Allen County commissioners repeatedly have said they intend to finance whatever is done to improve healthcare through remodeling of Allen County Hospital or construction of a new hospital with revenue bonds.
In pure form, revenue bonds are retired with money generated by what they’re supporting. Consequently, debt service for revenue bonds to pay for construction work associated with ACH would come from profits the hospital would realize each year. If hospital income isn’t sufficient to retire revenue bonds, commissioners could opt to include revenue from a tax issue, and the option would be a sales tax.
Commissioners have said they have no interest in pursuing any property tax issue. Gary McIntosh, commission chairman, told the Register he categorically was opposed to raising property taxes to pay for hospital improvements. Commissioners Dick Works and Rob Francis have said much the same.
So, if tax money is required for hospital improvements, a local sales tax is the only recourse acceptable to commissioners. Commissioners know, on the basis of a countywide sales tax to support the Allen County Landfill, that a sales tax of half a cent would raise about $800,000 a year.
Commissioners won’t know how much bond money is needed until they decide what to do, either remodel or build anew. The hand-in-glove component to that is information from Hospital Corporation of America (HCA) about how much revenue the hospital has generated during HCA’s five years of management, so a forecast may be made for annual revenue in the years ahead. Commissioners have yet to receive revenue figures from HCA, McIntosh said.
For illustration’s sake, the Register obtained amortization schedules for financing a $25 million revenue bond issue. For a 20-year issue, the annual payment would be $2.22 million; for 25 years it would be $2 million. Those figures are based on percentage rates of 6.25 percent for 20 years and 6.5 percent for 25 years, which Jim Gilpin, executive vice president and trust officer at Community National Bank and Trust, said were reasonable expectations in today’s money market.
McIntosh also noted that if the county were able to come up with money to pledge to the project, interest rates and debt service figures would improve to the county’s advantage. Examples, he noted, are a capital campaign or some source of revenue unforeseen today. That has occurred in neighboring communities with construction and remodeling of hospitals. At Neodesha more than $2 million was raised publicly and at Girard a foundation has raised $1.9 million in recent years.
Meanwhile, if a sales tax issue is to become a component of financing, a referendum will decide it. The earliest that might occur is at the Nov. 2 general election, a date McIntosh thinks is doable. The next available date without a special election is the April 5, 2011 countywide school and city election.
Second funding course: sales tax
