∙
Purchase of Capital Equipment for
departments
∙ Refinancing of existing debt
Method of
Bond Issue: The issuance of Bonds will be on one of the following basis:
Series A – Will be issued on a Parity Basis with the 1997 Bonds
Series B – Will be issued on a Non-Parity Basis on one of the following:
∙ Non-Recourse Debt
∙ Capital Lease
Series C – Will be issued on a Non-Parity Basis as non-recourse for refinancing of existing Hospital obligations.
Anticipated Funds
from issuance:
Series A Issue is expected to be $ 2,500,000
Series B Issue is expected to be $ 4,250,000
Series C Issue is expected to be $ 4,150,000
Total Issue is expected to be $10,900,000
Willard “Frenchy” LaJoie, Central Savings Bank President and President of the Hospital Finance Committee, noted that all the financial institutions who will be involved in this venture are fully aware that there is no full faith and credit support behind this issue from the County and they are also aware that any expenses related are going to be paid for by the Hospital. He also noted that Central Savings Bank would be the lead bank.
Commissioner Shackleton asked if once the investment is made and the equipment is in place, how many new jobs would be created for the community.
It was stated that over the last ten years, 325 jobs have been created and it would be anticipated that 5-10 additional jobs would be created.
Commissioner Timmer questioned the time and work involved
for the
Marilyn McDonald,
Chairman Kay stated that there will be no increased work for
the
Phil Wolfe, auditor, said he was concerned with the SCC
Disclosure rules, but the Hospital will be responsible for these. He was also concerned with the activation of
the Hospital Finance Authority. Technically,
a Board should be appointed every year with three members: chairman, treasurer
and secretary and the
Chuck Leonhardt, Gillett, Halvorsen & Leonhardt, noted that he had verified the calculation for the $2,000,000 over five years at 4.75%. The total cost would be $2,250,000 and with the same calculation at 8.25% it is $2,447,000; the savings would be $200,000.
Chairman Kay noted that the Hospital is in a bind and would like to move forward as soon as possible. Chairman Kay asked the board to circumvent the normal procedure for appointment to boards and appoint a committee immediately. Three individuals that were mentioned as potential appointees were Marilyn McDonald, Ron Meister and Bill Lynn. Two of these people are currently on the City/County Building Authority.
Commissioner Cooper asked how long the Hospital had been working on this project and was answered that the Hospital had been working on the project about 2 years, but the bonding issue for only 2 months.
It was moved by Commissioner Timmer, supported by Commissioner LaJoie, to circumvent the normal appointment procedures and appoint Marilyn McDonald, Ron Meister and Bill Lynn to the County Hospital Finance Authority and that this board be appointed annually during the appointments to boards/agencies/authorities.
Commissioner Cooper expressed concern that procedures are in place for appointments and does not feel the need to circumvent the policy.
On the motion on the floor, roll call vote, Commissioners Postula, Cooper, Shackleton, Timmer, LaJoie, Moore and Kay voted yes. The motion carried 7-0.
It was moved by Commissioner Shackleton, supported by Commissioner Moore, to approve the following resolution:
Resolution Regarding Issuance of Bonds by the
Benefit of
WHEREAS, the Chippewa County War Memorial Hospital, Inc. (the “Hospital”) has
requested the Chippewa County Hospital Finance Authority (the “Authority”) to issue bonds (the “Bonds”) the proceeds of which would be used by the Hospital to purchase certain equipment and to finance certain renovations to facilities of the Hospital:
WHEREAS, the Hospital has presented the Board with a preliminary term sheet, a copy of which is attached to this Resolution as Appendix A, regarding the issuance of the Bonds through the Authority;
WHEREAS, the Bonds will be limited obligations of the
Authority and will not constitute general
obligations or debt of the
WHEREAS, prior to the issuance of the Bonds a public hearing (the “Prior Hearing”) with respect to the Bonds will be held in order to satisfy the applicable public hearing requirements of the Internal Revenue Code of 1986, as amended.
NOW, THEREFORE, IT IS RESOLVED by the Board of Commissioners of Chippewa County as follows:
1. The County Board of Commissioners hereby provides its preliminary approval for the Authority to take the initial steps necessary to move forward with the issuance of the Bonds, as set forth in the Term Sheet.
2. The County Board of Commissioners agrees that prior to the issuance of the Bonds, and after the Public Hearing with respect to the issuance of the Bonds, that the Board will consider a formal resolution approving the issuance of the bonds as required by the Internal Revenue Code of 1986, as amended.
3. The County Clerk is hereby directed to provide a certified copy of this resolution to the Authority and to the Hospital.
Draft Term Sheet
Issuance of Bonds for the Benefit of Chippewa County War Memorial Hospital, Inc.
Amount of Bond Issues 2 Series of Bonds, in an aggregate total of approximately $600,000.
Amortization Period and
Repayment Schedule for the
Bonds Series A (Equipment) $2 million principal amount repaid
over 5 year amortization period.
Series B. (Renovation) $2 million principal amount repaid
over 10 year amortization period.
Monthly payments of principal and interest with level debt
service payments for each individual series, which will
result in total annual debt service for years 1 through 5
exceeding total annual debt service for years 6 through 10.
Interest Rate on the Bonds Fixed interest rate for each series of bonds. Series A (Equipment)
will have an interest rate of 4.75%. Series
B (Renovations) will have an interest rate of slightly above
4.75%.
Uses of Bond Proceeds Purchase of equipment (Series A), renovation of facilities
(Series B) and payment of the costs of issuance of the
Bonds.
Issuing Authority The
Exhibit A sets forth a diagram illustrating the issuance
process for the Bonds.
Flow of Funds The Bonds will be sold by the Authority pursuant to a
Trust Indenture. The proceeds of the Bonds will then be
loaned by the Authority to the Hospital pursuant to two
Loan Agreements. The loan repayments required under the
Loan Agreements will be used to pay the debt service on
the Bonds.
Method of
placement to a syndicate of banks lead by Central Savings
Bank. Each bank will execute an institutional investor
letter in connection with the purchase of the Bonds.
Disclosure Document There will not be an official statement or private placement
memorandum prepared in connection with the sale of the
Bonds. Each purchaser will sign an investor letter
certifying that it has completed its due diligence in
connection with its purchase of the Bonds.
Limitations on Debt and
Liens Contained in the l997
Bond Authorizing
Documents The 1997 Loan Agreement and the 1997 Trust Indenture
set forth limitations on the ability of the Hospital to incur
additional indebtedness and to grant liens in connection
with additional indebtedness.
Series A Bonds Issued as
Non-Parity Debt and Secured
By a Lien on the Equipment
Financed with the Bonds The Series A Bonds will be issued on a non-parity basis
with the 1997 bonds, and accordingly the Hospital will
need to demonstrate that it meets the requirements under
Section 5.10(d) of the 1997 Loan Agreement for non-parity
indebtedness. The Hospital will grant a lien pursuant to
Section 5.13(b) of the Loan Agreement to secure the
equipment purchased with such non-parity bonds.
Series B Bonds Issued on
A Parity Basis with the 1997
Bonds The Series B Bonds will be issued as parity debt with the
1997 bonds pursuant to Section 5.10(f) of the 1997 Loan
Agreement, and accordingly the Hospital will need to
demonstrate that it meets the “Required Pro Forma
Coverage” for such parity debt. Additionally, the Hospital
will need to meet the requirements of Section 5.11 of the
Loan Agreement with respect to filing certain documents
with the 1997 Bond Trustee. The Series A Bonds will be
secured by a lien on the Gross Revenues of the Hospital,
and such security will be on a parity basis with the lien that
exists on the Gross Revenues for the benefit of the holders
of the 1997 bonds.
Obligation of the County
To repay the Bonds The debt service on the Bonds will be paid by the Hospital
making payments pursuant to the Loan Agreement.
service on the Bonds. The credit of the County will
not be pledged as security for the Bonds.
Financing Schedule A draft schedule showing the steps that need to be
completed is attached as Exhibit B.
Issuance of Bonds Through a
Pursuant
to a Private Placement Agreement with Local Banks.
The bonds would be issued by the County Hospital Finance Authority pursuant to the terms of an indenture. Local banks would purchase the bonds through a private placement agreement. The proceeds of the Bonds would be loaned to the Hospital and used for the purchase of equipment and for certain renovation projects. The loan repayments by the Hospital would be sufficient to pay the principal and interest on the bonds. Credit enhancement, in the form of a letter of credit or bond insurance, would not be used for the transaction.
A roll call vote on the foregoing resolution was taken and was as follows:
YES: Ted Postula, Don Cooper, Scott Shackleton, Richard Timmer, Bernard LaJoie, Jim Moore and Earl Kay
NO: None
ABSTAIN: None
The resolution was declared adopted.
Having no further business, it was moved by Commissioner
Moore, supported by Commissioner LaJoie, to adjourn. On a voice vote, the motion carried and the
Board did adjourn at
Respectfully submitted,
Diane S. Cork, Clerk Earl Kay, Chairman