Grays Harbor Community Hospital will go out for bonds to refinance their debt. After a year of restructuring and consultant-led reductions in workforce, the hospital will exercise an option they’ve been eyeing since last year. The board of commissioners voted unanimously last night to begin the process to issue $38-million in Limited-tax general obligation (LTGO) bonds.
Chief Finance Officer Niall Foley told the board that the money would pay off old bonds, and free up nearly 2-million in reserve funds. “Refunding the 7’s [and] the 11’s that the hospital holds currently, and the line of credit with Key Bank and the loan from Bank of the Pacific.”
Foley added that the current cost to carry the hospital’s debt is about $300-thousand per month, and the hospital would save about $4-5 million in two years with this move.
Board member Miles Longenbaugh explained a downside to the move, “Thing is that it does shift the responsibility of paying that debt from the non-profit hospital to the public. We’re obligating the public, through the tax levy, to service the debt.” The Public
After providing a financial update to the board that included a $500-thousand deficit for last month, Longenbaugh said that for the year hospital is operating about $5-million in the red. He added that refinance only prolongs the costs associated with carrying the debt.
The Municipal Research and Services Center explains that a Limited tax general obligation (LTGO) bonds (also called “councilmanic” bonds or non-voted debt), may be issued by a vote of the legislative body. Because the voters have not been asked to approve a tax increase to pay for the principal and interest, general fund revenues must be pledged to pay the debt service on LTGO. It is important to note that LTGO debt does not provide any additional revenue to fund debt service payments but must be paid from existing revenue sources.
CEO Tom Jensen said administrators will prepare the bonds for a late December release, hoping to see income from the sales by the end of the year.