Maple Grove, Minn., has disclosed that the Internal Revenue Service has initiated an audit of $53.8 million of bonds it issued in 2005 to finance renovations and construction to two health care facilities.
In a material event notice filed with the Municipal Securities Rulemaking Board’s EMMA system late last week, the city said it had received a letter from the IRS dated July 30, 2009, announcing that the bonds had been selected for a routine audit.
The bond proceeds were loaned to North Memorial Health Care, a nonprofit corporation that owns a general acute-care hospital, according to bond documents.
The proceeds were to be used to finance the renovation, construction, expansion, and improvement of the corporation’s health care facilities, as well as the acquisition and installation of equipment.
The proceeds also were to be used to initially contribute to a debt service reserve fund and pay issuance costs.
Specifically, the proceeds were to be used to finance renovations or construction on two separate projects. In the town of Robbinsdale, a portion of the proceeds was to go towards the expansion of emergency department facilities, renovation of outpatient care facilities, other improvements to acute-care facilities, and the acquisition of a helicopter for medical transport.
North Memorial also anticipated using proceeds to reimburse itself for roughly $7.5 million in costs it had already incurred for the ongoing projects.
In Maple Grove, the proceeds were to be used to develop a new medical campus on a 30-acre parcel of land acquired by the corporation in 2005. Another portion of the proceeds was to be used to finance a 110,000-square-foot, two-story ambulatory care center.
Faegre & Benson LLP of Minneapolis was bond counsel on the deal, and Fredrikson & Byron PA was the corporation’s counsel. Piper Jaffray & Co. was the underwriter, and retained Dorsey & Whitney LLP as its counsel on the transaction.
Maple Grove officials could not be reached for comment.