The Grossmont Healthcare District (GHD), a taxpayer-supported public agency that serves as landlord of Grossmont Hospital in La Mesa, has announced the sale of $136,860,000 in general obligation (G.O.) bonds to both institutional and retail investors in the U.S. municipal bond market. The bond proceeds will help provide ongoing financing for a number of capital improvement construction projects planned over the next several years at the publicly owned hospital.
GHD said its bonds were sold in about two hours on Wednesday, Feb. 23. Bond sales have been known to take up to several weeks due to market volatility. However, GHD officials said the District’s financial stability and a favorable rating from Moody’s Investor Services got investors’ swift attention.
GHD’s bonds received a rating of “Aa2,” which ranks near the top of Moody’s 10-tier scale, with “AAA,” as the highest rating possible. The U.S. government, for instance, has a Triple-A rating. Moody’s is a recognized and widely utilized independent source for credit ratings on debt involving sovereign nations, corporations and municipalities.
“The strong rating was a real plus for local taxpayers because it affirmed the creditworthiness of the bonds, as well as the utmost confidence by institutional investors in the District’s financial stability,” said Debbie McElravy, 2011 GHD board president. “The high rating also helped lower the bond sale transaction and interest costs so that bond proceeds will go further for infrastructure upgrades and patient improvements at the hospital.”
This is the second time that GHD has sold G.O. bonds to help pay for improvements at the hospital. In 2007, GHD sold $85.6 million in bonds, and a third sale of approximately $24 million in bonds is tentatively scheduled for 2014, depending on construction progress and market conditions. In 2007, it was the first time since the hospital opened in 1955 that G.O. bonds had been sold to fund construction improvements at the regional medical complex. About $41 million of the $85.6 million in bonds was spent to build-out three patient care floors located directly above the hospital’s existing Emergency Department and Intensive Care Unit. The 75,000-square-foot expansion, which opened in September 2009, included 90 new patient beds consisting of 24 intensive care beds on one floor and 66 medical/surgical beds on two other floors. The addition brought the total bed count at the hospital to 536.
GHD officials said this latest bond sale will help finance a number of construction projects that are currently in various planning stages, including: medical, electrical and plumbing upgrades to the nursing units and patient rooms at the East Tower that was originally constructed in 1974; a new Central Energy Plant that will meet the capacity needs of Grossmont Hospital for several years into the future; a new Heart and Vascular Center to feature space for a new pharmacy and clinical lab and cath labs, as well as flexible, multi-purpose procedure rooms that can be used for a wide range of specialties; and, the new Dr. John W. Hardebeck Health Occupations Training Center that will feature classroom and lab space for the training for future generations of health care professionals.
“We are very pleased at the success of our second bond sale, and we are especially gratified that some investors this time were repeat purchasers from our initial bond sale back in 2007,” said McElravy. “The timing was right because our building fund cash-flow needs will be significant over the next six months and we want the construction activity to stay on schedule.”
The $136 million in bonds will mature in various years, between 2016 and 2040, at an interest rate of 5.9226 percent. In comparison, the bonds sold in 2007 returned to investors a yield of 5.25 percent. Serving as bond underwriter on both bond sales was Goldman Sachs, a leading global investment banking, securities and investment management firm. In addition, an 11-member Independent Citizens’ Bond Oversight Committee has been overseeing the bond expenditure process.
GHD’s decision to use G.O. bonds to finance hospital construction was prompted several years ago when GHD board members realized that major capital improvements were needed at the hospital. As a result, the District sponsored a $247 million bond measure, called Proposition “G,” which appear on the June 2006 ballot. East County voters approved Prop. 6 by more than 77 percent, well above the two-thirds passage requirement. There was no organized opposition to Prop. G, and no ballot argument against it filed with the Registrar of Voters.
Construction work related to Prop. G could continue until at least 2016, GHD officials said. The specific list of construction projects, which are limited to buildings and other fixed assets according to the ballot measure, is following the Grossmont Hospital Facilities Master Site Plan.
The Grossmont Healthcare District, a public agency that supports various health-related community programs and services in San Diego’s East County region, was formed in 1952 to build and operate Grossmont Hospital. Serving as hospital landlord, the District owns the hospital, including the property and buildings, on behalf of local taxpayers. In 1991, the District leased the hospital’s operation to Sharp HealthCare under a 30-year lease that runs through the year 2021.The District is governed by a five-member board of directors, each elected to four-year terms, who represent nearly 500,000 people residing within the District’s 750 square miles in San Diego’s East County. GHD also operates the Dr. William C. Herrick Community Health Care Library, a public library specializing in health research information, located at 9001 Wakarusa St. in La Mesa. For more information about GHD, visit www.grossmonthealthcare.org.