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PBC board helps narrow bonding companies
For Pawnee Valley Community Hospital
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LARNED – Members of the Pawnee County Public Building Commission are considering two bonding companies 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. They agreed during a commission meeting Monday that UMB, Kansas City, Mo. and Piper Jaffray, Lenexa, were the top two candidates. The commissioners and PBC must choose a banking company to underwrite and sell bonds for the financing of PVCH.
King wrote in a memo that UMB’s local connection with First State Bank was an advantage.
“UMB has the experience necessary and their costs to sell the bonds seem reasonable,” King wrote. “The Piper Jaffray proposal was well prepared and their experience would be comparable.”
Pawnee County Commissioner John Haas said the finalists would be invited to make another presentation that would include more specific financial numbers.
“They both have experience and good networks,” Haas said.
A favorable bond rating from Moody’s or Standard and Poor’s would help secure an optimum interest rate. An “A” bond rating would qualify for bank-qualified, tax-exempt bonds.
George said, “I couldn’t see a whole lot of difference. They both will help us get our bond rating.”
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. Haas said since Pawnee County has no debt, it has a good chance to receive a favorable A bond rating.
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).
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.