Star Prairie board demonstrates good governance
Trustees vote unanimously in favor of the resolution to issue a revenue bonds
Following a public hearing June 1 during which attorneys and staff representing Westfields Hospital presented a proposal to employ the village’s tax exempt status as a conduit to help finance $3,500,000 in new improvements to the hospital which created more questions than it answered, Westfields Hospital CEO Steve Massey got a second chance to clarify the hospital’s request before trustees during a special session Thursday June 9.
Trustees expressed some reluctance and confusion in response to the initial proposal, citing several sticking points. The confusion centered around an “administrative fee” somewhat loosely offered by attorneys at the June 1 public hearing. The trustees’ hesitation centered around two questions: Why is the amount the village is being asked to shoulder $7,500,000 in total, $3,500,000 worth of debt to be refinanced from a previous project in 1999 and $3,5000,000 for the newly-proposed improvements to the hospital campus, twice the amount the City of New Richmond is being asked to shoulder?
Trustees also wanted to know why other local municipalities also served by the hospital had not been approached to share as financial conduits.
“I appreciate the group getting back together on such short notice to reconsider the conduit financing that was discussed on June 1,” Massey said. “I apologize. The people who came to the last meeting don’t live in this area and looking back, I wished I had been able to come here to answer some of your questions.”
Massey described new improvements to the hospital that will include a larger, better-equipped therapy and rehab facility, an improved sleep lab, an expanded newly-remodeled emergency room and redesigned surgery department focused on better workflow and privacy.
“It will be the best emergency room is western Wisconsin,” said Massey.
Massey went on to explain that the administrative fee initially tendered June 1 had not been discussed with himself or the hospital board and was not inline with hospital policy.
“I know there was an option presented by bond counsel at the last meeting about an administrative fee. That was not anything that we had discussed with our board of directors. I have had a chance to connect with them (regarding this option) and I do not have their support to offer that,” said Massey. “And just personally, I don’t believe in it, and I’m not willing to go on record saying that that’s what we’d like to do. It would be very easy for me to come in and say, ‘Yeah, we can do some type of administrative fee to put some money into the village for that work that they have to do,’ but at the same time, that money has to come from somewhere. It would have to come from our balance sheet.
“I would rather put that money to use caring for patients and looking for opportunities to drive costs down for the entire population that comes to Westfields Hospital and Clinic. I would ask you to consider as you look at the resolution tonight, not the fact that it is bond financing, but really consider what the money is going towards. What we are really asking you to consider is being a conduit to the bank qualified program because of the merits of the project.”
Massey appreciated that committing 75 percent of the village’s available $10,000,000 limit does complicate the village’s ability to burrow in the bank qualified market should the need arise during the remainder of 2016 (the cap renews automatically each year).
“We can put language in the bond offering that says if that does happen, if there is a project that hits the horizon where you the village is unable to get bank qualified financing, whatever the delta is between the cost of the bank qualified debt and the cost of non-qualified debt, if it’s 25 or 30 basis points, if it is 10 or 20 or $30,000 of risk, whatever that spread is, we will cover that in whole. If the $10,000,000 is needed and you can’t go out to the bank qualified market, we can work out language in bond offering to assure everyone here that there is zero risk in terms of the $10,000,000 cap,” said Massey.
He went on to assure residents they would be at no risk in terms of the financing.
“There is no cost to the village or any of its residents to us financing and using the bond market and bank qualified financing. There is zero risk of us defaulting and anyone personally, or as an organization, being responsible for paying off the debts that we are taking on as part of this project,” Massey said.
Massey explained that New Richmond was not shouldering more of the financing because it had already reached the $10,000,000 limit placed on municipalities for conduit financing. In addition to the hospital’s request, New Richmond had to split its 10 million dollar cap amongst several other nonprofits asking for their assistance.
The hospital approached only the village of Star Prairie because of its successful partnerships in the past and to keep the financing less complicated by involving only two organizations. Massey stated, that though they would not be opposed to adding another municipality into the mix, it would require additional time and another public hearing, thereby delaying the start of the project. He went on to say, should the village decline the hospital’s proposal, there would be no ill will between the hospital and the village and that they would solicit another municipality’s assistance.
Trustees appeared reassured by the hospital’s offer to cover any costs incurred should a need arise on the village’s behalf to seek bank qualified funds for its own projects that would exceed its $10,000,000 cap during the remainder of 2016. Trustees also weighed the value of requiring an administrative fee against the merits of the project in terms of serving the medical needs of community members and found in favor of the important role the hospital plays in keeping residents healthy.
Trustees voted unanimously in favor of the resolution to issue a revenue bonds not to exceed $7,500,000 to refinance debt remaining from the 1999 bond and finance new improvements to Westfields Hospital and Clinic.