GALLIPOLIS — The Gallia County Board of Commissioners have reaffirmed their support of the ongoing merger of Holzer Health Systems on Thursday by rescinding and reissuing a bond resolution previously adopted by the commission.
The resolution allows the county to act purely as a facilitator for the issuance of a hospital facilities revenue bond on the behalf of Holzer Health Systems — a bond not to exceed $175 million, according to the resolution.
The original resolution was adopted on August 11, 2011, and, according to bond counsel, Erin Sutton of Peck, Shaffer & Williams of Columbus, the rescinding and re-issuance of the resolution is being done for two reasons.
“The resolution before you rescinds that prior resolution for two reasons,” Sutton said. “One is cosmetic — just to refresh the resolution to reflect that these bonds will be issued in the correct calendar years. We will call them series 2012 bonds, for example, instead of series 2011; and two: there’s some structural changes in the transaction, the major one being that there will now be a subordinate series of bonds which will be offered and purchased by the doctors in exchange for their lien on the health system properties that Holzer Health Systems is acquiring.”
The agreement essentially allows Holzer to borrow money at a lower rate than what they would be able to do otherwise and, according to Sutton, as with the prior agreement, the new agreement does not represent a liability or cost to the county or its assets. The bond will be backed solely by the properties and revenues of the hospital.
“The most important thing for you to note, as in the prior resolution, in section four, where it says that these are not general obligation bonds or bonded indebtedness of the county or any political subdivision in Ohio,” Sutton said. “The bonds will be supported by the revenues and properties of Holzer Health Systems and not drain the county’s finances.”
Additionally, the resolution provides for “participating public hospital agencies agreements” that essentially allow Gallia County to issue bonds on the behalf of Meigs, Jackson, Lawrence and Athens counties — bonds that will finance Holzer health care facilities located in their jurisdictions.
As the resolution allows Holzer to utilize the county’s debt capacity of $10 million in 2012, County Commission President Harold Montgomery questioned the agreement’s “make-whole provision.” This provision provides that, in the event the county would have to incur debt for any reason in 2012, Holzer Health Systems would provide the difference in interest between a bank-qualified, low interest loan the county would normally issue and the higher interest loan they would incur as a result of the agreement.
“We have that language in the sublease, the ‘make whole provision’ as you said,” Sutton said. “It states that if you want to go ahead and issue your own debt, because of that, your interest rate would change because it can’t be bank-qualified, because you’ve already issued 10 million in bonds this year. There is a ‘make-whole provision’ and you will be compensated for that differential in interest rate.”
Holzer Health System President and CEO Brent Saunders was also present during the meeting and reported that officials with Holzer attempted to finalize the merger in 2011; however, due to the accounting and legal process, the discussions surrounding the merger had to be extended to 2012.
Saunders further discussed what Holzer Health Systems officials hope the merger will mean for the community.
“We are very excited. We think this is going to be great for the community. By merging the two entities together, we think we will be able to expand services. We’ve been hooked at the hip for many years with two separate entities, and we need to be one and unite our efforts,” Saunders said. “Everyone is excited that the physicians have overwhelmingly approved this, and we’re looking forward to going forward and serving the community for another 100 years. We appreciate your support.”
For Holzer, Saunders elaborated, serving the community also means the creation of new jobs.
“There’s over 2,000 jobs in the system which are very important to this community,” Saunders “Our goal is to expand our services and expand and create more jobs.”