Municipal Corporations Committee forwards HHC refunding proposal to full council

The Municipal Corporations Committee voted to forward Proposal 2‑13 from the Health and Hospital Corporation of Marion County to the full City-County Council with a "do pass" recommendation, advancing authorization for up to $150 million in general obligation refunding bonds to refinance debt related to Eskenazi Hospital.

The measure, presented by Joe Glass, executive director and general counsel of the Indianapolis Bond Bank, would refund certain 2010 bonds and related lease rental bonds and keep the final maturity date at January 2040. "We are here, to present proposal 2 13, which authorizes, refunding bonds, an amount not to exceed 150,000,000 for the series, 20 10 a 2, health and hospital bonds," Glass said.

The committee heard that the 2010 A2 and B2 bonds were issued as Build America Bonds (part of the American Recovery and Reinvestment Act of 2009). James Simpson, interim chief financial officer of the Health and Hospital Corporation, explained the federal subsidy has been reduced by sequestration and related adjustments. "When these bonds were issued in 02/2009, the understanding was we'd receive a 35% subsidy payment on these federal taxable bonds," Simpson said, adding that sequestration and statutory adjustments have reduced payments from expectations and increased debt service obligations for the corporation.

Officials described three principal reasons for the refunding: reduce uncertainty tied to the federal Build America Bond (BAB) subsidy, convert a cash-funded debt service reserve to a surety (releasing cash now), and potentially realize interest-rate savings. The presentation said about $141,000,000 remains outstanding on the 2010 series tied to Eskenazi Hospital and roughly $328,000,000 is outstanding on the related lease rental bonds issued by the Indianapolis-Marion County Building Authority. The two refundings together would free roughly $33,800,000 now held in a cash debt service reserve and would lower rental payments for the Health and Hospital Corporation by about $2,450,000 per year, according to the presentation.

Committee members asked clarifying questions. Councilor Allen (District 16) summarized the action as similar to refinancing a mortgage: "We're basically refinancing these at a lower interest rate, so that way we end up paying less over the long term of the bond," he said. Glass and Simpson said the primary goal was reducing subsidy risk and freeing reserve cash; interest-rate savings were possible but not guaranteed. Glass said the final pricing is planned for September and that the full council vote is expected at the council's August meeting.

Councilor Ron Gibson moved to send Proposal 2‑13 to the full council for final adoption; the motion was seconded and approved by voice vote. The committee record shows the committee will present its recommendation to the full City-County Council, after which bond pricing and final issuance steps would proceed.

Next steps noted on the record include a council consideration in August and anticipated pricing in September. No formal objections or penalties to the refunding were recorded in committee discussion; questions centered on the mechanics of the federal subsidy reduction, the source of issuance costs (to be included in cost of issuance), and whether the refunding would change bond maturities (it would not).