Tuesday, September 29, 2009

Health & Hospitals - 2nd Public Notice on the New Wishard Project

On Friday, September 25, the Health & Hospitals Corporation published two public notices in the Indianapolis Star. The first was required by law since they intend to issue bonds secured by property taxes. I mentioned that notice in my 'Um - What Happened to No Property Taxes for New Wishard Project' entry.

The second public notice may not be required by any law and may be H&H's attempt to link the price tag and the project description to the upcoming referendum. To say that the referendum question is poorly written is to be kind; rather it is decidedly propaganda without reference to any facts a discerning voter might want to consider, like price tag and project description.

I will cut and paste the 2nd notice below, so you can read it for yourself.

What I see is an English version of the shorter, first notice, with more detail that I hope the public does take the time to read. What I see as items of interest are briefly put:

1) new Wishard project is described as the acquisition of land, construction of and equipping of a medical complex (two or more buildings related to the dispensing of health care), construction of least one parking garage and/or parking lot, and construction of a power plant.

2) they will finance the project by entering into a lease with the Indianapolis-Marion County Building Authority and BOTH entities will float bonds -- why is not explained. H&H will float General Obligation Bonds secured with property taxes. IMCBA will issue Revenue Bonds secured by the lease payments to be made by H&H. No indication is made as to why both bodies would issue bonds, or indeed, why the IMCBA need be involved at all in this project.

3) the total of all bonds issued by both bodies combined will not exceed $703,040,000 in principle, not exceed 30 years in payback time, not exceed 6.16% interest, and not exceed $830,478,858 in total interest paid over the 30 years. These numbers do not include the Build America Bonds issued by the federal government, estimated elsewhere to be about $120,000,000 in total interest to be paid by those bonds. So, the total payback could be as high as $1,653,518,858. These numbers also do not include any money, such as the $150,000,000 H&H has already saved in cash for this project. There is no indication in the notice of how much of the total bonds shall be issued by H&H and how much by IMCBA.

4) the maximum annual lease to be paid by H&H to IMCBA is $54,807,604 which is estimated would cause a maximum increase in property tax rates of $0.1494 per $100 of assessed value. Not mentioned is that this amount would be outside of the property tax caps now law in Indiana.

5) the current debt plus lease obligations currently held by H&H and repaid by property taxes is $41,730,000. The total of debt plus lease obligations currently held by all taxing units in Marion County combined and repaid by property taxes is $2,160,112,176, or 5.8878% of the total assessed value of Marion County.

Not said in the notice, but easily derived is that the new Wishard project would increase the total debt plus lease obligations currently held by all taxing units in Marion County combined and repaid by property taxes by a third.

6) the notice links the bonds to the approval of the referendum on November 3, 2009.

Following is the public notice itself.

THE HEALTH AND HOSPITAL CORPORATION OF MARION COUNTY, INDIANA NOTICE OF PRELIMINARY DETERMINATION BY THE BOARD OF TRUSTEES OF THE HEALTH AND HOSPITAL CORPORATION OF MARION COUNTY, INDIANA, TO ISSUE GENERAL OBLIGATION BONDS AND TO ENTER INTO A PROPOSED LEASE OR LEASES OF FACILITIES OPERATED OR TO BE OPERATED BY THE HEALTH AND HOSPITAL CORPORATION IN CONNECTION WITH THE WISHARD HOSPITAL PROJECT

Registered voters residing within Marion County, Indiana (the “County”), hereby are given notice that the Board of Trustees (the “Board”) of The Health and Hospital Corporation of Marion County, Indiana (the “Health and Hospital Corporation”), preliminarily has determined, at its meeting held on September 22, 2009: (1) that a need exists for all or any portion of the construction and equipping of a replacement hospital and related facilities for Wishard Health Services currently located at 1001 West Tenth Street (the “Wishard Complex”), together with land acquisition and site development related thereto and all projects and activities related to any of the foregoing, including, but not limited to, all or any portion of the following: (a) acquisition of land and any improvements located thereon and any site development related thereto, (b) renovation and equipping of any such buildings, and the construction and equipping of one or more buildings which will replace the existing hospital and related facilities for the Wishard Complex and provide all or any portion of (i) inpatient services, (ii) diagnostic and treatment, (iii) clinical support, (iv) non-clinical support, (v) offices and education, and (vi) public and building functions, (c) construction and equipping of a new ambulatory care building, (d) construction and equipping of one or more related parking garages and/or surface lots, (e) construction and equipping of a central plant for all of the foregoing facilities, and (f) all projects related to any of the projects or facilities described in clauses (a) through and including (e) (clauses (a) through and including (f), collectively, the “Wishard Hospital project”); and (2) to the extent permitted by law to take all of the necessary steps to finance all or a portion of the costs of all, or as much as is possibly based on the facts and circumstances at the time, of the Wishard Hospital project by: (a) entering into a proposed lease or leases (collectively, the “Lease”) between the Indianapolis-Marion County Building Authority (the “Building Authority”), as lessor, and the Health and Hospital Corporation, as lessee, relating to all or any portion of the Wishard Hospital project operated or to be operated by the Health and Hospital Corporation; and (b) issuing one or more series of general obligation bonds of the Health and Hospital Corporation (the “General Obligation Bonds”). The Building Authority will issue one or more series of revenue bonds, as lessor, secured by and payable from the lease payments under the Lease (the “Revenue Bonds”).

Each series of the General Obligation Bonds and the Revenue Bonds (collectively, the “Bonds”) will have a maximum term of 30 years. The Bonds will be issued in an original aggregate principal amount not to exceed $703,040,000, or such greater amount in the case of the issuance of any bonds, all or any portion of which will be used to refund all or any portion of the Bonds. The proposed term of any Lease entered into in connection with the Revenue Bonds will not exceed 30 years, beginning on the date each such Lease is executed by the Health and Hospital Corporation. Based on an estimated maximum interest rate that will be paid in connection with the Bonds of 6.16% per annum, the total interest cost associated therewith will not exceed $830,478,858 (which amount is net of any funds expected to be received by or on behalf of the Health and Hospital Corporation or the Building Authority from the United States of America as a result of any series of the Bonds being issued as Build America Bonds pursuant to Section 54AA of the Internal Revenue Code of 1986, as amended (the “Code”), as Recovery Zone Economic Development Bonds pursuant to Section 1400U-2 of the Code or as any other type of tax credit bond pursuant to the Code (collectively, the “Tax Credit Bonds”)), not taking into account any funds of the Health and Hospital Corporation or the Building Authority available for capitalized interest.

Including interest costs, the maximum annual lease rental to be paid by the Health and Hospital Corporation under the Lease is $54,807,604 (which amount is net of any funds expected to be received by or on behalf of the Building Authority from the United States of America as a result of any series of the Bonds being issued as Tax Credit Bonds), and the maximum total lease rental over the term of the Lease is $1,478,711,254 (which amount is net of any funds expected to be received by or on behalf of the Building Authority from the United States of America as a result of any series of the Bonds being issued as Tax Credit Bonds), not taking into account any proceeds of the Bonds deposited in a debt service reserve fund for the Bonds. The Health and Hospital Corporation’s: (i) total debt service fund tax levy for 2007 pay 2008 (which is the most recent certified tax levy) is $3,714,897; and (ii) debt service fund tax rate for 2007 pay 2008 (which is the most recent certified tax rate) is $0.0085 per $100 of assessed value. The estimated maximum increase in the debt service fund tax levy for the Health and Hospital Corporation and the estimated maximum increase in the debt service fund tax rate for the Health and Hospital Corporation after the issuance of the Bonds are anticipated to occur in 2036 pay 2037 and will be $54,807,604 and $0.1494 per $100 of assessed value, respectively, as a result of the payment of the debt service on the General Obligation Bonds and the lease rentals under the Lease.

The net assessed value of taxable property within the County, which is coterminous with the jurisdiction of the Health and Hospital Corporation, as shown by the last, complete and final assessment for state and County taxes (which is for 2008 pay 2009), is in the amount of $36,686,229,690 (the “Net Assessed Value”). The aggregate amount of the Health and Hospital Corporation’s debt service payments on bonds and lease rental payments under leases secured by ad valorem property taxes in 2009 is $4,314,980. Such amount divided by the Net Assessed Value is equal to 0.0118%. The projected maximum aggregate amount of the Health and Hospital Corporation’s debt service payments on bonds currently outstanding, together with the General Obligation Bonds, and lease rental payments under leases currently in effect, together with the Lease, which are secured by ad valorem property taxes, is $54,807,604. Such amount divided by the Net Assessed Value is equal to 0.1494%.

The sum of the Health and Hospital Corporation’s currently outstanding long-term debt, together with any bonds secured by leases entered into by the Health and Hospital Corporation and currently in effect, all of which are secured by ad valorem property taxes, is $41,730,000. The sum of the outstanding long-term debt of all other taxing units in the County, as of September 2, 2009, together with any bonds secured by leases entered into by all other taxing units in the County and in effect as of September 2, 2009, all of which are secured by ad valorem property taxes, is estimated to be $2,118,272,176. The aggregate of such amounts is $2,160,002,176. Such amount divided by the Net Assessed Value is equal to 5.8878%.

The proposed payment of debt service on the General Obligation Bonds or lease payments under the Lease must be approved at the special election to be held in the County on November 3, 2009, on the following public question:

“Shall the Health and Hospital Corporation of Marion County, Indiana, issue bonds or enter into a lease to finance safe, efficient and functional facilities for the Wishard Hospital project:
1.to allow Wishard to provide access to care for all residents of Marion County, including people who are seniors, poor, uninsured or vulnerable regardless of their ability to pay; and

2.to allow Wishard to provide specialized care, including to victims suffering from traumatic injuries or severe burns; and

3.to allow Wishard to work with colleges and universities, including Indiana University School of Medicine, Ivy Tech Community College, and the Purdue School of Pharmacy, to teach future doctors, nurses and other healthcare professionals in Indiana?”

Dated this 25th day of September, 2009. THE HEALTH AND HOSPITAL CORPORATION OF MARION COUNTY By: Dan Sellers, Treasurer (S - 9/25/09 - 5543537) - 09/25

9 comments:

Anonymous said...

When they started this promotion they said they could build this without property tax dollars -I say, let them.Vote NO
Lest we forget the approx. 700million for IPS coming soon to you ABOVE the cap via your property tax bill to add this; which they will, if not now, in a few years they will find out the house of cards tumbled and we need you homeowners.
After the long unfinished battle to get property taxes under control why let them do this -get out and vote. If not, they have those with vested interests voting for you.

Downtown Indy said...

Our message should be clear:

Vote 'No' on the Wishard Referendum:

1. Matthew Gutwein has stated unquivocally that the hospital will pay for its project using its nursing home revenue stream.

2. Wishard only needs the referendum to pass so that property tax dollars could be used to secure the debt.

3. Since Matthew Gutwein doesn't need property tax dollars, he doesn't need the referendum to pass.

Taxpayers must protect themselves from cap-exceeding property tax rate increases by voting 'NO.'

Had Enough Indy? said...

Anon - You are correct, folks need to be aware of the erosion in the property tax caps that these referenda bring. It will devalue a house with extra taxes over an identical one without.

But, the people get the chance to vote and must show up to protect their own property. If they don't, I'm not sure we have anyone else to blame.

Had Enough Indy? said...

DI - you bring up a very interesting point. If they don't need to raise property taxes to pay for the project, then, why do they need to have a referendum?

Could it be that bond buyers would not trust that H&H will be profitable for the next 30 years? Which begets the question - if bond buyers don't trust it, why should taxpayers?

You are correct, a "no" vote to the referendum should not slow down the project, since Gutwein can do it without more of our property taxes. Or so he says.

Downtown Indy said...

Reality vs. Matt Gutwein
Waves Of New Funding Cuts Imperil US Nursing Homes

"A Medicare rate adjustment that cuts an estimated $16 billion in nursing home funding over the next 10 years was enacted at week's end by the federal Centers for Medicare and Medicaid Services -- on top of state-level cuts or flat-funding that already had the industry reeling.

"And Congress is debating slashing billions more in Medicare funding as part of health care reform.

"Add it all up, and the nursing home industry is headed for a crisis, industry officials say."

Pete Boggs said...

This thing stinks. State revenue collections are down $254M from projections & most recent numbers indicate a downward trend.

Hey, no catalyst (coherent tax policy & smaller govt.), no change. Look for more bad news in the next round of figures as our leaders stare at the problem, hanging their hopes for change on their own inactivity & non-response.

It's called philosophy, one of smaller government, where's the action part?

Edward said...

You need the referendum in order to back the bonds and lock in a low interest rate. If the bods were unsecured they would be issued at a rate way above the market rate (which is extremely low right now). Wishard also has over $150,000,000 in funds to cover any revenue shortfalls. If there has ever been a project in Indianapolis that is properly, and possible even over financed... This would be the project.

They need the insurance of the tax payers to issue the bonds and get a great low risk rating. Thats it.

Stop being so incredibly paranoid.

Had Enough Indy? said...

Edward - it is not incredibly paranoid to ask your government to tell the truth, the whole truth and nothing but the truth. It is the right thing to do.

Gutwein & company sold the community on repayment without raising taxes but failed to mention floating general obligation bonds that require property taxes as the guarantee of repayment UNTIL the notice went out.

If their revenue stream was as dependable as they have claimed, the interest rate on revenue bonds (not secured by property taxes) would be nearly as low as general obligation bonds.

No, its not paranoia, its good citizenship.

Had Enough Indy? said...
This comment has been removed by the author.