St. Elizabeth Healthcare is seeking up to $60 million in municipal bond debt to pay off earlier debt packages.
St. Elizabeth is one of the largest healthcare systems in the Northern Kentucky and Greater Cincinnati region. It had roughly $2.19 billion in revenue and $3.4 billion in total assets, as of its most recent tax filings. It had about $840 million in total liabilities, which includes debt, during the same period.
“St. Elizabeth is refinancing approximately $60 million of debt originally issued in 2016 as part of its routine review of financing opportunities to secure a lower interest rate and reduce borrowing costs,” a spokesperson wrote in an emailed statement. “Because some of the projects financed by the original bonds were located in Covington, federal tax law requires the city to approve the refinancing, even though no new construction is involved and the city has no financial responsibility for the debt.”
Specifically, St. Elizabeth is seeking up to $60 million in bonds from the Kentucky Bond Development Corporation, which is an initiative administered through the Kentucky League of Cities, or KLC. KLC is a membership-based consortium that offers various services to Kentucky cities, including insurance and other financial services. Many of the cities in the NKY region, including Covington, are members of the KLC.
The bonds will pay off an earlier debt issuance from 2016 worth $85 million, according to city documents. Essentially, the hospital system will take out the new debt to pay off older debt. The 2016 bonds were also issued by the Kentucky Bond Development Corporation to pay off an even earlier debt issuance from 2009. The 2016 bonds have not yet reached maturity, according to city documents.
The 2009 bonds were issued by the Kentucky Economic Development Finance Authority, a state agency that offers economic development incentives. The public legal ad, published in the Kentucky Enquirer, states the facilities and services financed by the initial debt issuance include the system’s facilities in Covington, Edgewood and Crestview Hills.
In order to get the new bonding package, the hospital system has to get sign-offs from the cities in which the financed facilities are located, in this case Covington, Edgewood, Crestview Hills and Woodlawn. This week, Covington placed its approval on the consent agenda for next week’s meeting, meaning it will likely pass.
“This doesn’t lose the city any additional money, nor gain us any money?” Covington City Commissioner James Toebbe asked the city’s finance director at this week’s meeting.
“We’re not issuing any new debt,” said Finance Director Jerome Heist.
In other words, the cities themselves are not on the hook for the bonding debt; it belongs to St. Elizabeth. The bonding is structured similarly to an industrial revenue bond, where a private interest will piggyback off a municipality to get a better interest rate.
Covington will cast a final vote to rubber-stamp the bonding package at their meeting on Sept. 8.
