LOS ANGELES -- Alameda County, Calif. is planning to sell $287 million of lease revenue bonds this week to finance improvements to the county hospital.
The bonds will be issued by the Alameda County Joint Powers Authority and priced by JPMorgan on Thursday. A retail order period will begin on Wednesday, according to assistant county administrator, Donna Linton.
Proceeds from the deal will finance the remainder of Phase II of the county’s project to replace and expand buildings at the Highland Hospital, located on a 14-acre campus in Oakland.
“We are very excited about moving this project forward,” said Linton. “The Highland Hospital is the key facility in terms of the entire county’s health care system.”
The project includes three key phases. The first phase, which has been completed, constructed the new Highland Care Pavilion to house campus-wide support functions and outpatient clinic services.
The second phase includes construction of a new acute care tower — a nine-story, 169-bed inpatient facility, expected to be complete in 2016. Bonds issued in 2010 financed a portion of the project and this week’s issue will finance the remaining portion.
The final phase, expected to begin in early 2016, will construct the Link Building, a connector building with an interior courtyard.
The project was undertaken to comply with state earthquake-safety requirements for hospitals.
The entire project is expected to be complete in 2017 and will end up costing a grand total of around $668 million.
The final phase of the project will require the county to issue a third series of bonds, which Donna said would likely occur in 2016.
The lease revenue bonds are secured by the county’s lease payments for the use of a long list of assets, including portions of the current medical center campus. The total insured value of the assets is more than $612 million.
Including the current issue, the county has approximately $1.14 billion in outstanding direct debt, including $109 million in pension obligations and $923 million in lease-backed obligations.
The bonds will be structured as serial bonds with maturities ranging from 2018 through 2035.
“We think we have a very strong plan of finance and we’re really looking forward to very aggressive orders coming in,” Donna said.
Moody’s Investors Service rates the bonds Aa3 with a stable outlook, citing the county’s exceptionally strong financial position as it emerges from the recent severe economic downtown.
“Throughout the downturn, as other counties in the state were struggling with revenue shortfalls, and often relying on their reserves, Alameda County continued to add to its reserves,” Moody’s analysts said in a report. “It now boasts the strongest reserve position among the largest and most highly rated counties in the state.”
Alameda County is California’s seventh largest county and occupies most of the East Bay region of the Bay Area, including the cities of Oakland and Berkeley.
The rating on the lease revenue bonds is two notches below the county’s Aa1 issuer rating, due to the weaker security pledge.
Standard & Poor’s rated the bonds AA, with a stable outlook. It rates the county AA-plus.
“The stable outlook reflects our view that positive economic trends and policies that have supported budget-balancing solutions will help the county to maintain very strong reserves, but that policy and budgetary shifts at the state and federal levels will continue to represent a source of budgetary uncertainty,” S&P analysts said.
Squire Sanders is bond counsel on the deal and Montague DeRose and Associates is the financial advisor.