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HomeMy WebLinkAbout2009-12-14 10-032 RESOLVECOUNCIL ACTION Item No. 1 Q 2 Date: 12/14/2009 Item/Subject: Resolve, Appropriating Repayment of Bangor Nursing and Rehabilitation Center's Line of Credit for the Purpose of Funding Capital Improvements to the Facility Responsible Department: Finance Commentary: As part of the Master Transaction Agreement (MTA) with Bangor Nursing and Rehabilitation Center (BNRC), the City appropriated $400,000 for the purpose of funding a line of credit for the benefit of BNRC. In accordance with the MTA, as amended, the line of credit is set to expire on June 30, 2012. The line was partially reduced in accordance with the MTA to a limit of $367,575, which is fully drawn down. To date the City has fulfilled $1.047 million of its $2.25 million capital contribution. The majority of the capital contribution has been funded through the issuance of general obligation bonds. The BNRC Board is acutely aware of the City's financial and economic constraints and works with City staff to attempt to balance the financial impacts to the City with the facility's physical plant needs when pursuing capital projects. Therefore, the Board of BNRC would like to propose repaying a significant portion of the currently outstanding line of credit to the City and request that the amount of any repayment be appropriated by the City as a capital contribution to BNRC under the terms of the existing MTA. Staff's recommendation is that the option presented by the BNRC Board is in the City's best fiscal interest. It will allow the City to meet its obligation under the MTA without the need to appropriate funds in future years either as a direct appropriation or through the issuance of general obligation bonds. Department Head Manager's Comments: This item was reviewed by the Finance Committee on 12/7/09, which recommends approval. Associated Information: See attached memo Budget Approval: Legal Approval: Introduced for Passage x First Reading City Manager L L-4 F4 i ance Director Page _of_ City Solicitor :L0 032 Assigned to Councilor - Bronson December 14, 2009 CI`T"Y OF BANGOR (TITLE.) Resolve, Appropriating Repayment of BNRC's Line of Credit for the Purpose of Funding Capital Improvements to the Facility BY THE CITY COUNCIL OF THE CITY OF BANGOR: WHEREAS, Bangor Nursing and Rehabilitation Center (BNRC) was created for the purpose of acquiring, managing, and operating the Bangor city Nursing Facility; and WHEREAS, in December 2000, the City entered into a Master Transaction Agreement (MTA) with BNRC; and WHEREAS, the MTA outlines not only the guiding principles and factors regarding the conversion process, but also commits the City to certain financial support and consideration in order for BNRC to operate; and WHEREAS, the MTA states that the City shall assume financial responsibility for required capital improvements to the BNRC facility in the amount of $2.25 million; NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF BANGOR that any line of credit repayments made by BNRC during fiscal year 2010 be appropriated for the purpose of funding capital improvements to the BNRC facility within the limits established by the Master Transaction Agreement and that the available limit of the line of credit be reduced by the amount of said repayments. IN CITY COUNCIL December 14, 2009 First Reading CITY CLERK IN CITY COUNCIL December 28, 2009 Mo ion Made and Seconded P sed CITY CLERK (TITLE,)Appropriatine Repayment of pian ar N jXai ng -a d Rehabilitation Conte -Is Idne of Credit for the Purpose of Funding Capital Improvements to the Facility for Passage Assigned to Councilor 10 032 To: Finance Committee From: Debbie Cyr, Finance Director Date: December 2, 2009 Re: Request from BNRC Regarding Repayment of Line of Credit Background Until December 31, 2000, the City operated the Bangor Nursing Facility, a 60 bed skilled nursing home. The City -owned operation required at times significant operating subsidies to cover its' operating expenses. The City Council expended considerable time determining how to best operate a facility of this type. Through their efforts, it was determined that in the constantly changing healthcare environment, the facility would operate best as an independent non-profit. To that end, the Bangor Nursing & Rehabilitation Center (BNRC) was created. As the operations, employees, assets etc of the new entity were entirely City -owned and operated, a Master Transaction Agreement (MTA) was -executed that identified each parties' responsibilities for the new entity. Key financial provisions of the MTA are as follows; • The City provided a line of credit which has a balance of $367,575 and is set to expire on June 30, 2012. • The City allowed for repayment of accounts receivable owed as of December 31, 2000, subsequently collected by BNRC over time beginning June 30, 2009, which have been repaid in full ahead of schedule. • In recognition of the physical plant limitations, the City agreed to provide $2.25 million of capital funds to rehabilitation/renovation/reconfiguration the facility. Request The request of the Board of BNRC centers around the City's capital commitment to the facility. To date the City has fulfilled $1.047 million of its $2.25 million capital contribution. These funds have been used to undertake projects such as; paving, roofing, HVAC replacement, sprinkler system installation, and kitchen/dining room improvements. The building houses not only the operations of BNRC but the City rents a significant amount of space for its Health & Community Services departments. Last year, the worst areas of the roof were replaced, and it is the desire of the BNRC Board to complete this roofing project this season as well as address the long overdue upgrade of the facility's power supply. To date the City's capital contribution has been funded through the issuance of general obligation bonds. The BNRC Board is acutely aware of the City's financial and economic constraints and works with City staff to attempt to balance the financial impacts to the City with the facility's physical plant needs when pursuing capital projects. Therefore, the Board of BNRC would like to propose repaying a significant portion of the currently outstanding line of credit to the City (potentially ranging from $250,000 to $300,000) and request that the amount of any repayment be appropriated by the City as a capital contribution to BNRC under the terms of the existing MTA. Any funds repaid and appropriated as the City's capital contribution would reduce not only the outstanding amount of the line of credit but the overall line of credit limit. 10 032 Staff Recommendation When the original line of credit for BNRC was established, the City appropriated the entire agreed upon limit of $400,000, therefore any repayments have a direct positive impact to the City's financial status. It is my opinion, that the option presented by the BNRC Board is in the City's best fiscal interest. It will allow the City to meet its obligation under the MTA without the need to appropriate funds in future years either as a direct appropriation or through the issuance of general obligation bonds.