Hospital asks supervisors to approve $95 million in bonds

Carson-Tahoe Hospital will ask Carson City supervisors on Thursday to approve $95 million in bonds to build a new medical center.

The facility will be built near Silver Oak Golf Course in North Carson City. The money from the bonds will be added to more than $40 million in the hospital's capital fund, bringing the total budget for the project to $132 million.

Hospital Chief Executive Officer Ed Epperson said supervisors will be asked to approve two bond issues. The first is a fixed-rate bond totaling $45 million, which Epperson said is insured by Radian. That, he said, gets the hospital Radian's AA bond rating instead of the hospital's BBB rating.

The difference will save Carson-Tahoe Hospital several million dollars over the 30-year life of the bonds. The remaining $50 million is covered by a letter of credit from U.S. Bank, by which the bank makes the periodic payments and the hospital reimburses U.S. Bank.

Hobbs, Ong and Associates of Las Vegas advised supervisors the letter of credit will give the city protection in case the hospital can't pay at some point because "these capital market participants will bear the brunt of the financial risk associated with the financings."

The primary risk, they pointed out, is the U.S. Bank-backed bonds have a variable interest rate. As interest rates increase in an economic recovery, the cost of retiring them will increase.

Epperson said the arrangement protects the city's financial rating, because the city's name will appear on the tax-free bonds.

Epperson said the hospital will be able to handle the debt load because its business and market are growing. The five-year financial plan he prepared for supervisors projects net patient revenue will nearly double by 2007. Hospital officials predict a significant expansion of business once the new and larger facility is open.

Epperson pointed to a survey by IntelliMed which rates the hospital a bargain by comparison with rates charged by St. Mary's and Washoe Medical Center in Reno.

When complete, the facility will contain 337,000 square feet of space on three levels. The construction budget is $65 million with the rest consumed by equipment and furnishings.

Hospital officials say it will greatly expand Carson-Tahoe's capabilities when opened in December 2005 -- including a short stay surgical hospital and accredited cancer center. It will employ about 1,200 people.