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HomeMy WebLinkAboutMINUTES - 02131996 - D2 TU: BOARD OF SUPERVISORS 5 L Contra j Costa i;IFhGM: •, Phil Batchelor, County Administrator ,{ RATE: February 13, 1996 `'y 4T'�C(jUN'� County SUBJECT: Merrithew Hospital Financing SPECIFIC REQUEST(S)OR RECOMMENDATION(S)&BACKGROUND AND JUSTIFICATION RECOMMENDATIONS: 1. Acknowledge that there has recently been a significant decrease in long- term interest rates compared to those that prevailed during the original hospital financing in 1992. 2. Acknowledge that the construction bid for the project was substantially below the estimated cost. 3. Acknowledge that construction is progressing rapidly and remains on schedule and within the budget. 4. Acknowledge that the construction fund has interest earnings in excess of expectations. 5. Acknowledge that the planning for the Merrithew project was downsized from 234 medical beds to a partial replacement of 144 medical beds as a conservative business decision in anticipation of a blended solution with other public and private hospitals. 6. Acknowledge that another step in the direction of conservative business decisions is to change the mix of patient beds to include acute psychiatric beds which other public and private hospitals have indicated no interest in accepting. 7. Acknowledge that there are serious deficiencies with the physical conditions of the Merrithew psychiatric units which may threaten their continued licensing. They must be either substantially upgraded or replaced. These units were originally scheduled for phase II construction at a cost of $17,000,000 to $20,0.00,000. CONTINUED ON ATTACHMENT: YES SIGNATURE: A0w RECOMMENDATION OF COUNTY ADMINISTRATOR RECOMMENDATION OF BOARD COMMITTEE APPROVE OTHER SIGNATURES ACTION OF BOARD ON February , 9 APPROVED AS RECOMMENDED OTHER The Board APPROVED the 22 recommendations as presented including the adoption of Resolution 96/57 determining to proceed with the Certificate of Participation financing for the Merrithew Memorial Hospital replacement project; REQUESTED the Financial Team to consult as needed with a non-County financial adviser on the process; and REQUESTED the County Administrator to regularly report to the Board with the first report submitted in two to three weeks. The Chair advised that Supervisor Bishop (who was not present for the vote) had previously stated her opposition to the motion. (See Attachment A for list of speakers on this matter.) VOTE OF SUPERVISORS I HEREBY CERTIFY THAT THIS IS A TRUE X UNANIMOUS(ABSENT III , IV ) AND CORRECT COPY OF AN ACTION TAKEN AYES: NOES: AND ENTERED ON THE MINUTES OF THE BOARD ABSENT: ABSTAIN: OF SUPERVISORS ON THE DATE SHOWN. ATTESTED February 13, 1996 Contact: PHIL BATCHELOR,CLERK OF THE BOARD OF CC: SUPERVISORS AND COUNTY ADMINISTRATOR SEE PAGE 3 BY ,DEPUTY -2- 8. Acknowledge that the historic census for acute psychiatric beds has been very stable. 9. Approve a change in mix of patient beds to include the Merrithew acute psychiatric program within the scope of the phase I project. The proposed change: ♦ Would not increase the physical size of the structure. ♦ Would change the mix of medical/surgical beds on the fourth floor so that two-thirds of the floor would be converted to the psychiatric program. ♦ Would fully develop the fifth floor for medical beds, of which one- fourth has been planned as shelled area. ♦ Would cost an estimated $5, 400,000. ♦ Can be funded within the available project funds due to lower bids and excess interest earnings. ♦ Can be implemented with little or no extension of the project completion date. ♦ Will result in savings of $12,000,000 to $15,000,000 for psychiatric unit replacement. ♦ Will allow the psychiatric units to be replaced in a timely manner and stay within the federal and state licensing requirements. 10. Approve as a prudent economic decision, the refinancing of the Merrithew Hospital Certificates of Participation to the extent possible. Refinancing is projected to reduce future debt service costs by $3 to $4 million dollars in net present value terms over the course of the remaining debt service period. 11. Direct the County Administrator to take actions to obtain the lowest cost of financing including utilization of bond insurance, if appropriate and the ability to implement the motor vehicle license fee intercept program. 12. Approve appointment and continuation of U.S. Trust Co. of California, N. A. as Trustee and Escrow Agent for any new issue. 13. Approve the appointment of Smith Barney ( as Lead Manager), and BA Securities, Inc. and Bear Stearns (as Co-Managers) as the Underwriting team for the financing. 14. Approve the appointment and continuation of Prager, McCarthy & Sealy as Financial Advisor. 15. Approve the appointment and continuation of Orrick, Herrington & Sutcliffe and Pamela Jue as Co-Special Counsel. 16. Direct and authorize the County Administrator to request proposals and appoint other consultants as needed, such as for specialty printing and escrow verification services for the refinancing. 17. Direct that all consultants on the refinancing work on a contingency basis so that fees are paid only if the County proceeds with the refinancing. 18. Direct staff and consultants to take the necessary actions to meet with bond insurance companies, rating agencies and investors. 19. Authorize staff to take the necessary actions to be positioned to take advantage of favorable interest rate changes in the market to maximize future savings. i -3- 20. Adopt the initial authorizing resolution for the refinancing as prepared by the co-special counsel. 21. Authorize the County Administrator or his designees to execute consultant agreements and other necessary contracts to complete the transaction. 22. Direct that the co-special counsel proceed with preparation of the required documents for the issue and to prepare a final resolution for Board consideration at the appropriate time. FINANCIAL IMPACT: Refinancing of the Certificates of Participation issued to finance the construction of the Merrithew Memorial Hospital Replacement Project is expected to reduce future debt service costs for the County by $3 to $4 million dollars in present value terms during the remaining term of the issue. The exact amount will depend upon market conditions at the time of sale. BACKGROUND Recent reductions in interest rates have created an opportunity to reduce the County's future costs for the Hospital Replacement Project. Past interest rate fluctuations, while attractive, could not be considered until the construction was further advanced. The project has now progressed to the point where the construction risk is minimal since the steel structural framing has been put in place. The construction bids were below estimates and the project has adequate construction contingency reserves. It is a prudent measure to move ahead at this time to take all of the necessary actions to be in position to refinance the existing issue if market conditions are favorable. The County's financial advisor, Prager, McCarthy & Sealy has solicited proposals from leading national underwriting firms and in consultation with the County's financial staff have recommended three firms as the underwriting team for the refinancing. The firms are Smith Barney (as the Lead Manager) , and BA Securities, Inc. and Bear Stearns ( as the Co- Managers) . All firms are,outstanding and are committed to providing their best performance for the County. The Health Services Department has continued to examine the changes in the health care field and to seek ways to maintain maximum flexibility while improving their revenue potential. A serious concern continues to be the condition of the hospital psychiatric units (I and J). Without multi-million dollar upgrades continued license approval is doubtful for those units. Past efforts to integrate mental health patients into other hospitals have been unsuccessful. Review of the Merrithew reconstruction has indicated that the bed capacity for the I and J units can be integrated into the new construction by a change in the bed mix thereby resulting in a downsizing in the number of medical beds along with completing the shelled area on the fifth floor. Sufficient funds are available within the project due to the lower than anticipated bids and to excess interest earnings to cover the estimated cost of the changes. Contact: DeRoyce Bell (646-4093) cc: Health Services Department County Counsel Auditor-Controller Treasurer-Tax Collector Orrick, Herrington & Sutcliffe (via CA00 Prager, McCarthy & Sealy (via CAO) February 13 , 1996 D. 2 A T T A C H M E N T A The following persons spoke in support of the Merrithew Memorial Hospital Replacement Project financing proposal: Wayne Simpson, 897 Dolphin Street, Danville; Henry L. Clarke, Local One, on behalf of Mike Cornwall; Marie Goodman, 3331 Brookside Drive, Martinez; and Herb Putnam, 1747 Bishop Drive, (city not given) . All persons desiring to speak were heard. RESOLUTION NO. 9 6 5 7 OF THE BOARD OF SUPERVISORS OF THE COUNTY OF CONTRA COSTA CALIFORNIA RESOLUTION DETERMINING TO PROCEED WITH CERTIFICATE OF PARTICIPATION FINANCING FOR REFUNDING OF CERTIFICATES OF PARTICIPATION FOR MERRITHEW MEMORIAL HOSPITAL REPLACEMENT PROJECT, AND AUTHORIZING COUNTY OFFICIALS TO TAKE NECESSARY ACTIONS AND TO PREPARE NECESSARY DOCUMENTS. WHEREAS, this Board of Supervisors hereby determines that it would be in the best interest of the County to proceed with a certificate of participation financing for the refunding of all or a portion of the outstanding Certificates of Participation (Merrithew Memorial Hospital Replacement Project) Series of 1992 (herein called the "Outstanding Certificates of Participation"); WHEREAS, this Board of Supervisors desires to authorize County officials to prepare necessary legal documents and to take other preliminary actions in connection with the proposed issuance of Certificates of Participation. NOW, THEREFORE, BE IT RESOLVED by the Board of Supervisors of the County of Contra Costa, as follows: SF2-54472.2 Section 1. This Board of Supervisors hereby determines to proceed with a • Certificate of Participation financing for the refunding of Outstanding Certificates of Participation. Section 2. The appropriate County officials are hereby authorized and directed to prepare the necessary legal documents to accomplish said financing. Section 3. Prager, McCarthy & Sealy is hereby appointed as financial advisor in connection with the Certificates of Participation, Orrick, Herrington & Sutcliffe and the Law Offices of Pamela S. 7ue are hereby appointed as co-special counsel in connection with the Certificates of Participation, and Smith Barney Inc., Bear, Stearns & Co. Inc. and BA Securities, Inc. are hereby appointed as managing underwriters in connection with the Certificates of Participation. f ' sF2-5U72.2 2 J Section 4. This resolution shall take effect from and after its date of adoption. PASSED AND ADOPTED THIS 13th day of February, 1996. AYES: Supervisors Rogers , Torlakson, Smith NOES: None ABSENT: Supervisors Bishop, DeSaulnier [Seal] (24 1—v�AL Chai the Board of Supervisors ATTEST: Philip J. Batchelor, of the County of Contra Costa Clerk of the Board State of California of Supervisors and County Administrator By: - eputy Cle SP2-5U72.2 3 CLERK'S CERTIFICATE I, J. 0. Ma g 1 i o Deputy Clerk of the Board of Supervisors of the County of Contra Costa, hereby certify that the foregoing is a full, true and correct copy of a resolution duly adopted at a regular meeting of the Board of Supervisors of said County duly and regularly held at the regular meeting place thereof on the 13th day of February, 1996, of which meeting all of the members of said Board of Supervisors had due notice and at which a majority thereof were present; and that at said meeting said resolution was adopted by the following vote: AYES: Supervisors Rogers , Torlakson, Smith NOES: None ABSENT: Supervisors Bishop, DeSaialnier An agenda of said meeting was posted at least 72 hours before said meeting at 651 Pine St., Martinez, California, a location freely accessible to members of the public, and a brief general description of said resolution appeared on said agenda. I further certify that I have carefully compared the same with the original minutes of said meeting on file and of record in my office; that the foregoing resolution is a full, true and correct copy of the original resolution adopted at said meeting and entered in said minutes; and that said resolution has not been amended, modified or rescinded since the date of its adoption, and the same is now in full force and effect. 3F2-54472.2 WITNESS my hand and the seal of the County of Contra Costa this 13th day of February, 1996. Deputf Clerk of the Aard of Supervisors of the County of.Contra Costa State of California [Seal] sF2-5"72,2 2