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Articles / 2011

Ventura City Council agrees to assist hospital with bonds

Ventura County Star
Saturday, 07/19/2011
by Kevin Clerici

Community Memorial Health System's new $320 million replacement hospital got a big boost Monday night when the Ventura City Council agreed to issue $390 million in tax-exempt municipal bonds to finance the midtown facility.

Council members approved the bond sale unanimously after receiving repeated reassurances from city finance staff, the hospital's bond counsel and health system CEO Gary Wilde that the deal was airtight and fiscally sound.

The city shoulders no legal liability for repayment of the bonds, which will allow the hospital to obtain a lower interest rate for money to construct a six-story hospital next to the existing hospital on Brent Street.

The new facility, which will have 252 private rooms, 10 surgical theaters and 10 more critical care beds than the current hospital, will meet state seismic safety standards and could be completed in less than four years, hospital officials said. The new facility also will feature "healing" gardens and other outdoor amenities.

In separate action, the council also agreed Monday to swap properties with the hospital so it can obtain full site control of the land footprint it needs to begin construction this year.

The city will hand over about a 45,000-square-foot parcel between Main and Brent streets in exchange for about a 19,000-square-foot lot owned by the hospital in the same vicinity. Both sides agreed the value of the properties were equal, so no money will be exchanged. The hospital agreed to cover the full expense of all escrow and title fees, and other taxes or charges, City Attorney Ariel Calonne said.

Council members hailed the hospital project, which they see as a catalytic project in the city's midtown area that could spur other investment. Their approval of the bond sale never appeared in doubt, but they wanted multiple reassurances city funds could not be raided with so much debt at stake.

Ventura Chief Financial Officer Jay Panzica said even if health system were to go out of business, be acquired or couldn't make payments on time, "those (scenarios) won't affect us financially," he told the council.

"Our only risk is our reputation," Panzica said, adding that if the hospital system were to default, it would be a black-eye for the city as the lead agency on the bonds.

There were no public comments.The nonprofit hospital will repay the debt with $31 million annual payments over 30 years, beginning in about four years, Panzica said. Until then, the hospital would pay interest-only payments. Panzica said the state Constitution allows cities to help local hospitals with such transactions, which are not uncommon and usually referred to as "conduit debt." A provision in the agreement specially states the city bears no responsibility for the debt, and the limited nature of the city's participation is clearly disclosed to investors who purchase the bonds, he said.

"The official statement reads that the bonds are not a debt or liability of the city and that neither the faith and credit nor the taxing power of the city is pledged to their payment," he said in a report to the council.

CEO Wilde said the hospital was fully prepared to pay off the debt and thanked the council for assistance. "We are a prudently run organization," he said.