City Council Meeting Date: July 19, 2016
To: Mayor and City Council
City Administrator
From: Melanie Lammers, Finance Director
Title
Discussion of Hospital Bond Refunding
Body
Action Requested:
The Northfield City Council will be presented with a proposed Hospital Bond Refunding and new money proposal.
Summary Report:
The Northfield Hospital is looking at refunding an outstanding bond issue that is callable in November of 2016. The original bond issue was in 2001 to construct a new facility which opened in 2003. In 2006, the bonds were refunded to a lower interest rate of 5.375%. With the call date approaching, and our low interest rate environment, the Hospital is proposing to refund the 2006 bonds to a lower interest rate. In addition, they are taking out new money at the low interest rate. Total amount of debt issuance is $25 million. Of this, $22,065,000 is existing refunded debt, and $2,935,000 of new debt. The estimated interest rate at closing will be approximately 2.72%. This will result in substantial interest savings for the Hospital. The first year interest savings are estimated at $600,000, even with the new money.
Representatives of the Northfield Hospital will be in attendance at the meeting to present their request in greater detail.
Financial Impacts:
The refunding portion of the debt issuance has no impact to the City finances. It will save the Hospital in interest costs over the next 15 years. The new money piece of the transaction will account for a portion of the $10 million allowance for bank qualified rates. It will not directly affect the City finances since we will still have $7 million left of bank qualified financing.
Tentative Timelines:
The resolution authorizing the refunding and new debt will come before council for consideration on August 2, 2016.