ORTONVILLE CITY COUNCIL-OAHS
HEALTHCARE BOARD
JOINT WORKSHOP
MEETING MINUTES
CITY MEETING ROOM
315 Madison Avenue, Ortonville, MN
Monday, November 17, 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,
Deputy City Clerk Susan Lundell. Media Present: Mike Swenson
(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 and Steve Proeschel of Piper
Jaffray, OAHS Board Members Marilyn Lindahl, Bill Thyne, Mary Ann Ulrich,
and Ron Thomas, Dr. Bryan Delage, Eric Hanson, Dave Meyer, and other
interested citizens.
DISCUSSION: FINANCING FOR OAHS HOSPITAL REBUILD PROJECT – EHLERS &
ASSOCIATES, INC.
City of
Ortonville and Ortonville Area Health Services (OAHS) representatives met
with area bank officials at an informational meeting earlier in the day.
City and OAHS representatives were accompanied by their finance team,
including financial advisors from Ehlers and Associates, Inc. and
investment bankers from Piper Jaffray.
John
Hemmingsgard of Piper Jaffray stated a good meeting was held with area
bankers this afternoon. The consensus was to continue on with a long-term
bond issue as originally envisioned. Long-term bonds can be called after
ten years. He noted the City would have the one-time option of an advanced
refunding if interest rates lower dramatically. The bond issue would be
done in two portions, both under $10M to be bank qualified. It is planned
to continue looking at a multi-series issuance of Revenue Warrants
(2008-2009) to finance the entirety of the replacement hospital project.
John
Hemmingsgard indicated OAHS is a critical access hospital that provides
cost-based reimbursement for Medicare costs, including interest expense.
Accordingly, the interest expense that OAHS will incur will be reimbursed
by Medicare. That reimbursement rate currently would be approximately 55%
of the incremental interest expense.
Hemmingsgard stated the finance team would continue looking at the
financial forecast over the next two weeks and come back to the City
Council Meeting on December 1, 2008 with updated information. He
recommended against funding any portion of the project on an interim
basis.
Ortonville
City Council Workshop Meeting Minutes November 17, 2008 Page 2 of 2
Carolyn
Drude of Ehlers & Associates stated the lenders noted the benefits of the
cost-based reimbursement that will result in a partial offset of the bond
interest cost.
Brian
Reilly of Ehlers & Associates noted that if a referendum on a General
Obligation issue failed, we would have a timing issue.
Hemmingsgard noted that the Fairview Hospital System in the Twin Cities
recently sold an A-rated bond issue at a 7% interest rate. The pro forma
projections indicate a 9% interest rate; hopefully the final interest rate
will come in lower.
Hemmingsgard noted the credit
profile at OAHS is very strong; however, OAHS is small, and the bond
rating agencies look at size of the issuer, rather than other financial
factors. He estimated our interest rate would be in the 8% to 9% range.
Steve
Berkner asked Carolyn Drude to further research the feasibility of doing a
temporary bond on no longer than a three-year term. We currently have an
outstanding bond issue of OAHS that would place any new temporary bond
issue in a subordinate position. This would not be popular with potential
lenders.
Adjournment:
Mayor
Johnson adjourned the meeting by consensus at 6:38 PM.
APPROVED: ATTEST:
_________________
___________________
Blair
Johnson David A.
Lang
Mayor
Clerk-Administrator
