Pinckneyville Hospital is one step closer to new facility
The Pinckneyville Community Hospital Board of Directors Monday accepted a proposal from AgStar, a Farm Credit institution, for $23 million in private placement bonds for a new hospital. Accepting the proposal means only that the application process will continue. No loans or bonds are guaranteed at this time. The hospital committed only to a $7,500 non-refundable fee.
There are four pieces to the funding package which include $7.386 million in funding from the hospital, $595,000 in grant funds, a $5 million long-term fixed rate bond and $18 million in short-term interim funding which will be converted to a direct loan from USDA to be repaid over 40 years. Total financing on the project comes to $30.981 million.
The $5 million bond would be repaid over 30 years. The rate would be fixed once an agreement is signed. The current rate is 4.55 percent, but the fixed rate would be whatever the rate is the day financing is finalized. If all of USDA's requirements are met, they would guarantee 90 percent of the bond. The hospital would pay interest only on the first two years of the bond.
The rate on the up to $18 million in construction funding would be variable. Once it is converted to a direct loan from USDA, the rate would be fixed.
USDA indicated that they would commit to the project if the hospital could secure construction funding. AgStar reviewed the analysis of affordability and concluded that PCH could handle the debt service. Their continued participation is dependent upon a conditional guarantee from USDA.
Hospital Board member Chad Rushing said AgStar was very thorough on their visit to Pinckneyville, spending time in the community on their own.
"They (AgStar) look like a good partner," Dave Pirsein, speaking for the Board's Finance Committee, said. "They're doing all the right things."
The bond/loan conditions spelled out in the proposal for debt service are typical, Pirsein added. AgStar would truly be a partner, keeping a close eye on the hospital's revenue stream and cash on hand.
The next step on the road to a new hospital is to receive a letter of commitment from USDA. Once AgStar has the commitment letter, the application can proceed.
If the funding is approved, the drawings would be re-worked and handed off to Construction Managers Robbins Morton to be re-bid. USDA will require a guaranteed maximum price for construction.
Hospital Administrator Tom Hudgins said Robbins-Morton has indicated that they do not expect the price of construction to change drastically. The market has not increased since the last bid.
Board Chairman John Shotton emphasized that the AgStar proposal is a step forward and another entity agrees with the auditing firm Whipfli that PCH can handle the debt.