WASHINGTON — The Internal Revenue Service has notified the Cumberland County, Pa., Municipal Authority that $10 million of Series A revenue bonds it issued in February 2008 have been selected for examination.
The audit was disclosed in an event notice filed with the Municipal Securities Rulemaking Board’s online EMMA system on Monday.
“At this time, we have no reason to believe that [the] bond issue fails to comply with any of the applicable federal tax requirements,” the IRS said in the letter it sent to the issuer.
The proceeds of the bonds were loaned to Messiah Village, a Pennsylvania not-for-profit corporation, which used them to finance improvements to a continuing-care retirement community located on approximately 80 acres in Upper Allen. The facilities consist of 124 residential living apartments, 128 residential living cottages, 158 assisted-living units and 184 skilled nursing beds.
Specifically, the bond proceeds were used for the cost of the design, construction, installation and equipping of new independent-living cottages, related site improvements and alterations to the existing facilities, according to bond documents.
Standard & Poor’s rated the revenue bonds BBB-minus, the lowest investment-grade rating, when they were issued.
Earlier this year, Municipal Market Advisors said 2.13% of bonds tied to continuing-care retirement communities were in default, the sixth-highest of 46 types of municipal debt that were tracked by the research-and-advisory firm, the Wall Street Journal reported.
Based on previous quarterly financial audits, Messiah Village’s finances are in good standing order, said Craig Cramer, a corporate trust administrator with Manufacturers and Traders Trust Co., the trustee for the bonds.
Cramer said the revenues Messiah Village uses to pay back the loans are primarily the fees paid by the individuals living at the retirement community.
For independent living, the entrance fee ranges from $56,000 to $300,000, depending on the type of housing an individual chooses, a staff member at Messiah Villages said. For personal care, there is a monthly fee ranging from $2,000 to $6,000, depending on the level of care needed, she said.
Wachovia Securities, now Wells Fargo & Co., was underwriter for the bond transaction.
Rhoads & Sinon LLP was bond counsel.
