Loading...
HomeMy WebLinkAbout24 - Hoag Hospital 2011 Health Care Facility Revenue BondsCITY OF NEWPORT BEACH CITY COUNCIL STAFF REPORT Agenda Item No. 24 January 11, 2011 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: Administrative Services Department Tracy McCraner, Administrative Services Director (949) 644 -3123 or tmccraner(a)newportbeachca.4ov Dan Matusiewicz, Deputy Administrative Services Director (949) 644 -3126 or danm(a)newportbeachca.gov SUBJECT: Resolution 2011 - Hoag Memorial Hospital Presbyterian Series 2011 Health Care Facility Revenue Bonds Issue: Hoag Memorial Hospital Presbyterian ( "Hoag ") desires the City's assistance in issuing Health Care Facility Revenue Bonds in an amount not to exceed a total of $120 million. The proceeds of the revenue bonds will be used to refund existing variable rate bonds previously issued by the City as well as finance various new projects on Hoag's Newport Beach campus. Recommendation: 1) Conduct a public hearing under the requirements of the Tax and Equity Fiscal Responsibility Act (TEFRA) and the Internal Revenue Code of 1986, as amended (the "Code "); and 2) Adopt Resolution No. 2011- authorizing the preparation, execution and delivery of the City of Newport Beach Health Care Facility Revenue Bonds (Hoag Memorial Hospital Presbyterian) Series 2011 in an amount not to exceed $120 million and authorizing the execution and delivery of certain documents and directing certain actions in connection with the issuance, sale and delivery of said bonds. Discussion: 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 Hoag Memorial Hospital Presbyterian Series 2011 Health Care Facility Revenue Bonds January 11, 2011 Page 2 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. Chapter 3.26 of the City's Municipal code allows the City to issue debt to assist in the financing of improvements to nonprofit health care and recreation facilities located within the City so long as such financing results in a significant public benefit. Further, the City may contract with the participating institution to refund or refinance outstanding obligations of the institution incurred to finance the cost of acquiring, constructing, rehabilitating or improving a health or recreation facility, if the City finds that such a refunding or refinancing is in the best interest of the public and either alleviates a financial or operating hardship of the participating institution. Every issuance of bonds for the purposes specified above shall be a limited obligation of the City and shall not constitute a debt or liability of the City. Neither the faith and credit nor the taxing power of the City is pledged to the payment of the principal of or premium or interest on such bonds. This proposed bond issue would benefit Hoag by helping it manage various elements of its debt portfolio while diversifying the financial organizations that provide liquidity support to existing City variable rate bonds with Hoag. Because of the continuing uncertain interest rate environment, Hoag and the finance team will continue to monitor the wisdom of dividing the 2011 issue between fixed rate bonds and variable rate, or intermediate term debt backed by a JP Morgan Chase letter of credit or Hoag Hospital's own credit. In 1984, 1992, 1996, 1999, 2005, 2007, 2008 and 2009 the City issued similar bonds to assist Hoag Hospital Memorial Presbyterian. The debt service for these bonds is not a City obligation. Hoag will use the proceeds of this issue (2011) to refinance the outstanding City of Newport Beach Revenue Bonds (Hoag Memorial Hospital Presbyterian) Series 2009B and 2009C ( "2009 Bonds ") as well as issue new Revenue Bonds in an amount not to exceed $35 million. The 2009 Bonds were issued at an initial interest rate expiring February 7, 2011, and the refinancing allows Hoag to cause new interest rates to be determined for a new term. The City is proposing an administrative fee of $30,000 to compensate for City staff time relating to this issue. All other costs of issuance expenses will be borne by Hoag. In order for all or a portion of the Bonds to qualify as tax - exempt bonds, the City of Newport Beach must conduct a public hearing (the " TEFRA Hearing ") providing members of the community an opportunity to speak in favor of or against the use of tax - exempt bonds for the financing of the Project. Prior to such TEFRA Hearing, reasonable notice must be provided to the members of the community. Following the close of the TEFRA Hearing, the City Council must provide its approval of the issuance of the Bonds for the financing of the Project. Hoag Memorial Hospital Presbyterian Series 2011 Health Care Facility Revenue Bonds January 11, 2011 Page 3 It has been customary for many municipalities in California to assist nonprofit charitable organizations, such as Hoag, to access tax - exempt financing of this nature through what is known as "conduit revenue bonds." The City acts as the conduit to make exempt interest rates accessible to Hoag. Since the City has a limited role in the financing, all documents carefully provide that the City incurs no independent financial responsibility for the indebtedness and is fully indemnified by Hoag for any claims or expenses arising during the life of the bond issue. Existing conduit financing agreements of this type are disclosed in the City's Comprehensive Annual Financial Report. We are unaware of any adverse impacts on the City's credit or bond ratings as result of such conduit bond financings. The limited nature of the City's participation in the financing is also clearly disclosed to investors who purchase the Bonds. The Bonds to be issued by the City will be the sole responsibility of Hoag Hospital, and the City will have no financial, legal obligation, liability or responsibility for the Project or the repayment of the Bonds. All financing documents will contain clear disclaimers that the Bonds are not obligations of the City or the State of California, but are to be paid for solely from funds provided by the Hospital. Environmental Review: This action is not subject to any additional action under the California Environmental Quality Act ( "CEQA "). Pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, the new project being financed has no potential for resulting in physical change to the environment, directly or indirectly, that has not already been mitigated. Public Notice: This agenda item has been noticed according to the Brown Act (72 hours in advance of the meeting at which the City Council considers the item). Notice of the TEFRA Hearing was published 14 days in advance of the public hearing. 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; in that case Hoag would lose significant preparation time in seeking the services of a different conduit bond issuer or would have to access the taxable debt market. Hoag Memorial Hospital Presbyterian Series 2011 Health Care Facility Revenue Bonds January 11, 2011 Page 4 Prepared by: Submitted by: n Matusiewicz racy Mcqoner Deputy Administrative Se 'ces irector Administra roe Services Director Attachment: Resolution The following documents are available for viewing online at www.newportbeachca.gov and in the City Clerk's office at City Hall. Official Statement(s) Loan Agreement(s) Bond Indenture(s) Bond Purchase Agreement(s) RESOLUTION NO. A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF NEWPORT BEACH AUTHORIZING THE ISSUANCE OF NOT TO EXCEED $120,000,000 MILLION AGGREGATE PRINCIPAL AMOUNT OF THE CITY OF NEWPORT BEACH REVENUE BONDS (HOAG MEMORIAL HOSPITAL PRESBYTERIAN), SERIES 2011 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 Xl 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 Califomia 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 2011, in one or more series from time to time, each such series to be distinctly identified and to bear interest at a fixed or variable interest rate (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 (if desired by the Corporation); 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 the Health Facilities and reimbursing the Corporation for certain expenses incurred for the purposes of acquiring, constructing, rehabilitating or improving the Health Facilities; and OHS We t:261057852.7 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 "); OHS We t:261057852.7 2 (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 "Official 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 Inc., 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 one or more of the Underwriters, 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, the City Manager, the Administrative Services Director or the designee of any of them 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, the City Manager, the Administrative Services Director or the designee of any of them 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 $120 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 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. OHS We t261057852.7 . 3 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 $120 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, the City Manager, the Administrative Services Director or the designee of any of them 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, the City Manager, the Administrative Services Director, the City Clerk or the designee of any of them (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, the City Manager, the Administrative Services Director, the City Clerk or the designee of any of them be and hereby are authorized and empowered to execute and deliver one or more Bond Purchase Contracts with Citigroup Global Markets Inc. and/or J.P. Morgan Securities LLC, in substantially the forms 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, the City Manager, the Administrative Services Director, the City Clerk or the designee of any of them are hereby authorized and directed, jointly and severally, to do any and all things, and to execute and deliver any and all documents or certificates which they may deem necessary or advisable, in order to consummate the issuance of the Bonds and securing credit support therefor (if requested by the Corporation) and otherwise to carry out, give effect to and comply with the terms and intent of this Resolution, the documents referred to herein and the actions approved hereby, it being the intent of this resolution that the City Manager should administer the Bonds and the transactions contemplated by the agreements approved hereby in such manner as determined in the best interest of the City without further action of the City Council, provided such action does not subject the City to any out of pocket expenses and is subject to the indemnity of the Corporation substantially in the manner provided in the Loan Agreements. Section 9. Each of the Mayor, the City Manager, the Administrative Services Director, the City Clerk or the designee of any of them, acting alone, is hereby authorized, for and in the name of and on behalf of the City, to do any and all things, and to execute and deliver any, and all documents, which they may deem necessary or advisable in connection with the transactions contemplated by the terms of the respective documents approved hereby (including any tax certificate and agreement incorporated by reference into the Loan Agreements), including but not OHS West261057852.7 4 limited to securing credit support, if any, for the Bonds and (with respect to the City Manager, alone or his designee) any waivers or consents, or (with respect to the City Manager, alone or his designee) any future amendments or supplements, to any of the documents approved hereby if requested by the Corporation from time to time, provided that such amendments or supplements are made, and such waivers or consents are given, in accordance with the terms of the respective documents approved hereby and in furtherance of the transactions as contemplated therein. In addition, and without limifing the foregoing, the City Manager may approve any certifications, waivers, consents or acknowledgements as well as any amendments or supplements to any of the bond documents to which the City is a party relating to the revenue bonds of the City issued in 2008 and 2009 for the benefit of the Corporation, but only to the extent such instruments are entered into in accordance with the terms of the related bond indenture and relate to the (1) interest rate modes, (2) principal payment schedules (whether based on bond maturities or sinking account payments), (3) mechanics for conversion among interest rate modes, (4) addition, substitution or replacement of credit or liquidity support for such bonds, (5) change of remarketing agent, tender agent or trustee, or otherwise, provided that any such action does not subject the City to any additional out -of- pocket expenses and is subject to the indemnity provided to the City by the Corporation substantially in the manner provided in the related loan agreement. 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. OHS We t:261057852.7 5 Section 11. This Resolution shall take effect from and after its date of adoption. ADOPTED, SIGNED AND APPROVED this 11th day of January, 2011. Mayor of the City of Newport Beach ATTEST: City Clerk of the City of Newport Beach APPROVED AS TO FORM: OFFICE OF THE CITY ATTORNEY �:._ "I a�. M. .� PREPARED BY AND APPROVED AS TO FORM: ORRICK, HERRINGTON & SUTCLIFFE LLP, AS BOND COUNSEL TO THE CITY By: Diane S. Potter OHS We t:261057852.7 STATE OF CALIFORNIA COUNTY OF ORANGE I hereby certify that the foregoing Resolution was adopted by the City Council of the City of Newport Beach at a regular meeting thereof held on the 11th day of January, 2011, by the following vote: AYES: Council Members: NOES: Council Members: ABSENT: Council Members: ABSTAIN: Council Members: City Clerk of the City of Newport Beach OHS Ww:261057852.7 7 PROOF OF PUBLICATION STATE OF CALIFORNIA) ) SS. COUNTY OF ORANGE ) I am a citizen of the United States and a resident of the County aforesaid; I am over the age of eighteen years, and not a party to or interested in the notice published. I am a principal clerk of the NEWPORT BEACH /COSTA MESA DAILY PILOT, which was adjudged a newspaper of general circulation on September 29, 1961, case A6214, and June 11, 1963, case A24831, for the City of Costa Mesa, County of Orange, and the State of California. Attached to this Affidavit is a true and complete copy as was printed and published on the following date(s): December 14, 21, 28, 2010 I certify (or declare) under penalty of perjury that the foregoing is true and correct. Executed on December 29, 2010 at Costa Mesa, California Signature NOTICE OF PUBUC HEARING Notice is hereby given that on January 11, 2011, a public hearing as required by Section 147(f) of the Internal Revenue Code (the "Code ") will be held with respect to the proposed issuance by the City of Newport Beach, California (the "City ") of its revenue bonds in one or more series, from time to time, in an amount not to exceed $120 million (the "Bands "). The proceeds of the Bonds will be used by Hoag Memorial Hospital Presbyterian (the "Corporation) and Newport Healthcare Center, LLC ( "Newport ") to finance and refi- nance the cost of acquisition, construction, - improvement, equipping, renovation, rehabilita- tion, remodeling and other capital projects located on and about the hospital campus at One Hoag Drive and on and about the healthcare facility located at 500 -540 Superior Avenue, each in Newport Beach, CA (collectively, the "Project "). Each facility identified above is owned and. operated by the Corporation or Newport, each treated as an organization described in Section 501(c)(3) of the Code. The hearing will commence at 7:00 p.m., or as soon thereafter as the matter can be heard, and will be held at the City Council Chambers, City Hall, 3300 Newport Boulevard, Newport Beach, CA 92663. Interested persons wishing to express their views on the issuance of the Bonds or on the nature and location of the health facilities proposed to be financed or refinanced may attend the public hearing or, prior to the time of the hearing, submit written comments. The Bonds will be issued by the City under 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 of the City to finance the costs of the Project described above and will be limited obligations of the City to be repaid solely from revenues received by the City from the Corporation and Newport. Additional information concerning the above matter may be obtained from and written comments should be addressed to the City Clerk, City of Newport Beach, 3300 Newport Boulevard, Newport Beach, California 92663. Leilani Brown City Clerk of the City of Newport Beach December 28, 2010 Published Newport Beach /Costa Mesa Daily Pilot December 28, 2010 T772