The County of Santa Clara
California

Fiscal/Budget Item
97808

Consider recommendations relating to the issuance of lease revenue bonds for the acquisition of the hospital properties.

Information

Department:Finance AgencySponsors:
Category:Appropriation Modification (4/5 Roll Call Vote)

Attachments

  1. Printout
  2. F85-11

Multiple Recommendations

Possible action:
a. Approve Request for Appropriation Modification No. 11 - $4,864,091 increasing revenues and expenditures in the Facilities and Fleet Department budget, increasing expenditures in the Controller-Treasurer Department budget, decreasing expenditures in the Special Programs budget, and transferring funds within the Santa Clara Valley Medical Center Hospital and Clinics budget relating to the issuance of the Santa Clara County Financing Authority Lease Revenue Bonds 2019 Series A and 2019 Series A-T for the acquisition of hospital properties. (4/5 Roll Call Vote)
b. Approve establishment of Capital Project 263-CP20004 "VMC-O'Connor Seismic Compliance."
c. Approve establishment of Capital Project 263-CP20005 "VMC-O'Connor Elevator Modernization."
d. Approve establishment of Capital Project 263-CP20006 "VMC-O'Connor Pharmacy Upgrade."
e. Approve establishment of Capital Project 263-CP20007 "VMC-Saint Louise Pharmacy Upgrade."
f. Approve establishment of Capital Project 263-CP20008 "VMC-Saint Louise Radiology Upgrade."
g. Approve establishment of Capital Project 263-CP20009 "VMC-Saint Louise E.D. Expansion."
h. Approve establishment of Capital Project 263-CP20010 "VMC-Saint Louise Fire System Replacement."
i. Approve establishment of Capital Project 263-CP20011 "VMC at Bascom Building E Improvements."

Body

FISCAL IMPLICATIONS

The recommended action establishes the necessary appropriation related to the issuance of the Santa Clara County Financing Authority Lease Revenue Bonds 2019 Series A and 2019 Series A-T (Federally Taxable) (the Bonds). 

This budget modification establishes the appropriation for the debt service payments and building depreciation charge to SCVMC, transfers the depreciation charges to the Accumulated Capital Outlay Fund, and adjusts the appropriation for various SCVMC capital improvement projects. 

The annual debt service cost is $15,172,574 (interest of $8,687,574 and principal of $6,485,000).  The annual building depreciation charge to SCVMC is $4,864,091.  There is no net impact to the General Fund as the interest cost is reimbursed by SCVMC and the principal cost is offset by the reduction of a reserve established for the debt service payments to fund the acquisition of the new hospital and related capital projects for the hospital system.  There is also no net impact to the enterprise funds as SCVMC is offsetting the interest cost and the building depreciation charge by reducing existing Salaries and Benefits (Object 2) appropriation.  The annual debt service on the Bonds will be approximately $15.2M beginning in FY2019-20 and continuing through FY2048-49.

The building depreciation charge of $4,864,091 is transferred to the Accumulated Capital Outlay Fund which collects depreciation charges to fund the future replacement facilities.

The modifications to the various capital projects budget include: a decrease of $10,000,000 for VMC-Saint Louise Improvements (Capital Project P263CP19017), decrease of $25,000,000 for VMC O’Connor Improvements (Capital Project P263CP19018), increase of $1,868,757 for  DePaul Improvements, (Capital Project 263-CP19019), increase of $30,000,000 for  VMC-O'Connor Seismic Compliance (Capital Project 263-CP20004), increase of $3,000,000 for VMC-O'Connor Elevator Modernization (Capital Project 263-CP20005), increase of $3,000,000 for VMC-O'Connor Pharmacy Upgrade (Capital Project 263-CP20006), increase of $3,000,000 for VMC-Saint Louise Pharmacy Upgrade (Capital Project 263-CP20007), increase of $5,000,000 for VMC-Saint Louise Radiology Upgrade (Capital Project 263-CP20008), increase of $2,000,000 for VMC-Saint Louise E.D. Expansion (Capital Project 263-CP20009), increase of $2,000,000 for VMC-Saint Louise Fire System Replacement (Capital Project 263-CP20010), increase of $10,000,000 for VMC at Bascom Building E Improvements (Capital Project 263-CP20011) and a decrease of $768,518 for the Purchase of Verity Hospital System (Capital Project 263-CP19014). The net cost of the budget modifications to the various capital project budgets is $24,100,329 and is offset by a transfer from the General Fund that was included in the FY19-20 Adopted Budget.

REASONS FOR RECOMMENDATION

The Board approved the issuance of the Bonds on May 7, 2019 and the Bond financing closed and funds were received on June 27, 2019.  It is now necessary to establish the debt service payments and adjustments in appropriations to complete the bond issuance.

CHILD IMPACT

The recommended action will have no/neutral impact on children.

SENIOR IMPACT

The recommended action will have no/neutral impact on seniors.

SUSTAINABILITY IMPLICATIONS

The recommended action will have no/neutral sustainability implications.

BACKGROUND

On November 6, 2018, the Board approved the acquisition of assets of O’Connor Hospital, St. Louise Regional Hospital and De Paul Medical Center located in San Jose, Gilroy and Morgan Hill, respectively

On November 20, 2018, the Board adopted a resolution declaring the Countys official intent to reimburse the General Capital Improvements Fund from bond proceeds for acquisition-related expenditures.  In addition, Appropriation Modification No. 135 for $300,000,000 was also adopted, increasing revenue and expenditures in the County Debt Service and Facilities and Fleet budget relating to the purchase of the former Verity hospitals and health care facilities. 

On June 11, 2019, the Bonds were successfully priced and sold through a competitive sale and the financing closed on June 27, 2019.  The 2019 Series A Bonds received a total of six bids; the winning bidder was Citigroup with a total interest cost (TIC) of 2.97%.  The 2019 Series A-T Bonds received a total of ten bids; the winning bidder was Morgan Stanley with a TIC of 2.18%.

CONSEQUENCES OF NEGATIVE ACTION

There will not be adequate appropriations to record the transactions related to the bond issuance.

STEPS FOLLOWING APPROVAL

Upon approval by the Board of the appropriation modification, the Clerk of the Board of Supervisors will electronically notify Paul McDonough in the Controller-Treasurer Department.

Meeting History

Aug 13, 2019 9:30 AM Video Board of Supervisors Regular Meeting
RESULT:APPROVED [UNANIMOUS]
MOVER:Cindy Chavez, Vice President
SECONDER:Susan Ellenberg, Supervisor
AYES:Mike Wasserman, Cindy Chavez, Dave Cortese, Susan Ellenberg, S. Joseph Simitian