Dallas County Hospital District Delays $747M Deal for a Year

DALLAS - The Dallas County Hospital District will not issue for at least a year any of the $747 million of voter-authorized bonds that will finance most of a $1.27 billion project to replace county-owned Parkland Hospital.

Chief financial officer John Dragovits told trustees of the Parkland Health and Hospital System on Tuesday that current market conditions would not allow the district to obtain the 4.5% interest rate on the bonds used in developing the financial plan for the hospital replacement effort.

Although the district does not now plan to issue any GO debt in 2009, Dragovits said a sale this year is being considered of up to $600 million of taxable Build America Bonds, which provide a 35% federal tax credit to investors.

Dragovits said the decision to not issue GOs this year is not a delay or a deferral because a debt schedule has not been formally adopted. The planned completion date of 2014 for the new hospital will not be affected, he said.

"I'm not digging us a hole," he said. "We just approved the architects on Tuesday, so we don't need the money right now."

Voters in November 2008 overwhelmingly approved $705 million of GO bonds, supported by the district's property tax rate of 27 cents per $100 of assessed value, and $42 million of hospital revenue bonds for the new Parkland Hospital.

The financing plan adopted by the hospital board in 2008 included a proposed sales schedule with a GO tranche of more than $530 million of 20-year bonds in 2009 and a second one of more than $160 million in 2010 or 2011, but it was not a firm timetable.

"We have $250 million in cash on hand, so I don't need the proceeds for two years," Dragovits said. "I'm the investment bankers' nightmare, because I have the luxury to sit back and see how the market goes. If it goes well, we'll jump into it. If it doesn't, we will wait."

Dragovits said the district could issue the bonds in quick order if the market turns favorable.

"We have the documentation we need, and we've been in contact with the rating agencies," he said.

Dragovits said the issuance of taxable BABs is a possibility being considered. "We're looking at how those bonds are being priced in the market," he said. "It may be a very viable option for us."

The district has no outstanding bond debt. Moody's Investors Service dropped its A1 underlying rating on the district's debt in April 2006 when outstanding bonds matured. Dallas County's GO debt is rated triple-A.

The hospital district's last bond issue was $80 million of GOs approved by voters in 1980 to expand the hospital's burn center, add intensive care facilities, and build an in-patient treatment wing.

The proposed replacement hospital will include 862 adult beds, 117 infant beds, and a 96-bed neonatal intensive care unit. The complex will also include a clinic and an office building.

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