HomeMy WebLinkAboutRes2010-018 Sponsored by: Oates
CITY OF SEWARD, ALASKA
RESOLUTION 2010 -018
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SEWARD,
ALASKA, AUTHORIZING A MEMORANDUM OF UNDERSTANDING
WITH PROVIDENCE HEALTH & SERVICES TO ACCOUNT FOR THE
TRANSFER OF FUNDS NECESSARY TO FACILITATE DEBT SERVICE
PAYMENTS ASSOCIATED WITH SEWARD MOUNTAIN HAVEN
WHEREAS, the Seward City Council passed Resolution 2006 -28 on March 13, 2006 and
Resolution 2007 -50 on May 14, 2007, authorizing the issuance of $27 million in revenue bonds for
the purpose of financing, designing, constructing and equipping a new long -term care facility in
Seward, known as Seward Mountain Haven ( "SMH "); and
WHEREAS, the primary mechanism for repayment of these bonds is the capital cost
component of patient charges, including Medicare revenues, generated from Seward Mountain
Haven, which began operations on October 1, 2009; and
WHEREAS, the City will utilize 100% of the capital cost component of patient revenues for
the sole purpose of repaying bond debt and capital costs of Seward Mountain Haven; and
WHEREAS, the City and Providence Health and Services are entering into a Memorandum
of Understanding to ensure that the capital cost - related revenues of Seward Mountain Haven are
transferred to the City to be deposited into the Seward Mountain Haven Debt Service Fund to be
designated solely for the purpose of bond repayment and capital costs.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY
OF SEWARD, ALASKA that:
Section 1. The city manager is hereby authorized to sign the Memorandum of Understanding
between the City of Seward and Providence Health & Services, in substantial form as attached
hereto.
Section 2. The City will account for and segregate the revenues associated with the capital
costs of the facility, in the Seward Mountain Haven Debt Service Fund, and will utilize those funds
to pay debt service and capital costs associated with Seward Mountain Haven.
Section 3. This resolution shall take effect immediately upon its adoption.
PASSED AND APPROVED by the City Council of the City of Seward, Alaska, this 22nd day of
February, 2010.
CITY OF SEWARD, ALASKA
RESOLUTION 2010 -018
THE CITY • F SEWARD, ALASKA
" lel°
Willard E. Dunham, Mayor
AYES: Valdatta, Bardarson, Keil, Amberg, Shafer, Dunham
NOES: None
ABSENT: Smith
ABSTAIN: None
ATTEST:
Je.,1 Lewis., CM
Ci Clerk
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Council Agenda Statement
Meeting Date: February 22, 2010 a of sets
Finance Director O
Kristin Erchinger, •.,1 � -
From:
Through: Phillip Oates, City Manager 4 4A511P
Agenda Item: Memorandum of Understanding with Providence Health
& Services to transfer long -term care facility revenues to
pay debt service and capital costs
BACKGROUND & JUSTIFICATION:
The Seward City Council authorized the issuance of $27 million in revenue bonds to finance, design, construct, and
equip Seward's new long -term care facility, Seward Mountain Haven (SMH). The annual debt service payments on the
bonds will be approximately $1.97 million. The revenues to repay the bonds will come directly from revenues of Seward
Mountain Haven.
The purpose of this action is to establish a Memorandum of Understanding (MOU) whereby Providence Seward Medical
& Care Center will remit to the City, the portion of patient revenues attributable to capital costs. These funds can then
be segregated by the City into the Seward Mountain Haven Debt Service Fund, to be used to repay bond debt and capital
costs of SMH. The MOU agrees to utilize the State of Alaska's allocation methodology for determining which portion
of patient revenues are attributable to capital costs, and to use that proportion of revenues from the facility, to pay debt
service on the bonds.
It should be noted that the State currently rebases the facility's rate every four years. This rate is critical to the
determination of how much funding the City will receive to repay bonded debt. As census fluctuates and operating costs
increase over time, the reimbursement rate will change, and this will have a direct bearing on the resources available to
pay for debt service. Therefore, it is extremely important that to the extent that there may be a surplus of funds available
in the Seward Mountain Haven Debt Service Fund at any given time, those funds not be utilized for any other purpose
than repayment of debt. Otherwise, in a future four -year rebasing cycle, it is possible that the reimbursements will be
insufficient to cover debt costs. Also, given that in the first year of the bonds, the City requested interest -only payments,
it was expected that we would generate some modest level of excess cash to ensure the availability of cash flow to make
early debt payments. Ultimately however, these funds will be needed to make debt service payments.
CONSISTENCY CHECKLIST:
Where applicable, this resolution is consistent with the Seward City Code, Charter, Comprehensive Plans, Land Use
Plans, Strategic Plan and City Council Rules of Procedures.
INTENT:
The intent of this action is to ensure that all revenues received at the long -term care facility which are proportionally
attributable or allocable to the capital component of the daily rate (as opposed to the portion attributable to other non-
capital costs), be transferred from the current manager of the facility, Providence Seward Medical & Care Center, to the
City of Seward, to fund debt service and capital payments related to Seward Mountain Haven.
FISCAL NOTE: There ale no costs associated with entering into this Memorandum of Understanding.
Approved by Finance J /Lv J 4/ 1 /"-
ATTORNEY REVIEW: no
RECOMMENDATION:
The City Council authorize the City Manager to enter into a Memorandum of Understanding with Providence
Health & Services, to ensure that the portion of patient revenues attributable to capital costs of Seward
Mountain Haven, be made available to the City to pay for debt service and capital costs of Seward Mountain
Haven.
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