Travis County Commissioners Court
Tuesday, July 20, 2010,
Item 14
>> speaking of excitement, item 14 is to consider and take appropriate action on the request by central health pursuant to section 281.106 of the health and safety code for approval of issue -- approval to issue certificates of obligation in accordance with subchapter c, chapter 271, local government code for district purposes.
>> thank you, judge. As you know, we are underway for the design phase of the north central clinic now. And with that clinic the board has consistently reserved the option to finance the cost of constructing it. In fact, even before the board selected the current site and before they appropriated funds for construction, they passed in april of 2008 a reimbursement resolution demonstrating their interest in financing the clinic. The key dates for the project are april 2008 the board expressed their intent to finance the project. In september of 2008 the board approved 18.1 million for the construction. And in december of 2008 the board approved the purchase of the site at 1210 west braker lane. This is -- i would characterize this as a relatively simple financing. The amount is relatively small in terms of governmental debt issue at 18.1 million. The project, the construction of a 50,000 square foot clinic facility is straightforward. We believe that certainly in working with our financial advisor that market conditions for such a financing are good now. Interest rates were relatively low and central health enjoys the same tax base that the county does. We are in good financial condition, but we are also mindful about a number of things about health care reform that we cannot now predict. We have been advised that under health care reform that we should expect some cut back in the amount of revenue that we receive from seton as additional lease payments. And also we can't quantify this now, we feel it would be prudent to hold on to the reserves we have. As you saw, we are proposing to spend some of those to continue to expand access to health care next year, 7.8 million. But we think it would be prudent for us to hold on to the rrches and use this opportunity to establish a credit rating which we do not now have. There are no future projects on the horizon that we see right now that we would finance, but we think it's possible that in the future we might need to do a more complicated financing than this one, either for a larger amount or one that has a more complicated pledge behind it. For example, a public-private partnership. And we would be better doing -- be better off doing that more complicated financing if we had in fact established a credit rating. We estimate that if we were able to issue co's at a four percent interest rate, the annual debt service would be about 1.3 million. We are proposing to pay the first year's debt service out of central health reserves because at this point we don't think we can get the financing done in order to be able to include it in our tax rate for next year. So if the court approves this item, there will be no debt service added to our tax rate for fiscal year 2011. We will pay that 1.3 million out of reserves. However, beginning in 2012 and subsequent years, the annual debt service would be funded by a debt service tax rate that we estimate now would be about .14 or .15 cents. For a homeowner with a homestead single-family residence with a taxable value of $219,424, this debt service would mean an additional $3.07 on the annual tax bill at current estimates. Even at a five percent interest rate, we may not get as low as four percent, but even at a five percent interest rate, the increase would only be .16 cents on the tax rate and about $3.50 on the annual tax bill. So if the commissioners court approves this request that we brought to you this morning to issue certificates of obligation, we will request final approval from our board, and if granted we plan to sell the co's this autumn.
>> what would be the length of the debt service, $18 million?
>> we would have to work that out. It would probably be a 20 year debt, but there might be opportunities to shorten the horizon on that if we got a lower interest rate, example, for an earlier maturity, but we would work with ladd to figure out what the structuring of that debt would be.
>> okay. And i noticed you did mention for the average home, property tax payor, it would be an increase of $3 and something cents per --
>> between 3 and 3.50.
>> for an average of 240 something average dollars?
>> 219,000.
>> it should be about a -- a little more than three dollar increase.
>> in 2012, not next 83.
>> in 2012, right. And if the court decided to issue, allow you to -- this debt to be issued, the co's, my question is when would that be made readily available as far as the money is concerned to -- for use by the -- i want to say the health district again.
>> that's perfectly fine.
>> that's fine? Okay. When would that money be made ready for use for the purpose in which is stated here today?
>> well, i'm going to estimate that it would be sometime in october or november at this point. We would -- we want to make sure we had gone all the way through the process to have the debt service included as an expenditure in our budget for next year, approved by both the board of managers and the commissioners court. So we would begin at that point trying to market the debt in october, and i'm assuming that we can close by the end of october and november approximately.
>> remind me how much you have in reserve.
>> we expect to end this year with about 115 million in total reserves. That does count a capital reserve for capital that the board has appropriated, which at this point includes the north central clinic, but we will take that if the board approves the financing and if the court approves it, we would take that out and put it in our allocated reserve.
>> our unallocated reserve, just to remind us all, is based on the board of managers policy adopted, and that is 150 days cash, basically operating expense cash. So that is about --
>> for next year we're budgeting about 55 million in that unallocated reserve.
>> so a little more than half of the available reserves are unallocated and dedicated for -- basically untouchable.
>> so in capital reserve there's seven million dollars?
>> our capital reserve at the end of next year would be about seven million at the end of september the 30th, 2011, if we do not finance this. Otherwise it would be lower than that.
>> so about 53 million in allocated reserve.
>> approximately. At the end of this year -- we budgeted for an unallocated reserve in 2010 of 48 and a half million. 55 million next year, and we expect to end this year with an allocated reserve of about 48 million, about the same amount at the end of this year.
>> i don't have any problem with the co's, but i do have a problem with three of us being here. I would feel a whole lot better with four. We won't have four until august 3rd. So what problem does that pose for you, if any?
>> we have been advised that it does not pose a legal issue. And --
>> you mean the three versus four? The three versus four does not pose a legal issue, we were advised yesterday, but the county judge's comfort is important.
>> [ laughter ] and the reason i would prefer to have four is that a full complement would be five. Three is a little bit more than half. This would be a major decision for us, so even if the vote is three-one, i would feel a whole lot better with four participating. And if you're looking at an issue in october, i guess i'm having a hard time determining that there is significant harm of delaying action on the co request for two weeks.
>>
>> [inaudible - no mic].
>> i don't have any problem with it. My problem, though, is two being absent today, three of us being here, full complement of court members being five, and we have -- you can say 60 percent is a super majority, but that's getting too close to just one half of us for a significant decision. So we've got another month before we receive a preliminary budget, another month after that to mull over it, review it and i guess get some feedback of the public hearings that you have, and if the public hearings are like they've been historically, there would be very few people attending anyway, sort of like the public hearings we have here on the budget. But on the -- since it is the first debt issuance by the district, i would really feel better with four people present.
>> did you suggest the august 3rd meeting?
>> that's when we'll have four.
>> okay.
>> unless somebody is sick that day.
>> i think we could certainly come back at that point. I would like to be able to -- we are presenting our budget for preliminary approval to our board on august the 18th, and then returning on the 24th to commissioners court. I'd like to be able to have included in that august 18th budget the debt service expenditures at that point, but if we could make that august 3rd date, that would work fine.
>> our intention would be to act on it on august 3rd. And i see no reason why we wouldn't have four except we are human beings, although super human on some days.
>> [ laughter ] but i'm anticipating that on august 3rd we will have four members of the court present. And i would feel a whole lot better taking action that day than with just three of us.
>> we'll bring it back to you on august 3rd then.
>> in my view i don't see any reason not to go ahead and work toward it. I assume there's --
>> i would just like to weigh in that i think it's a good process to issue the co's at this point. I think it's not just doing in this building, but i think the broader picture of how this organization is developing financially that it's important. And this is a good time to do it that way.
>> and we know the level of need is great.
>> absolutely.
>> and part of our responsibility is to try to meet that need, and you've got to increase your capacity to do that. So do the medical professionals who work in the clinics work for the district?
>> they're actually employees of the district, but they're assigned to work with the 501(c)3 entity that is called community care. And you recall that that does have a separate board of directors, fqhc board of directors. So we are essentially through our agreements, we employ them, but assign them to that entity to perform those services.
>> okay. Anything else?
>> no, judge. It's been laid out pretty thoroughly this morning.
>> we'll plan to have 14 back on the agenda on the -- two weeks from today.
>> thank you very much.
>> thank y'all very much. Appreciate it. Keep up the good work.
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Last Modified:
Tuesday, July 20, 2010 1:25 PM
