City Council Meeting Date: December 11, 2018
To: Mayor and City Council
From: Ben Martig, City Administrator
Title
Consider Northfield Hospital & Clinic Second Amended and Restated Indenture of Trust.
Body
Action Requested:
The Northfield City Council considers approving the attached Resolution authorizing the execution of a Second Amended and Restated Indenture of Trust Between the City of Northfield, Minnesota and Wells Fargo Bank, National Association.
Summary Report:
The Council Finance Policy Subcommittee met on Monday, December 3rd and is supportive of a recommendation for the Council to approve this amendment to the Indenture.
The Northfield Hospital & Clinics Board met on Thursday, November 29 and approved a recommendation for the City to approve the "proposed definition" as outlined in summary form in the attached Powerpoint presentation. Chief Financial Officer (CFO) Scott Edin requested that the Bond indenture amendment to clarify in writing that Pension expense is not to be included as an Operating Expense. This is the way all of the Bankers agreed that it should be handled; but he wanted to codify this more permanently that this was interpreted this way by future Bank & Hospital representatives.
There is a covenant (Debt Service Coverage ratio) that measures an organizations ability to repay the debt. In summary, it takes the amount of Profit in Cash (ie. EBIDA) divided by the annual Debt payment. The indenture requires a minimum of 1.2 times coverage. Since the pension Expense is not a Cash expense (i.e. there is no written check to the State of MN) everyone agrees that is shouldn't be subtracted from hospital profits for purposes of this equation.
The following are some specific items of note that Jenny Boulton with Kennedy & Graven felt are relevant in discussions for perspective:
1. Northfield Hospital is an instrumentality of the City and therefore the 2015 and 2016 hospital revenue bonds are revenue obligations of the City (pa...
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