Jackson Health System receives 'A' rating for $83 million in improvement bonds
By Risa Polansky
To finance Jackson Health System infrastructure improvements, officials sold about $83.32 million in bonds last week, less than a planned $87 million, underwriter documents show.
The bonds are to yield $74.987 million to a project fund — which is what matters, said Arnie Paniagua, controller for the Public Health Trust (PHT), Jackson's governing body.
"What is important is that the PHT looked to raised $75 million for infrastructure projects and was able to sell bonds to cover that amount faster than originally anticipated. Two days were reserved for the sale of these bonds but market purchased the entire amount on day one," he said in a statement via e-mail without addressing, as requested, why the full $87 million didn't sell.
At a true interest cost of about 5.57%, Jackson is to pay $88.34 million in interest, underwriter Morgan Keegan's documents say, bringing total debt service to nearly $171.7 million.
Average annual debt service payments are to sit at about $5.77 million, hitting an about $5.8 million annual maximum over the bonds' 29-year life.
The first payment is set for June 2010: about $3.4 million, the documents show.
That number jumps to $5.8 million the next year but remains about even annually after that.
Fitch Ratings gave the bonds an A+ rating with a stable outlook.
An A is the third highest on Fitch's 11-rating scale. The agency tacks on pluses and minuses when appropriate within that scale.
The bonds are secured by gross revenues of the Public Health Trust, which include Miami-Dade County appropriations both required and voluntary, as well as proceeds from a local voter-approved, half-percent sales surtax for healthcare.
Miami-Dade is also pledging to budget and appropriate all legally available non-ad valorem tax dollars to replenish any draws from the debt service fund.
That's what the A+ rating is based on, the Fitch report says.
"Total non-ad valorem revenues were down approximately 4% in fiscal year (FY) 2008 to $893 million and provide ample security to bondholders."
The report notes, though, that "Broad service demands, including substantial general fund support for the Public Health Trust (PHT), create ongoing budgetary pressures. These service demands coupled with declines in major operating revenues continue to pressure operations. Fitch expects the county to maintain a structurally balanced budget and adequate reserves as it adapts to weaker revenue performance and ongoing spending commitments."
The healthcare surtax generated about $188 million in health trust revenues last fiscal year, the Fitch report says.
The county deducts from those revenues the monthly debt service requirement on the bonds to put into the county-held debt service fund before any surtax revenue can go to the trust for operations.
County contributions and surtax proceeds funded 20% of all trust revenue on average every year between fiscal 2006 and fiscal 2008, the Fitch report says, noting "County financial support is instrumental for the operations of the Jackson Health System."
And the rating agency is keeping an eye on county finances.
Taxable assessed value "grew at an average annual rate of 13.3% from FY 2003 through FY 2008 but slowed to just 0.1% for FY 2009 and declined approximately 10% for FY 2010," the report says. "Fitch believes that declines may occur over several years despite some ongoing development. Housing data obtained by Fitch suggests that the region's residential real estate market is heavily exposed to non-traditional mortgage products, and that the foreclosure problem is more serious in Miami-Dade County than in other regions of the country."
Still, it adds later, "Fitch expects debt levels to remain manageable as the county finances its sizeable capital improvement program over the next several years."