SAN FRANCISCO — Palomar Pomerado Health, a hospital district in San Diego County, will shift its hospital replacement plans into second gear this fall, with the latest issue in a $982 million capital plan that will substantially replace most of its two main hospitals.
The forthcoming issue, a $150 million revenue bond deal, follows last year’s issuance of $80 million in general obligation bonds, which was the first under a $496 million GO authorization the district’s voters approved in 2004.
“The intertwining of GO issuance and revenue bonds will occur throughout the time frame of the project,” said Robert Hemker, the district’s chief financial officer.
The Escondido-based hospital district, which encompasses 800 square miles, developed the master plan in response to the growing population of its service area as well as state mandates for earthquake safety in hospitals.
The plan calls for a brand new campus to replace its 324-bed Palomar Medical Center in Escondido, as well as a new patient tower for its 107-bed Pomerado Hospital in Poway. The district will re-use its existing Palomar hospital building for purposes other than acute care.
GO bonds and revenue debt will be mixed, Hemker said, to take advantage of market conditions and allow the district to remain within the tax levy limit it pledged to voters in the 2004 election. With continued development expected in the suburban district, continued growth in assessed property valuations is expected, he said.
The projects are expected to be complete by the first quarter of calendar year 2011, he said.
The amount of revenue bonds in the capital plan prompted Moody’s Investors Service to downgrade the district’s revenue bond rating to A3 from A2 in June, though Moody’s affirmed its Aa3 rating of the district’s GO bonds, which are backed by a property tax levy.Standard & Poor’s assigns the district’s GO bonds an underlying AA-minus rating. Fitch Ratings does not have underlying ratings of the debt.
Citigroup Global Markets Inc. is underwriter for the district’s bond program. Kaufman Hall & Associates is financial adviser. Orrick, Herrington & Sutcliffe LLP is bond counsel.
Squire, Sanders & Dempsey LLP is underwriters’ counsel.
Palomar Pomerado had to achieve a two-thirds majority to get the bond authorization passed.
“We saw a very supportive community in terms of recognizing the value of the projects,” Hemker said.
It’s not the only public hospital district in San Diego County to look for a GO bond — and its associated property tax increase — to finance new facilities.
Two districts had GOs on the ballot in June.
The Tri-City Healthcare District on the coast side narrowly failed, garnering 65.91% of the vote for its $596 million bond measure, to fall just shy of the required two-thirds threshold.
To the east, the Grossmont Healthcare District was successful with its $247 million bond measure, approved with 77.68% of the vote.
Chief executive officer Barry Jantz said the district is still working on a timeline for its first bond issue, not expected until late this year or early the next.
“It will be probably close to a quarter or less of the total $247 million,” he said.
The district has selected Goldman, Sachs & Co. as underwriter, and Sidley Austin LLP as bond counsel, he said. No financial adviser has been chosen yet.
