06/13/1990 SPECIAL MEETING
CLEARWATER HEALTH FACILITIES AUTHORITY
June 13, 1990
The City of Clearwater Health Facilities Authority (CHFA) met in special session in the Mayor's Conference Room, City Hall, on Wednesday, June 13, 1990.
The following members were present:
C. J. Wollett, Chairman
George Bouse, Vice-Chairman
Florence Hosch, Secretary/Treasurer
Frank George, Jr.
Absent:
Ruth Condon, Assistant Secretary/Treasurer
Also present:
Jeff DeCarlo, Ruden, Barnett, Bond Counsel, Hialeah
Richard Blinderman, Esq., Papy, Weissenborn & Papy,
Legal Counsel-Buyer
Charles C. Papy III, Papy, Weissenborn & Papy
Francis E. Friscia, Papy, Weissenborn & Papy
Brian Barth, Continental Medical Systems, Inc.-Seller
Ronald Felty, National Healthplex, Inc.-Buyer
Michael Benedict, Morgan Stanley, Financial Advisor, CHFA
Robert Olive, Legal Counsel, CHFA
M. A. Galbraith, Jr., City Attorney, Clearwater
Bill Goodwin, Citizens Advisory Board, Drew Gardens
Bill Cantlin, Accounting Manager, Clearwater
Michael Wright, Assistant City Manager/Community Services, Clearwater
Mary K. Diana, Assistant City Clerk, Clearwater
The meeting was called to order at 4:00 P.M. by Chairman Wollett.
The purpose of this meeting is to consider the proposed issuance by the City of Hialeah (the "Issuer"), of Health Facilities Revenue Bonds (National Healthplex, Inc., Florida Projects),
Series 1990 in the maximum aggregate face amount of $12,000,000 to assist in financing the acquisition, rehabilitation and operation of Palmetto Health Center, Hialeah, Florida; Drew
Village Rehabilitation Center, Clearwater, Florida; Helen Wilkes Residence, Lake Park, Florida. The Clearwater Health Facilities Authority is proposing to enter into an Interlocal Agreement
with the Issuer permitting the Issuer to issue Bonds to finance the Clearwater facility. The portion of the Bonds allocable to the Clearwater facility will not exceed $5,100,000.
The Chairman stated Continental Medical Systems, Inc. (CMS) wants to include a fifth facility, Palmetto Health Center located in the City of Hialeah, in the bond issue. CMS has approached
the City of Hialeah for the issuance of bonds to finance both the Palmetto Health Center in Hialeah and the Drew Village Nursing Center in Clearwater. The Authority is being asked to
consider adopting a resolution approving an interlocal agreement between the Cities of Hialeah and Clearwater for the issuance of the bonds. Mr. Wollett said final approval would be
required by the City Commission of the City of Clearwater.
Attorney Robert Olive, legal counsel for the City of Clearwater, advised the Authority that by adopting Resolution 90-2, the Authority would be approving the interlocal agreement, formalizing
the TEFRA hearing and making a recommendation to the City to approve the bond issue. He indicated, the City of Clearwater, under the resolution, would be approving only the issuance
of
the bonds. The determination to approve the interlocal agreement would be made solely by the Authority.
Mr. Olive presented Resolution 90-2 and read it by title only.
Providing an overview, Mr. Olive indicated in order for the City of Hialeah to issue the bonds state law requires they enter into an interlocal agreement with the governmental unit
that has jurisdictional authority. If the resolution is approved, Hialeah will issue the bonds and will defease the City's outstanding bonds on the facility. The agreement places no
responsibility upon the Authority other than the execution and the delivery of the agreement.
Concern was expressed regarding a default of the bonds and it was indicated, if this occurs, this would not be a default of the Authority or the City of Clearwater and would not have
to be disclosed for future bond issues. Mr. Olive indicated the concern of the Authority should be whether or not their actions would result in higher rates for the health services
being provided and the placement of the bonds in the hands of unsophisticated investors. He proposed a rider to the interlocal agreement, amenable to the City of Hialeah, which would
help to keep the bonds out of the hands of investors unable to evaluate the merits of this type financing. It was indicated the bonds would not be issued in denominations of less than
$500,000.
Attorney Richard Blinderman, Papy Weissenborn and Papy, distributed an analysis of the current debt service and the proposed debt service for the five facilities. It showed a substantial
savings after the new issue. He indicated that not-for-profit corporations have different bases of ownership, accounting for less dollars going out, i.e., real estate taxes.
In response to questions, it was indicated the $493,000 total proposed debt service for the Drew facility includes interest and pay back of the bonds and that the original bonds are
a 30-year issue which would mature in 26 years.
Discussion ensued in regard to fine tuning the principal amount of the bonds to be issued as an over issuance would cause the bonds to be taxable.
In response to a question, it was indicated the interest rate of the current bonds is approximately 9-1/4 percent and it was anticipated the rate of the proposed issue would be approximately
10 percent.
Discussion ensued in regard to the financial feasibility study being predicated on five facilities. It was indicated putting a cap on the master indenture or including the requirement
for a parity test is necessary in the event another facility is added. This would provide protection against a depletion entity coming in.
Mr. Blinderman indicated he had no problem including a parity test requirement as part of the bond documents assuring that any additional facilities to be added would fit into the established
parameters. Mr. Olive requested a condition be added to the agreement providing that any future acquisitions bring with them at least 110 percent of what they require.
In response to a question regarding the addition of the parity test to the bond documents, it was indicated Mr. Olive would be responsible for approving the addition and rendering an
opinion as to the enforceability of the agreement.
Discussion ensued in regard to whether or not the rates at the Drew Village Nursing Center would be affected due to the proposed bond issue, and it was indicated the Authority was not
doing anything to increase the rates; however, there are certain future inflationary costs for which the Authority can not be responsible.
Discussion ensued in regard to cross-collateralization of the facilities.
The feasibility study has shown that combining all five facilities together would produce more than enough in revenues to cover the bond issue.
Mr. Blinderman indicated the seller will be providing a corporate guarantee until certain performance ratios are met and the same management company will continue. It was indicated
there would be no profit realized from the sale with the purchase price being below the market price.
Ronald Felty, National Healthplex, Inc., requested the restriction on future acquisitions be set at 125 percent.
Referring to Section 4. Representations, Warranties and Legal Opinions of the agreement, Mr. Olive expressed concern regarding the language relating to representation by the Authority
being too broad and he requested language be inserted making this representation more specifically and solely related to the Clearwater Health Facilities Authority.
Michael Benedict, Morgan Stanley, stated the Laventhal & Horavath study projects increases of approximately 5 percent a year in nursing facility rates to meet debt service coverage
ratios. It was indicated these projections are based on historical increases.
Brian Barth, CMS, pointed out that the latest feasibility study reflects the out patient component of the Palmetto facility which was omitted in the financial feasibility study sent
to the Authority last week. He indicated the addition of this component helped the coverage ratios.
A citizen spoke in support indicating a need exists for nursing facilities as reflected in an article in a recent issue of an AARP newsletter. He felt selling to a not-for-profit corporation
was the way to go as the money is put back into the capitalization of the program. He requested the Authority support the request.
Another citizen spoke in support stating he hoped the quality of work that has been done at Drew Village Nursing Center continues. He said he felt comfortable with today's input as
it has addressed prior concerns of the Authority.
Chairman Wollett commended Charles Papy and Richard Blinderman for their summarization of the proposal in their June 5th letter.
In response to questions, it was indicated Underwriter Bob Gillispie would prepare the bonds and place them in denominations of not less than $500,000. Mr. Papy indicated it is his
understanding the total issue will be purchased by no more than three investors.
Mr. Bouse moved to adopt Resolution 90-2 and approve the Interlocal Agreement subject to amendments. The motion was duly seconded. Upon the vote being taken:
"Ayes:" George, Bouse, Hosch and Wollett.
"Nays:" None. Motion carried.
Mr. Papy extended his appreciation for the efforts and hospitality shown by the Authority, legal counsel and staff.
The meeting was adjourned at 5:15 p.m.
Chairman
ATTEST:
Secretary/Treasurer