DALLAS - Dallas County plans to take a giant step toward rebuilding the landmark Parkland Hospital this week with a $705 million issue made up mostly of taxable Build America Bonds.
The general obligation bonds coming in three tranches represent the first offering of debt approved by voters for the project on Nov. 4, 2008.
A two-day retail order period began yesterday to be followed by institutional orders, officials said. The bonds will bear the name of the Dallas County Hospital District and the triple-A rating of the county.
The deal is led by Merrill Lynch & Co. with seven co-managers. First Southwest Co. and Estrada Hinojosa & Co. are co-financial advisers, with Vinson & Elkins sharing bond counsel duties with West & Associates.
At Vinson & Elkins, partner Ray Hutchison has worked closely with the district in developing the deal. Hutchison is the husband of U.S. Sen. Kay Bailey Hutchison, who is a candidate for governor of Texas.
All but $26.1 million of the bonds, Series A, will be BABs. Series B consists of $185 million of BABs, while Series C is $494 million of the taxable debt. All three series are rated AAA by Standard & Poor's and Fitch Ratings.
| John Dragovits |
Parkland chief financial officer John Dragovits said the availability of BABs - introduced earlier this year as part of the federal stimulus package - prompted the hospital district to step up its issuance. The district will receive a 35% interest subsidy from the U.S. Treasury under the BAB program."We were just being opportunistic to see when would be the right time in the market," Dragovits said, referring to the turbulent conditions of the past year. "With the economic recovery act and the development of the BABs, we watched that very closely to see how that would play out. With the opening up of the markets, we thought it was very advantageous to go in with our target rates. I'm looking at less than 4% on all-in costs."
Parkland's triple-A rating should assure such low rates, Dragovits believes.
"We'll be the first triple-A BABs since the University of Virginia issue," he said. "We were the only hospital district to garner triple-A, clearly due to the strength of Dallas County."
The hospital district is an independent and separate entity from Dallas County, but the Dallas County Commissioners Court appoints the seven-member hospital district board, approves the district's annual budget, and sets the tax rate to be levied for operations and debt service.
"We expect that the diversified area economy and substantial tax base will continue to provide more-than-sufficient resources for county officials to meet the demands, be it health care or other general county responsibilities," said Standard & Poor's credit analyst Sarah Smaardyk.
Dallas County, with a population of 2.4 million, is the second most populous county in Texas and carries ratings of triple-A from the rating agencies. Anchored by county seat of Dallas, the county has weathered the recession with job losses and foreclosures running below those of many other large urban centers.
Building the hospital is expected to take five years, with completion in 2014. The district may issue another $42 million of bonds for additional parking facilities.
The hospital will add $250 million from existing funds, $124 million from future earnings and $150 million from private donations. So far, the Parkland Foundation has raised $85 million in cash and pledges in the first year of a five-year campaign.
Current plans call for a full-service, acute-care hospital with 862 adult beds and 1.7 million square feet, including a 380,000-square-foot outpatient center and a 27,000-square-foot office center. Parking will accommodate 6,000 vehicles.
The site of the new hospital is across the street from the existing high-rise facility built in 1954. While there was some discussion about remodeling the old hospital for use by some departments, Dragovits said the building appears headed for demolition.
The campus is divided by a Dallas Area Rapid Transit light-rail line and station that are scheduled to go into operation in the year 2010.
Faced with extreme overcrowding, Parkland has been considering plans for expansion for years.
In March 2004, the Republican-controlled County Commissioners Court halted a $1.2 billion expansion plan for more study. At the time, the Dallas Cowboys were seeking the county's financial help in building a new stadium. Then-County Judge Margaret Kelleher resisted entreaties to raise county hotel taxes to subsidize the stadium, citing the needs of Parkland and the risk to Dallas' convention business if taxes rose to maximum levels.
Since then, Democrats have swept into power in most Dallas County posts, including the top administrative position of county judge, now held by Jim Foster. The $1.1 billion Cowboys' stadium opened last month in Arlington in adjoining Tarrant County.
Dallas-based First Southwest guided the hospital as it considered its options in issuing debt by 2005, but those plans failed to materialize.
At 55 years old, Parkland is half the size it should be for the current patient volume over a million visits per year, according to a study by consultant PriceWaterhouseCoopers. The facility does not meet current code and is inefficient to operate, overcrowded, and functionally deficient. Physical limitations often make it necessary to park patients' beds in the hallways while they wait for treatment.
With the county's population expected to double by 2025, Parkland was urgently in need of replacement, according to the study.
After all the years of study, a blue-ribbon panel composed of various businesses and organizations agreed that the hospital needed total replacement.
In November 2008, Dallas County voters approved by 82% a bond issue for a new facility, despite worsening economic conditions.
Known as the hospital where both President John F. Kennedy and his alleged assassin, Lee Harvey Oswald, died, Parkland has been recognized as a historical site. But the operating room where Kennedy died was bought and removed by the federal government 36 years ago and is stored in a former limestone quarry serving as a federal archive in Lenaxa, Kan.
At the moment Kennedy died on Nov. 22, 1963, the hospital emergency room was treating 23 people for automobile injuries, animal bites, delirium tremens, infections, and suspicious discharges, according to the late historian William Manchester. Oswald was delivered to Parkland's emergency room two days later.
