ORTONVILLE CITY COUNCIL-OAHS
HEALTHCARE BOARD
JOINT WORKSHOP
MEETING MINUTES
CITY MEETING ROOM
315 Madison Avenue, Ortonville, MN
Monday, November 3, 2008
6:00 P.M.
CALL TO
ORDER AND ROLL CALL:
Mayor Blair
Johnson called the Workshop Meeting of the Ortonville City Council to
order at 6:00 P.M. Roll Call was taken with the following Present: Mayor
Johnson, Nick Anderson, Craig Randleman, Steve Berkner, Bob Meyer, John
Cunningham, and Mike Dorry. Staff Present: City Administrator David Lang.
Media Present: Mike Swenson and Suzette Kaercher-Blake (Ortonville
Independent). Others Present: OAHS Administrator Rick Ash, OAHS Chief
Financial Officer Jim Foster, Carolyn Drude and Brian Reilly of Ehlers &
Associates, Inc., John Henningsgard of Piper Jaffray, and other interested
citizens.
DISCUSSION: Financing Market
Update-2008-2009 OAHS Bond Issue- The
discussion was led by Carolyn Drude and Brian Reilly of Ehlers &
Associates Inc. and John Henningsgard of Piper Jaffray. Brian Reilly
reviewed the handout included in the Council meeting packet. He reported
on the turmoil in the bond market that has occurred in recent months.
The bond
insurer issue has persisted for over a year. He noted there are few bond
insurers left in the market at the present time. Brian stated there is no
value in being placed on the tax-exempt status list for municipal bonds.
He also indicated that the incremental interest spread for non-rated
issues has increased dramatically in the last several months.
John
Henningsgard of Piper Jaffray explained the reasons why there are
significantly fewer buyers in the bond market at the present time. He
noted our bond issue would be designed to attract investment from
community banks. John reported some of these banks still have capital
available to invest. A graph he presented showed that until recently,
tax-exempt interest rates have been at historic lows and relatively
stable, which makes the current environment so difficult for investors and
issuers.
John stated
the healthcare bond market is at a standstill. He believes the interest
rates are not favorable to issue bonds the remainder of this year. The
OAHS bond issue will be different from the General Obligation bond issues
because it would be a revenue bond. A BBB-rated, investment grade bond
issue was done at 8.25% a few weeks ago.
Carolyn Drude noted that OAHS has the
ability to provide immediate “coverage” for the bond debt principal and
interest. The challenge is to get investors to look at the OAHS bond
issue. John noted OAHS does have a good “story” to tell.
Ortonville City Council Workshop Meeting Minutes November
3, 2008 Page 2 of 2
DISCUSSION:
Financing Market
Update-2008-2009 OAHS Bond Issue (cont.)
Brian
suggested that the in-patient wing be completed as the first phase while
permanent financing options are being considered. This would enable OAHS
to take advantage of low short-term interest rates to provide more time to
arrange for reasonably priced long term financing. Reilly also suggested
the City consider lending some of its funds to OAHS with interest.
Carolyn
Drude noted Minnesota cities have the ability to do short-term borrowing
up to 3 years and that such a bond issue can be turned over once, provided
the City has the authority to do long-term financing. The bonds have to
be subordinate to other existing bonds. John Henningsgard stated a
syndicate of community banks might be able to come together to provide an
interim financing solution.
Mayor
Johnson inquired if a 10-year callable window for a bond issue might be
available.
John
Henningsgard noted it might be difficult to fund the entire $16 million to
$17million with interim financing. Jim Foster stated the repayment
schedule of the principal itself needs to be structured carefully.
Adjournment:
Mayor
Johnson adjourned the workshop by consensus at 6:55 PM.
APPROVED: ATTEST:
_______________________
________________________
Blair
Johnson David A.
Long
Mayor
Clerk-Administrator
