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Council approves refinancing plan to back $7.5 million in hospital bonds
Summary
The Hillsboro City Council adopted Ordinance 14-14 authorizing the Public Building Commission to issue $7.5 million in refinancing bonds for Hillsboro Community Hospital; officials said the lease/sublease structure will have hospital rents repay the debt and should avoid tax-supported liabilities.
The Hillsboro City Council voted to adopt Ordinance 14-14, authorizing the Public Building Commission to issue $7,500,000 in refinancing bonds to refinance existing debt for Hillsboro Community Hospital and cover issuance costs.
City staff described the transaction as a refunding to replace the hospital's variable-rate taxable revenue bonds. Stiles said the financing is being packaged through the Rural Water Financing Authority and underwritten by USDA and Cash-of-Hayes, which staff expect will lower the hospital's borrowing costs. "They have a variable rate interest rate right now, which can get up to 10%. And these are somewhere in the neighborhood of 6," Stiles said.
Officials said the structure uses a lease by the Public Building Commission to the city and a sublease to the hospital operator so bond payments are repaid from hospital rents rather than the city's general fund. A member of staff advising on the transaction said the rural water financing authority will be the creditor that holds the packaged bonds and sets the interest rates: "The interest rates will be set a week from today, but they are anticipating they're in between 6 and 6.5," the advisor said.
Council members discussed the city's exposure and were told the sublease arrangement would allow the city to replace the operator if necessary and avoid drawing on Public Building Commission reserves. Mayor Lou Thurston noted the refinancing would stop the commission from dipping into reserves under the prior payment schedule.
Councilman McCarty moved to adopt the ordinance and the motion carried. The roll call produced three yes votes and one abstention; Councilman Wilkins recorded the abstention. Ordinance 14-14 was adopted with the mayor to sign.
The council packet and statements at the meeting said the financing is intended to provide long-term stability for the hospital's debt service and reduce interest costs; specific interest rates and bond-sale details will be finalized in the coming week when the bonds are marketed.
