REPORT TO THE CITY COUNCIL December 10, 2015 FROM: MICHAEL LIMA, Controller/Finance Director Finance Department BY: KAREN M. BRADLEY, Assistant Controller/Finance Director Finance Department SUBJECT ..Title TEFRA Hearing as required by Section 147(f) of the Internal Revenue Code of 1986, as amended, to hear and consider information concerning the proposed plan of finance providing for the issuance of Health Facility Revenue Bonds in an aggregate principal amount not to exceed $1,100,000,000 by the Michigan Finance Authority to (i) refinance the costs of acquisition, construction, furnishing and equipping of certain health care facilities owned and operated by Saint Agnes Medical Center (or an affiliate thereof) and (ii) pay certain expenses incurred in connection with the issuance of the bonds. 1. ***RESOLUTION - Approving the issuance of the Michigan Finance Authority revenue bonds (CHE Trinity Health Credit Group), in one or more series, for the purpose of refinancing the costs of acquisition, construction, improvement and equipping of health care facilities owned and operated by Saint Agnes Medical Center (or an affiliate thereof) in an aggregate principal amount not to exceed $25,000,000 and certain other matters relating thereto. ..Body RECOMMENDATION Staff recommends the City Council first hold a Public Hearing and then upon conclusion, adopt the accompanying Resolution approving the plan of finance and related issuance of Health Facility Revenue Bonds (the "Bonds") by the Michigan Finance Authority, (the "Issuer") on behalf of Trinity Health Corporation (formerly known as CHE Trinity Inc.), an Indiana nonprofit corporation. Trinity Health Corporation (the "Applicant") is the sole corporate member of Saint Agnes Medical Center, a California nonprofit corporation. The proposed purpose of the issuance is to (i) refinance the costs of acquisition, improvement, furnishing, and equipping of hospitals or other health care facilities owned and operated by Trinity Health (Saint Agnes Medical Center), and (ii) pay certain expenses incurred in connection with the issuance of the Bonds. EXECUTIVE SUMMARY The Applicant is requesting that the City Council consider information concerning the proposed plan of finance providing for the issuance of one or more series of hospital revenue bonds in an aggregate principal amount not to exceed One Billion, One Hundred Million Dollars ($1,100,000,000) pursuant to a plan of finance for various capital facilities located in the City of Fresno. The proceeds with respect to capital facilities in the City of Fresno would be utilized for (i) the proposed "2016 Project" which consists of refinancing the costs of acquisition, construction, furnishing, and equipping of various hospitals or other health care facilities owned and operated by Trinity Health (St. Agnes Medical Center) located at 1303 East Herndon Avenue; 1111 East Spruce Avenue; 1201 East Herndon Avenue; 1245 East Herndon Avenue; 1360 East Herndon Avenue; 7130 North Millbrook Avenue; 7202 North Millbrook Avenue; and 1313 East Herndon Avenue, all located in the City of Fresno, California; and other related acquisitions, improvements, equipment, construction and reconstruction on these properties, (ii) the proposed "Refunding Project" which consists of refunding certain outstanding bonds, the proceeds of which were used to refinance the costs of acquisition, construction, furnishing, and equipping of various hospitals or other health care facilities owned and operated by Trinity Health (St. Agnes Medical Center) located at 1303 East Herndon Avenue; 1111 East Spruce Avenue; 1201 East Herndon Avenue; 1245 East Herndon Avenue; 1360 East Herndon Avenue; 7130 North Millbrook Avenue; 7202 North Millbrook Avenue; and 1313 E. Herndon Avenue all located in the City of Fresno, California, and (iii) pay certain expenses incurred in connection with the issuance of the Bonds. As required by Section 147(f) of the Internal Revenue Code, the Council must hold a public hearing under the provisions of the Tax Equity and Financial Responsibility Act ("TEFRA") within the Internal Revenue Code to receive any public testimony regarding the project before it considers authorizing the issuance of bonds for this purpose. Should the City authorize the issuance of bonds, the City of Fresno would have no obligation or liability associated with the financing of these projects. BACKGROUND The City has received a request by the Applicant to hold a public hearing regarding a proposed bond issuance, and to authorize the Issuer to proceed with issuance of the Bonds in an aggregate principal amount not to exceed One Billion, One Hundred Million Dollars ($1,100,000,000), pursuant to a plan of finance developed by the Applicant for various capital facilities, including capital facilities located in the City of Fresno and identified as various Saint Agnes Medical Center facilities (the "Issuance"). The Issuance includes an amount not to exceed Twenty Five Million Dollars ($25,000,000) to refinance projects or prior bonds, which refinanced projects related to facilities of St. Agnes Medical Center located at 1303 East Herndon Avenue; 1111 East Spruce Avenue; 1201 East Herndon Avenue; 1245 East Herndon Avenue; 1360 East Herndon Avenue; 7130 North Millbrook Avenue; 7202 North Millbrook Avenue; and 1313 East Herndon Avenue, all located in the City of Fresno, California. The financing will assist Saint Agnes Medical Center in the continuance of quality health care to the residents of Fresno and the surrounding service area. The Internal Revenue Code requires the local legislative body hold a public "TEFRA" hearing (this acronym stands for the Tax Equity and Fiscal Responsibility Act of 1982) before it considers authorizing the issuance of such bonds. As the appropriate elected public body with jurisdiction over the Project, the Council must hold a public hearing under the provisions of TEFRA to receive any public testimony regarding the Project before considering authorizing the issuance of the Bonds for this purpose. The Bonds will be limited obligations of the Issuer, payable only from loan repayments to be made by the Applicant to the Issuers from certain funds and accounts established by or pursuant to the bond indenture(s) under which the Bonds will be issued. The Bonds will not constitute a debt or liability to the City. However, the financing cannot proceed without the City of Fresno's approval. The attached resolution, if approved by the Council, will provide authorization to issue hospital revenue and refunding bonds. The Issuer has the requisite authority to assist in the financing of facilities for nonprofit organizations, including facilities located outside their respective state. ENVIRONMENTAL FINDINGS This item is not a project of the City of Fresno and as such, for the purposes of this hearing, the California Environmental Quality Act requirements are not applicable. LOCAL PREFERENCE Local preference was not considered because this resolution does not include a bid or award of a construction or service contract. FISCAL IMPACT The City has no obligation or liability associated with this financing. The Bonds will not constitute an indebtedness or obligation of, and will not involve a pledge of the good faith and credit of the City. The Bonds will be limited obligations of the Issuer payable only from loan repayments to be made to the Issuer from certain funds and accounts established by or pursuant to the bond indenture(s) under which the Bonds will be issued. The Issuer has no taxing power and the issuance of the Bonds will not obligate the State of California or any political subdivision of the State to levy or pledge any form of taxation for the Bonds or to make any appropriation for the payment of the Bonds. Attachment: Resolution