COUNTY OF SAN MATEO

Inter-Departmental Correspondence

County Manager's Office

DATE:

April 27, 2004

BOARD MEETING DATE:

May 4, 2004

TO:

Honorable Board of Supervisors

FROM:

Paul T. Scannell, Assistant County Manager

SUBJECT:

Public Hearing and Approval of California Statewide Communities Development Authority Revenue Bonds for the benefit of Daughters of Charity Health System

RECOMMENDATION:

Conduct a public hearing regarding the issuance by California Statewide Communities Development Authority ("CSCDA") of bonds for the benefit of Daughters of Charity Health System ("DOCHS") and financing and refinancing the acquisition, improvement and equipping of certain facilities known as Seton Medical Center and Seton Medical Center Coastside, located within the County of San Mateo. Following the hearing, adopt a resolution approving such bond issuance.

BACKGROUND:

Daughters of Charity of the West Province, having previously been a sponsor within the multi-sponsored health system known as Catholic Healthcare West ("CHW"), evaluated the performance of seven of its California hospitals and the future of the mission of each of them and decided to leave CHW and form a separate health care provider system, as of December 31, 2001. The new system is known as Daughters of Charity Health System ("DOCHS") and acquired the assets of the seven California hospitals from CHW, including Seton Medical Center, located in Daly City and Seton Medical Center Coastline, located in Moss Beach. The proceeds of revenue bonds issued in 2001 by CSCDA were used by DOCHS to pay for the acquisition of the hospital assets. DOCHS now has the opportunity to refinance the 2001 Bonds and take advantage of more favorable interest rates, as well as finance additional capital improvements at several of the facilities. The portion of the existing indebtedness for Seton Medical Center and Seton Medical Center Coastside is approximately $83.3 million and $4.4 million, respectively. In addition, Seton Medical Center plans to draw down approximately $10.0 million from this new money borrowing for the acquisition of equipment. It is anticipated that, through the refinancing of the 2001 Bonds, DOCHS will be in a better position to focus on its mission to the sick poor in the communities they serve.

DISCUSSION:

DOCHS has applied to CSCDA for its assistance in refinancing the acquisition of certain medical facilities and financing additional capital improvements through the issuance of revenue bonds in an amount not to exceed $550 million. CSCDA is a joint exercise of powers authority consisting of numerous California counties, cities and special districts, including the County of San Mateo. CSCDA is authorized in its Joint Exercise of Powers Agreement ("Agreement") to assist California charitable organizations through the issuance of revenue bonds. Said Agreement also requires a public approval by each participating member of CSCDA in which any portion of the project being financed is located. The federal tax law also requires a public hearing to be conducted by a government unit having jurisdiction over the area in which the financed facility is located and approval by the governing body prior to the issuance of tax-exempt bonds.

Orrick, Herrington & Sutcliffe LLP, bond counsel to CSCDA, has prepared and caused to be published the required notice of public hearing. Orrick also prepared the form of resolution submitted to the County of San Mateo Board of Supervisors for its consideration.

The County is not liable for payment with respect to the bonds.

VISION ALIGNMENT:

This item keeps the commitments of responsive, effective and collaborative government through goal number 22: County and local governments effectively communicate, collaborate and develop strategic approaches to issues affecting the entire County.

FISCAL IMPACT:

By holding this hearing and approving the Bonds the County does not obligate itself in any way for the payment of debt service on the Bonds. The principal and interest on the Bonds will be paid solely from the payments to be made by the Health Institutions. The County is not obligated to pay, and is not liable for, the payment of the Bonds.