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HomeMy WebLinkAbout16 - Hoag Hospital 2009 Revenue BondsCITY OF NEWPORT BEACH CITY COUNCIL STAFF REPORT Agenda Item No. 16 May 12, 2009 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: Dennis Danner, Administrative Services Director (949) 644 -3123 ddanner@city.newport-beach.ca.us SUBJECT: Resolution 2009- Hoag Memorial Hospital Presbyterian Series 2009 Health Care Facility Revenue Bonds Issue: Should the City assist Hoag Memorial Hospital Presbyterian in issuing Health Care Facility Revenue Bonds in an amount not to exceed a total of $250 million, the proceeds of which will be used to refund existing auction rate and variable rate bonds previously issued by the City as well as finance new project bonds in an amount not to exceed $20 million? Recommendation: Hold the public hearing and adopt the resolution authorizing: • the sale of not to exceed $250 million of City of Newport Beach Revenue Bonds (Hoag Memorial Hospital Presbyterian) Series 2009; • the execution and delivery of one or more Loan Agreements in substantially the form presented; • the execution and delivery of one or more Indentures in substantially the form presented; • the execution and delivery of one or more Official Statements (including Appendix A) in substantially the form presented; • the execution and delivery of one or more Bond Purchase Contracts in substantially the form presented; and • staff to take the necessary steps to provide for the sale and issuance of the 2009 bonds. Discussion: In 1984, 1992, 1996, 1999, 2005, 2007 and 2008 the City issued similar bonds to assist Hoag Hospital Memorial Presbyterian. The debt service for these bonds is not a City Hoag Memorial Hospital Presbyterian Series 2009 Health Care Facility Revenue Bonds May 12, 2009 Page 2 obligation. The hospital will use the proceeds of this issue (2009) to refinance all or part of the outstanding City of Newport Beach Auction Revenue Bonds (Hoag Memorial Hospital Presbyterian) as well as issue new Revenue Bonds in an amount not to exceed $20 million. In each of the previous issues Hoag Hospital paid an issuance fee to the City that was used for a General Fund paramedic reserve or for infrastructure improvements. Since this issue simply refinances existing Hoag Revenue Bonds issued by the City along with a new small principal amount of project bonds, the City is proposing an administrative fee of $25,000 to compensate for City staff time relating to this issue. All other costs of issuance expenses will be born by the Hospital. This proposed issue provides a major benefit to the Hospital. Because of the uncertain interest rate environment and the instability of auction rate bonds, Hoag will be able to save money using the proceeds of this issue to refund the existing variable interest rate bonds and replace them with a combination of fixed rate bonds and intermediate put bonds. Commonly referred to as "Conduit Debt," it is not unusual for municipalities in California to assist nonprofit charitable organizations such as Hoag with tax - exempt financing of this nature. A significant provision of the agreement between the City and Hoag is that the City incurs no independent financial responsibility for the indebtedness. Existing agreements of this type are disclosed in the City's Comprehensive Annual Financial Report, which is approved by the City's auditors each year. We are unaware of any negative comments by the auditors or creditors or Bond rating agencies concerning the agreements. The limited nature of the City's participation in the financing is also clearly disclosed to investors who purchase the Bonds. The bond offering documents state that neither the full faith nor credit of the City nor the general taxing power of the City or the State of California are pledged in connection with the bond offering. 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. The Resolution authorizing the issue is attached to this staff report. All other documents are available in the City Clerk's office for examination. Public Notice: Public Notice of this hearing was provided as prescribed by law. Hoag Memorial Hospital. Presbyterian Series 2009 Health Care Facility Revenue Bonds May 12, 2009 Page 3 Funding Availability: No City funding is required by this action. Alternative: The alternative is to not assist Hoag Memorial Hospital Presbyterian in the issuance of Health Care Facility Revenue Bonds. Prepared and Submitted by: Dennis C. Danner Administrative Services Director Attachment: Resolution Copies of the Loan Agreement(s), Indenture(s), Official Statement(s), and Bond Purchase Contract(s) are on file in the City Clerk's Office. RESOLUTION NO. 2009- A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF NEWPORT BEACH AUTHORIZING THE ISSUANCE OF NOT TO EXCEED $250 MILLION AGGREGATE PRINCIPAL AMOUNT OF THE CITY OF NEWPORT BEACH REVENUE BONDS (HOAG MEMORIAL HOSPITAL PRESBYTERIAN), SERIES 2009 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 7 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 II 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. 85 -23 and 84-4, has adopted the Health Care and Recreation Facilities 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 "Corporation"), has requested that the City issue its Revenue Bonds (Hoag Memorial Hospital Presbyterian), Series 2009, in one or more series, each such series to bear interest at a fixed or variable interest rate, and from time to time (collectively, the "Bonds ") for the purpose of: (1) financing and refinancing the acquisition and construction of certain additions and improvements to, and equipment for, health facilities (collectively, the "Health Facilities ") located on and about the campus of Hoag Memorial Hospital Presbyterian, One Hoag Drive and Newport Healthcare Center, LLC, 500 -540 Superior Avenue, each in Newport Beach, California; and (2) providing for funding of a bond reserve fund (if necessary) and the payment of bond issuance expenses; and WHEREAS, the Corporation is a "participating health institution" and operates a "health facility" as those terms are defined in the Law; and WHEREAS, the loan or loans to be made with the proceeds of said bonds will promote the purposes of the Law by providing funds to finance or refinance the cost of acquiring, constructing, rehabilitating or improving health facilities and reimbursing the Corporation for certain expenses incurred for the purposes of acquiring, constructing, rehabilitating or improving the health facilities; 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 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 a Loan Agreement for one or more series of Bonds bearing interest at a fixed interest rate (the "Fixed Rate Loan Agreement') between the City and the Corporation; (2) Proposed form of a Loan Agreement for one or more series of Bonds bearing interest at a variable interest rate (the "Variable Rate Loan Agreement' and together with the Fixed Rate Loan Agreement, the "Loan Agreements ") between the City and the Corporation; (3) Proposed form of a Bond Indenture for one or more series of Bonds bearing interest at a fixed interest rate (the "Fixed Rate Bond Indenture ") between the City and Wells Fargo Bank, National Association (or such other financial institution acceptable to the City and the Corporation), as bond trustee (the "Bond Trustee "), providing for the authorization and issuance of the Bonds of one or more series designated therein; (4) Proposed form of a Bond Indenture for one or more series of Bonds bearing interest at a variable interest rate (the "Variable Rate Bond Indenture" and together with the Fixed Rate Bond Indenture, the "Bond Indentures ") between the City and the Bond Trustee, providing for the authorization and issuance of the Bonds of one or more series designated therein; (5) Proposed form of an Official Statement to be used in connection with the sale of one or more series of the Bonds bearing interest at a fixed interest rate (the "Fixed Rate Official Statement,,); (6) Proposed form of an Official Statement to be used in connection with the sale of one or more series of the Bonds bearing interest at a variable interest rate (the "Variable Rate Official Statement" and together with the Fixed Rate Official Statement, the "Officials Statements "); (7) Proposed form of a Bond Purchase Contract to be used in connection with the sale of one or more series of the Bonds bearing interest at a fixed interest rate (the "Fixed Rate Bond Purchase Contract ") between the City and Citigroup Global Markets hie., acting as representative on behalf of itself and J.P. Morgan Securities Inc. (the "Representative" and together with J.P. Morgan Securities Inc., the "Underwriters "), and approved by the Corporation; and (8) Proposed form of a Bond Purchase Contract to be used in connection with the sale of one or more series of the Bonds bearing interest at a variable interest rate (the "Variable Rate Bond Purchase Contract" and together with the Fixed Rate Bond Purchase Contract, the "Bond Purchase Contracts ") between the City and the Representative, and approved by the Corporation. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Newport Beach, California, as follows: Section 1. The respective form, terms and provisions of the Loan Agreements, to be used for the loan or loans, as applicable, 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, one or more Loan Agreements, in substantially the form thereof 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. Section 2. The respective form, terms and provisions of the Bond Indentures 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 Bond Trustee one or more Bond Indentures, in substantially the form thereof 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. 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 $250 million. 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 147(f). Payment of the principal of, redemption premium (if any) and interest on each series of the Bonds shall be made solely from the 3 revenues to be received by the City pursuant to the Loan Agreement related to such series of Bonds, and the 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 from time to time pursuant to one or more Bond Indentures, in an aggregate principal amount of not to exceed $250 million, is hereby authorized and approved. Section 5. Each form of Official Statement presented to this meeting be and the same hereby are approved for use by the Underwriters 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 one or more final Official Statements relating to the Bonds. The Underwriters are hereby authorized to distribute one or more Official Statements in preliminary form to potential purchasers of the Bonds, and one or more Official Statements 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 Bond Trustee for authentication and delivery to or upon the order of the Representative. Section 7. Each form of Bond Purchase Contract presented to this meeting be and the same hereby are 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 one or more Bond Purchase Contracts, 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, but not limited to, modification of the provisions of the Variable Rate Loan Agreement, the Variable Rate Bond Indenture, the Variable Rate Official Statement and the Variable Rate Bond Purchase Contract to conform to any requirements of a credit facility or liquidity facility provider selected by the Corporation and otherwise to carry out, give effect to and comply with the terms and intent of this Resolution and the documents referred to herein. Section 9. Each of the Mayor, the Mayor's designee, the City Clerk or the City Clerk's designee, acting alone, is hereby authorized to execute and deliver any future amendments or supplements to the documents authorized to be executed and delivered pursuant to this Resolution, from time to time, provided that such amendments or supplements are made in accordance with the terms of the respective documents executed in accordance with this Resolution. m u Section 10. The Bonds authorized to be issued pursuant to this Resolution shall be issued in strict compliance with the provisions of the Law. 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 May 12, 2009, by the following vote: ATTEST: AYES: Councilmembers: NOES: Councilmembers: ABSTAIN: Councilmembers: ABSENT: Councilmembers: City Clerk Mayor