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HomeMy WebLinkAbout04 - Hoag Hospital Revenue BondsNovember 8, 1999 Agenda Item No. 4 • CITY OF NEWPORT (BEACH ADMINISTRATIVE SERVICES DEPARTMENT Resource Management Division November 8,1999 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: Dennis C. Danner, Administrative Services Director /10,0. SUBJECT: HOAG HOSPITAL VARIABLE RATE DEMAND REVENUE BONDS DISCUSSION: In 1984, the City issued $61.2 million of Health Facilities Revenue Bonds on behalf of Hoag Memorial Hospital Presbyterian pursuant to the Health Care Facility Revenue Bond Ordinance adopted on February 13, 1984. The bond proceeds were used for the purpose of financing the acquisition, construction, improvement and equipping of the Hospital and acquiring adjacent land and health facilities. All principal and interest on these bonds was • payable by the Hospital. A fee of approximately $250,000 was paid by the Hospital to the City for its assistance in this issue. These funds were deposited to a Paramedic Reserve in the General Fund. In 1992, Hoag Hospital asked the City Council to authorize the issuance of revenue refunding bonds in an aggregate principal amount not to exceed $98.5 million. The transaction proposed by the Hospital was virtually identical to, and was used to repay, the original $61.2 million issued. Bond proceeds in excess of the amount to repay the initial issue were used to fund implementation of the Hoag Master Plan, acquire Hospital equipment, and construct other improvements to the campus. Again, all principal and interest on these bonds was payable by the Hospital. The City Council approved this refunding issue at their meeting of October 12, 1992. A fee of $200,000 was paid by the Hospital to the City for its assistance in this issue and these funds were likewise deposited to a Paramedic Reserve in the General Fund. In 1996, Hoag again approached the City to seek its assistance in issuing an additional $100 million in Variable Rate Demand Revenue Bonds. The Hospital used the proceeds of this issue to finance the acquisition and construction of certain additions and improvements to, and equipment for, the health facilities of the Hospital. The Bonds were again limited obligations of the City and are payable solely from payments or prepayments received by the bond trustee from the Hospital. Once again, a fee of $200,000 was paid by the Hospital to the City for its assistance in this issue. These funds were used for infrastructure projects in the vicinity of the Hospital, including landscaping as part of the Arches Interchange Project. Hoag Hospital Varible Rate Demand Revenue Bonds Page Two Hoag recently approached the City and asked its assistance in issuing not to exceed $125 • million aggregate principal amount of City of Newport Beach Variable Rate Demand Revenue Bonds, Series 1999. The Hospital will use these proceeds to: (1) finance the acquisition and construction of certain additions and improvements to, and equipment for, health facilities located at the campus of Hoag Memorial Hospital Presbyterian, and (2) provide for the payment of bond issuance expenses. The proposed issue provides a number of benefits to the City. First, Hoag will be able to save money using the proceeds of tax exempt bonds to finance the construction and improvements, and purchase equipment; a cost savings that should be passed along to Newport Beach residents in the form of reduced health care costs. Second, Hoag will be able to improve the quality of health care and do so quickly because it will have funds necessary to acquire state -of -the -art equipment and construct improvements to the campus. Finally, Hoag has agreed to once again contribute $200,000 to the City to be used towards a public improvement or other expenditure of benefit to the City as approved by the City Council. It is Hoag's suggestion that these funds be held by the City to pay for the widening of Hospital Road as required by the Circulation Element of the City's General Plan. A City is a successful combination of many factors, including the mix of land uses, the quality of public services, the availability of housing, open space opportunities, and various other amenities. Certainly one of the key factors in achieving a successful community is having a quality health care facility and health care providers. The City is fortunate to have a very high quality hospital in Hoag and its success has attracted a very high quality physician base to our immediate region The perpetuation of this asset is in the City's long term interest. Since there is no cost or risk to the City in approving the issue, it is in the community's interest to do so. RECOMMENDATION: That the City Council approve the sale of not to exceed $125 million of City of Newport Beach Variable Rate Demand Revenue Bonds (Hoag Memorial Hospital Presbyterian), Series 1999. That the City Council further approve the Resolution authorizing the issue, the Loan Agreement, Indenture, Preliminary Official Statement (including Appendix A) and the Bond Purchase Contract, and authorize City staff to take the necessary steps to close the bond sale. The Resolution authorizing the issue is attached to this staff report. All other documents are available in the City Clerk's office for examination. • • RESOLUTION NO. 99 -_ A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF NEWPORT BEACH AUTHORIZING THE ISSUANCE OF NOT TO EXCEED $125,000,000 AGGREGATE PRINCIPAL AMOUNT OF THE CITY OF NEWPORT BEACH VARIABLE RATE DEMAND REVENUE BONDS (HOAG MEMORIAL HOSPITAL PRESBYTERIAN), SERIES 1999 WHEREAS, the City of Newport Beach (the "City") is a municipal corporation and charter city duly organized and existing under a freeholders' charter pursuant to which the City has the right and power to make and enforce all laws and regulations in respect of municipal affairs and certain other matters in accordance with and as more particularly provided in Sections 3, 5 and 6 of Article XI of the Constitution of the State of California and Section 200 of Article II of the Charter of the City (the "Charter"); and WHEREAS, the City Council of the City, acting under and pursuant to the powers reserved to the City under Sections, 3, 5, and 7 of Article XI of the Constitution of the State of California and Section 200 of Article Il of the Charter, has found that the public interest and necessity require the establishment of a program for the authorization, issuance and sale of revenue bonds or notes by the City for the purposes of making loans such as those described herein; and WHEREAS, the City pursuant to Ordinance No. 84-4, has adopted the Health Care • Facility Revenue Bond Ordinance of the City of Newport Beach (the "Law ") to establish procedures for the authorization, issuance and sale of such revenue bonds or notes; and WHEREAS, Hoag Memorial Hospital Presbyterian, a California nonprofit public benefit corporation (the "Borrower") has requested that the City issue its Variable Rate Demand Revenue Bonds (Hoag Memorial Hospital Presbyterian), Series 1999, in one or more series (the "Bonds ") for the purpose of (1) financing the acquisition and construction of certain additions and improvements to, and equipment for, health facilities (collectively, the "Health Facilities ") located at the campus of Hoag Memorial Hospital Presbyterian, One Hoag Drive, Newport Beach, California; and (2) providing for the payment of bond issuance expenses; and WHEREAS, the Borrower is a "participating health institution" and operates a "health facility" as those terms are defined in the Law; and WHEREAS, the loan to be made with the proceeds of said bonds will promote the purposes of the Law by providing funds to pay the cost of acquiring, constructing, rehabilitating or improving a health facility and refinancing indebtedness incurred for the purposes of acquiring, constructing, rehabilitating or improving a health facility; and WHEREAS, pursuant to Section 147(f) of the Internal Revenue Code of 1986 (the "Code "), the Bonds are required to be approved, following a public hearing, by an elected representative of the City, as the governmental party issuing the Bonds, and an elected representative of the governmental unit or units having jurisdiction over the area in which the Health Facilities are located; and DocsscI:2W25.2 WHEREAS, the Health Facilities are located wholly within the City; and • WHEREAS, the City Council of the City is the elected legislative body of the City and is the applicable elected representative required to approve the issuance of the Bonds within the meaning of Section 147(f) of the Code; and WHEREAS, pursuant to Section 147(f) of the Code, the City Council of the City has, following notice duly given, held a public hearing regarding the issuance, execution and delivery of the Bonds, and now desires to approve the issuance of the Bonds; and WHEREAS, there have been presented to this meeting the following: (1) Proposed form of Loan Agreement (the "Agreement ") between the City and the Borrower; (2) Proposed form of Indenture (the "Indenture") between the City and Norwest Bank Minnesota, N.A. (or such other financial institution acceptable to the City and the Borrower), as trustee (the "Trustee "), providing for the authorization and issuance of the Bonds; (3) Proposed form of the Official Statement to be used in connection with the sale of the Bonds (the "Official Statement "); and • (4) Proposed form of Bond Purchase Contract (the `Bond Purchase Contract ") between the City and Merrill Lynch, Pierce, Fenner & Smith Incorporated. (the "Underwriter"). NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Newport Beach, California, as follows: Section 1. The form, terms and provisions of the Agreement be and they hereby are approved and the Mayor or the Mayor's designee is hereby authorized and empowered to execute, and the City Clerk or the City Clerk's designee is hereby authorized and empowered to attest and deliver, the Agreement, in substantially the form presented to and considered at this meeting with such changes as the official executing the same shall deem appropriate and in the best interests of the City, as conclusively evidenced by execution thereof. Section 2. The form, terms and provisions of the Indenture be and they hereby are approved, and the Mayor or the Mayor's designee is hereby authorized and empowered to execute and the City Clerk or the City Clerk's designee is hereby authorized and empowered to attest and deliver to the Trustee, the Indenture, in substantially the form presented to and considered at this meeting with such changes as may be approved by the official executing the same, such approval to be conclusively evidenced by execution thereof. 0 o0cssc1:2WZi.2 2 Section 3. Pursuant to Section 147(f) of the Internal Revenue Code of 1986, this City Council approves the issuance of the Bonds in an aggregate principal amount not to exceed $125,000,000. It is the purpose and intent of the Council that this Resolution constitute approval of the issuance of the Bonds by the applicable elected representative of the issuer and the applicable elected representative of the governmental unit having jurisdiction over the area in which the Health Facilities are located, in accordance with said Section 1470. Payment of the principal of and the redemption premium and the interest on the Bonds shall be made solely from the revenues to be received by the City pursuant to the Agreement, and said Bonds shall not be deemed to constitute a debt or liability of the City. Section 4. The issuance, sale and delivery of the Bonds in one or more series pursuant to the Indenture in an aggregate principal amount of not to exceed $125,000,000 is hereby authorized and approved. Section 5. The Official Statement in the form presented to this meeting be and the same hereby is approved for use by the Underwriter in connection with the public offering of the Bonds with such changes as may be approved by one or more officers of the City, and the Mayor or the Mayor's designee is authorized to execute the final Official Statement relating to the Bonds. The Underwriter is hereby authorized to distribute the Official Statement in preliminary form to potential purchasers of the Bonds, and the Official Statement in final form to actual purchasers of the Bonds. Section 6. The Mayor and the City Clerk (each of whom may sign by facsimile • signature) are hereby authorized and directed to execute, in the name and on behalf of the City, the Bonds and to cause the Bonds to be delivered to the Trustee for authentication and delivery to the Underwriter. 0 Section 7. The Bond Purchase Contract is hereby approved, and the Mayor or the Mayor's designee and the City Clerk or the City Clerk's designee be and hereby are authorized and empowered to execute and deliver the Bond Purchase Contract, in substantially the form presented to and considered at this meeting, with such changes as the officials executing the same shall deem appropriate and in the best interests of the City as conclusively evidenced by their execution thereof. Section 8. The Mayor or the Mayor's designee and the City Clerk or the City Clerk's designee are hereby authorized and directed, jointly and severally, to do any and all things, and to execute and deliver any and all documents which they may deem necessary or advisable, in order to consummate the issuance of the Bonds, including to modify the provisions of the Agreement, the Indenture, the Official Statement and the Bond Purchase Contract to conform to any requirements of a liquidity facility under the Indenture or to remove all references to a liquidity facility from the Agreement, the Indenture, the Official Statement and the Bond Purchase Contract if no liquidity facility is provided under the Indenture and the Borrower provides its own liquidity, and otherwise to carry out, give effect to and comply with the terms and intent of this Resolution and the documents referred to herein. oocssc1:2sw3s 3 Section 9. The City Clerk shall certify to the passage of this resolution by the City • Council of the City of Newport Beach, and it shall thereupon take effect. I hereby certify that the foregoing resolution was adopted by the City Council of the City of Newport Beach at its meeting of November 8, 1999, by the following vote: AYES: Councilmembers: NOES: Councilmembers: ABSTAIN: Councilmembers: ABSENT: Councilmembers: Mayor City Clerk ATTEST: • oocssc12W25.2 q