Pauls Valley, OK, Pauls Valley Democrat

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June 27, 2014

Important steps taken for PVGH

emann@pvdemocrat.com — Tuesday’s city council meeting marked one of the most important steps in stabilizing Pauls Valley General Hospital.

The unanimous approval of a $6.146 million will help fund the much needed turnaround. Explaining the overall process was Rick A. Smith, a representative of Municipal Finance Services out of Edmond.

“We had been talking with James Frizell (City Manager) and others in anticipation of the election,” said Smith. “Once approved it went into high gear to come up with a financial plan that made sense for everyone involved.”

The loans themselves will be broken up into two notes, according to Smith. They will be a taxable and non-taxable note, with $991,000 for the former and $5.155 million for the latter.

“There are components of what we’re financing that were not eligible for tax exempt financing,” said Smith. “We had to break it up into two notes for that purpose.”

Taking on the responsibility of hosting the loans will be First United Bank. Smith noted how they were the only institution to ‘step up.’ That’s due to the reputation and risks of rural hospitals and the recent bankruptcy.

“There are certain types of banks that have appetites for these types of notes . . We sent them information on the city, the hospital and the sales tax to peak their interest,” said Smith. “Rural hospitals are having a lot of issues and most of the players we typically go to declined. But the good news is First United Bank agreed to step up.”

One of the first things is reimbursing the city for their investment in keeping the doors open. For that purpose $300,000 will be set aside.

Some of the major items include $1 million for the surgery department remodel and $900,000 towards equipment. Also allocation of $650,000 toward working capital for everyday operations, said Smith.

The half cent hospital sales tax will essentially help pay these loans off. Another half cent was pledged by the city through the general government funds. This was to encourage the loan application process and offer a security cushion.

Smith placed a lot of confidence in the half cent tax and its ability to help pay off the loans. He noted how if past numbers hold where they are now, the half-penny should generate $670,000 annually.

That will start this July 1, with the first returns coming by September.

Along with the city’s pledged support, the annual payments of around $600,000 for both loans should be covered, said Smith. Once the taxable loan is paid off, the annual payment should dip to around $420,000 annually.

“Very few have shown the continued growth the Pauls Valley sales tax has,” said Smith. “That’s certainly very good.”

The first payment is due August 1st. The plan is to pay off the taxable note within three years and the other loan in 20 years. The city will only pay interest on the non-taxable loan until the taxable is paid off.

Smith noted that they could continue paying a higher annual payment as long as they notified First United Bank. It will become official with a closing date on Monday, June 30.

“The accounts will be immediately be set up to begin drawing funds out of them,” said Smith.

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