The Union Recorder

Local News

August 21, 2013

ORMC refinance wrinkle holds process

MILLEDGEVILLE — Jones, Cork & Miller, LLP attorney Warren Plowden informed the Baldwin County Commissioners of an urgent hospital financial matter during Tuesday’s work session.

Operating through the Hospital Authorities Law of Georgia, the Oconee Regional Medical Center previously received a tax pledge from the county supporting borrowing of up to $30 million to refinance existing bond debt and provide new monies.

New information indicates the contract approved by commissioners providing a 3-mill ad valorem tax backing isn’t enough. Guarantors need a concrete cash value to move forward with bond rating.

Plowden said the county’s tax collection schedule drew a red flag.

ORMC provided an updated intergovernmental agreement striking the 3-mill section. Plowden said the contract substance remains unchanged.

Based on the 2012 tax digest, Plowden said a 3-mill tax levy produces $3.3 million, which is $600,000 above the county’s required debt service at any point throughout the 15-year bond life.

“It doesn’t matter if it’s three, five, seven or 50. You are still only obligated to back this deal that appears in this example,” Plowden said.

ORMC requested that the county approve the revised contract allowing for a tax levy up to the increased 7-mills while not to exceed $2.6 million.

The resolution includes multiple protections preventing the county from ever leveraging the millage. Unrestricted cash and investment levels must be maintained throughout the intergovernmental agreement.

ORMC CEO Jean Aycock reminded the board the hospital has two years worth of debt service at $5.2 million on hand before the county would have to pay up if the regional hospital went under.

Two-year debt service payments are part of the proposal offering the county leeway to potentially sell the hospital or other action before leveraging the tax on citizens.

Sterne Agee is the underwriter for the upcoming refunding and improvements financing for the Baldwin County Hospital Authority.

David Lucas, senior vice president of Public Finance for Sterne Agee, said the net proceeds would be used to call and redeem $24.7 million worth of Series 1998 bonds, pay off a $515,000 BB&T note and fund the acquisition of $4 million in hardware and software upgrades required by the federally legislated HITECH Act.

The current bond interest rate is 5.34 percent. Back in March, Lucas expected the new issue to drop the rate below 4 percent, saving the hospital between $300,000 and $400,000 a year.

ORMC will use the savings to help offset the millions of dollars in charity and indigent care being provided to Baldwin County citizens.

Plowden said ORMC would like to close this refinancing deal by the end of September.

The lost time is costing the hospital valuable interest savings. If the deal closed today, the bond interest rate would sit closer to 4.5 percent.

 

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