SGMC asks Lowndes County Commission to guarantee $100 M in bonds 10 October 2011

Commissioners asked some perceptive questions two weeks ago at their work session, as well they should, when South Georgia Medical Center was asking the county to guarantee a hundred million dollars in bonds. Some questions may remain.

Representatives from SGMC gave a two part presentation about expansion of SGMC facilities, to include 96 new private rooms in the Dasher Heart Center, the 5 story parking deck, now under construction and due to be completed in early 2012, and Life Safety and Generator Equipment updates.

Additionally, they spoke briefly on the acquisition of Smith Northview Hospital on September 1, 2011. Smith Northview operates as a campus of SGMC and all Smith Northview employees are now SGMC employees.

The second part of the presentation was about the financial portions of each of the 4 projects. The total cost of all four projects is $143,000,000 and the financed portion of that is expected to be $115,000,000. $3,000,000 is set aside in SPLOST for the parking deck and 25,000,000 is SGMC internally available funds. (Because SGMC is a public, not-for-profit, hospital, any funds that are above the cost of providing services must be re-invested into the hospital and the services it provides.)

There are outstanding 2002 issued bonds (about 32 million dollars) that could be refinanced in 2012. This would be at a lower rate and save 1.5 million dollars in interest payments over the remaining term of the bonds if the county guarentees the bond. If the bond was re-issued without the county guarantee, the savings would be only $380,000.

The maximum amount that SGMC wants to finance through 30 year bonds is $150 million. The refinanced existing bond would be 15 years and all bonds would be callable after 10 years. The interest rate available to SGMC with their credit rating alone is 5.16% and if the county signs the guarentee the rate would be 4.75%. An arrangement to have monthly payments to go to an account at a trustee bank would ensure that the annual payments on the bonds would be met.

If SGMC goes alone, the total payments on the loan would be 313M. If the county guarentees, the total would be 297M for a savings of $16M over the life of the bond. They have no additional plans for debt in the next few years, after this bond issue.

During the question section, Commissioner Powell wanted to have the county attorney and accountant to swear that guarenteeing this bond would not impact the ability of future commissions to borrow money if needed. It was stated that this agreement is like the debt service agreement that Lowndes County has with the Valdosta Lowndes County Industrial Authority. Commissioner Powell then read from the agreement,

If the trustee indenture is insufficient to pay the principle and interest becoming due of the certificates. da.du.du.da… provides the county will levy taxes up to seven mils as necessary to make the payments
and then asked if levying taxes was the only option and Attorney Walter Elliot said it was not the only option,
“nothing here in contained shall be construed as limiting the right of the county to use its general funds or other monies available to the county”
Commissioner Powell was satified with the answer.

Commissioner Raines said

essentially if something should drastically change and the bottom fell out, this hospital would be a very a lucrative prize for any large hospital … I can’t imagine a scenario where we’d have to put the hospital up for sale but it would be a prize for anybody to come along.. Am I mistaken with that? We’re a regional healthcare center. It’s a huge engine for our economy.
His assertion was confirmed and SGMC officials asserted that the hospital maintains cash investment on hand in addition to the sinking fund.

Chairman Paulk spoke about the quality of the hospital, management, and employees and said

“As a banker this would be a very good loan. I have full confidence in them.”

Watching the videos back, I find the topic as interesting as I did the first time. The few questions I have are:

  • Is there really a need for 96 more cardiac focused hospital rooms?
  • Can they be repurposed from cardiac care to something else if necessary?
  • What bank does SGMC use? Local? Commercial? Where will the sinking fund be held?

I’d like to see SGMC grow to be a Level 1 Trauma Center and continue to provide quality jobs with a variety of skill levels to the citizens of our community.

Here’s a playlist:

SGMC New Facilities and Bond Proposal Presentation
Work Session, Lowndes County Commission (LCC),
Valdosta, Lowndes County, Georgia, 10 October 2011.
Videos by Gretchen Quarterman for LAKE, the Lowndes Area Knowledge Exchange.