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04/14/1990 FACILITIES Date M: 6z <az ' e CLEARWATER HEALTH FACILITIES AUTHORITY SPECIAL MEETING February 14, 1990 The City of Clearwater Health Facilities Authority met in special session at the Drew Village Nursing Center, 401 Fairwood Avenue, Clearwater, on Wednesday, February 14, 1990. The following members were present: C. J. Wollett, Chairman George Souse, Vice-Chairman Frank George, Jr. Ruth Condon Florence Hosch Also present: -4"U. Michael Wright, Asst. City Manager-Community Services, City of Clearwater M. A. Galbraith, Jr., City Attorney, City of Clearwater William Cantlin, City's Chief Accountant, City of Clearwater Bob Olive, Esq., Bryant, Miller and Olive Grace Dunlap, Foley & Lardner, Bond Counsel Gerald J. Neal, Esq., Foley & Lardner, Bond Counsel, National Healthplex, Inc. Walter Wilt, President, National Healthplex, Inc., Buyer Jerry Harden, Administrator, Drew Village Nursing Center Ronald Filty, National Healthplex, Inc. Brian L. Barsh, Continental Medical Systems, Inc., Seller Michael Panarese, Renaissance Health Care Corporation Mary K. Diana, Assistant City Clerk The meeting was called to order at 2:10 P.M. by Chairman Wollett who offered an invocation. The purpose of this meeting is to consider the ratification of Resolution No. 90-1 authorizing the issuance of not exceeding $7,000,000 Revenue Bonds (National Healthplex, Inc. Project) Series 1990. Chairman Wollett indicated he had acted on his own, with the advice of the City Attorney and the Chairman of the Pinellas County Health Authority, in obtaining information in regard to the sale of the nursing facility. He met with the proposed buyer, seller, and financial underwriter several days ago and had toured the facility. He also indicated he engaged the services of Attorney Bob Olive, of the law firm of Bryant, Miller and Olive, by letter, a copy of which he distributed to the Board. He noted this firm is the bond counsel for the City of Clearwater. Ms. Hosch moved to accept the action Chairman Wollett to prepare for this meeting. carried unanimously. CHFA 1 ..: of obtaining information taken by The motion was duly seconded and 2/14/90 Brian L. Barth, Continental Medical Systems, Inc., the current owner of Drew Village Nursing Center, indicated the facility is being proposed to be sold due to the Board of Directors focusing their primary business efforts on acute rehabilitation hospitals. He said a planned divesture of their long term care facilities is already underway. He indicated Continental Medical Systems, Inc. would not make any money on the sale and he felt the nursing home would not be adversely affected. In response to a question, Mr. Barth indicated this was Continental's only facility in the community. Walter Wilt, Chairman of the Board and President of National Healthplex, Inc., indicated he has done work in the past with the principals of Continental Medical Systems, Inc. He indicated National Healthplex, Inc. chose a non-profit corporation as the method of acquiring the nursing home in order to allow for tax exempt financing. His company is focusing on four facilities located in Maryland, Virginia, Lakewood, and Clearwater. These facilities will be funded crass-collaterally through bond issues of various authorities so that the income from all facilities are pooled in order to pay the obligations of the corporation. He indicated the current management company would remain the same for Drew Village Nursing Center and the other facilities would be managed by Renaissance Health Care Corporation. The purchase of these facilities would be done on an arms length basis and he indicated independent appraisals have been secured. Attorney Gerald J. Neal, Foley & Lardner, indicated the Internal Revenue Code requires periodic structuring of the management fee. Michael Panarese, President and Chief Executive Officer of Renaissance Corporation, indicated that 80 percent of the patients in Drew Village Nursing Center are government sponsored and the amount of monies generated by the facility is minimal. A non-profit status gives the facility the ability to do fund raising, obtain government grants, and allows for charitiable contributions providing new opportunities for the elderly. Jerry Harden, Administrator of Drew Village Nursing Center, indicated the center is currently housing 120 residents and he feels the sale would add to the quality of life for the elderly. Mr. Olive indicated the purpose of the Authority, as designated by the Florida Legislature, is to provide the community with the least expensive health care possible. He indicated the Internal Revenue Code allows tax exempt financing. The Authority's main focus should be on financing and how the public would be benefited. In response to questions, it was indicated the facility is currently financed through Cit of Clearwater bonds, that the actual cost of Continental Medical Systems is 5,065,000 and the actual sale price of the facility is $5,046,500. It was also reported that more bonds would be issued than the original issue, the interest rate will be higher after refinancing, and the debt service will be higher. The cost of medical care would probably be increased due to a higher debt service and if commercial financing is used. CHFA 2 2/14/90 Mr. Neal indicated the bonds would be in minimal denominations of $100,000. There would be a risk for both the buyer and the seller. In response to a question, it was indicated there is no relationship between the buyer and seller and this was considered to be an arms length transaction. Discussion ensued in regard to grouping the four nursing facilities together and it was indicated, if there is failure of one facility to pay the pro-rata share of the debt service, there would be at least a partial default of the bonds. Drew Village Nursing Center is the weakest facility. It was suggested that a Financial Advisor be engaged.. Discussion ensued regarding new legislation governing the Clearwater Health Facilities Authority. A question was raised as to whether or not the report filed by the City of Clearwater's Chief Accountant would satisfy the requirement of an independent audit. Discussion ensued in regard to the need to adopt administrative rules regarding generating income from fees to meet the Authority's obligations. Assistant City Manager, Michael Wright, indicated the City has certain guidelines, procedures, and fee schedules for the issuance of revenue bonds. Mr. Olive referred to manditory validation, a judicial process authorized by F.S. where the Court declares a transaction legal. Validation is not required under the new statute but he suggested these bonds be validated. Mr. Heal indicated there would be no problem with validating the bonds. Chairman Wollett questioned why the resolution provided for the issuance of $7,000,000 in revenue bonds when the original request was for $5,900,000. It was indicated it was typical to oversize the bonds to some degree due to the inability to know what the reserves and issuance costs may be and Mr. Olive indicated the Authority would not be obligated to issue any bonds. It was indicated the bonds would be unrated and, therefore, a high risk which has been addressed in F.S. Chapter 189. Mr. Neal indicated there would probably be five to six different institutional investors doing their own credit analysis thereby releasing the Authority from any liability. Discussion ensued in regard to obtaining a Financial Advisor and it was indicated this is essential since the Authority is seldom in the bond market. Mr. Olive indicated the proposed resolution indicates the Authority's willingness to go forward and puts in motion the opportunity for a TEFRA hearing under the tax laws providing for public input. It was also indicated that federal tax laws require final approval by the City Commission because the Authority is not an elected governmental body. In response to question, it was indicated the not-for-profit mechanism is a method to issue tax exempt bonds for the full amount of the market value of the facility at the present time. In response to a question, it was indicated the Authority's issuance of bonds did not have to be for new facilities. CHFA 3 2114/90 ? I A question was raised as to what the benefit would be for the citizens of ' Clearwater and Mr. Wilt indicated it was his company's intent to create an advisory board from within the community to provide input on the care for the elderly and to chart a course of direction for this facility. The not-for-profit status allows for the use of volunteers and provides for fund raising specifically for what is needed. It was indicated this advisory board could report periodicially to the Authority. The Authority recessed from 3:50 P.M. to 4:00 P.M. Discussion ensued in regard to engaging the services of a special counsel and financial advisor. Consensus of the Authority was to investigate the engaging of these services. A meeting regarding the consideration of a resolution for the issuance of the bonds was scheduled for March 2, 1990, at 2:00 P.M. in the City of Clearwater Commission Chambers, The meeting Was adjourned at 4:07 P.M. rman / . -1, Mary Kathryn Diana, Assistant City Clerk of the City of Clearwater, Florida, certify the foregoing to be a true and correct copy of the minutes of the February 14, 1990 meeting of the Clearwater Health Facilities Authority, and all persons dealing with the Authority may rely upon this certificate. itness '? of my and and the corporate , 1990. seal of the City of Clearwater this Assist t ty C-. CHFA 4 . . ?.'....,.+w\...,m,y?\?,. cmY. :?'. \\.Y?Y.:: ? ?,?ti.: ra..:..y„ r ,:li: .. I . 2/14190 11? ? . I