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Commission discusses bonding companies
Pawnee Valley Community Hospital
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By Jim Misunas
LARNED – Members of the Pawnee County Public Building Commission will provide insight for the selection of a bonding company for financing for a  proposed $18 million Pawnee Valley Community Hospital (PVCH).
Tom Giessel, Tim George and Dick King are members of a Pawnee Public Building Commission (PBC) who will issue the bonds on PVCH.
The commissioners and PBC must choose a banking company to underwrite and sell bonds for the financing of PVCH between UMB, Kansas City, Mo.; Piper Jaffray, Lenexa; Stifel, Nicolaus, Wichita; and The Country Club Bank, Kansas City, Mo.
“We want you to look at these four and give us an opinion,” said Donna Pelton, Pawnee County commissioner.
The PBC receives $18 million to finance the project and the bond company makes money by selling the bonds to investors, who also make money on their investment.
“We want your input,” Commissioner John Haas told PBC members Monday morning. “You will be the ones issuing the bonds.”
Based on current legislation, a single bond is limited to $10 million; so two bonds would have to be issued, one in 2011 and one for 2012 for Pawnee Valley’s $18 million project. The two bonds can be issued together for a similar interest rate, but they would be sold separately. Midwestern banks are the primary buyer. The bonds are considered safe investments because they have guaranteed revenue.
Pawnee Valley owns a critical care access license, which is certified to receive cost-based reimbursement from Medicare. The reimbursement is intended to improve the financial performance for rural hospitals though cost reimbursement plus 1 percent.
The bond would be repaid annually by estimated sales tax ($550,000), property tax of six mills ($350,000) and Medicare reimbursement ($650,000).
A favorable bond rating from Moody’s or Standard and Poor’s would help maximize an optimum interest rate. An “A” bond rating would qualify for bank-qualified, tax-exempt bonds.
“It’s important to be ranked because it gives us a better interest rate,” Haas said.
UMB’s investment banking group underwrote a $30 million Allen County Hospital project. Piper Jaffray completed a $47 million bond for the Hays Medical Center. Stifel, Nicolaus underwrote a $24.7 million bond for Labette County Hospital.
PBC members were asked to report their findings May 23. Commissioner Kathy Bowman said the commission would like to choose a bonding company within the next couple of weeks.
“They are all going to be good companies,” Bowman said.