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1999-02-04 Special Meeting NEW HANOVER COUNTY BOARD OF COMMISSIONERS SPECIAL MEETING, FEBRUARY 4, 1999 ASSEMBLY The New Hanover County Board of Connnissioners held an Emergency Session on Thursday, February 4, 1999, at 9:00 a.m. in the New Hanover County Administration Building, Room 501,320 Chestnut Street, Wilmington, North Carolina. BOOK 27 PAGE 59 Members present were: Connnissioner Buzz Birzenieks; Connnissioner Charles R. Howell; Vice-Chairman Robert G. Greer; Chairman William A. Caster; Deputy County Manager, Andrew 1. Atkinson; County Attorney, Wanda M. Copley; and Clerk to the Board, Lucie F. Harrell. Connnissioner Ted Davis, Ir. was absent. Chairman Caster called the Emergency Session to order and he reported the purpose of the meeting was to discuss insurance on revenue bonds for New Hanover Regional Medical Center. Deputy County Manager Atkinson informed the Board that the insurance carrier, MBIA, has requested the following language to be placed in the lease between New Hanover County and the New Hanover Regional Medical Center: The legal documents be identical to the prior 1993 deal except that if the Corporation's lease be terminated that said termination be subject to MBIA consent or that the bonds be defeased. Deputy County Manager Atkinson said after holding a conference call with MBIA, Bond Counsel, Ed Lucus, Lisa Conley with Salomon Smith Barney, and Kathleen Gormely, NHRMC, MBIA was not willing to omit or modify the clause to state that MBIA' s permission to terminate the lease would not be unreasonably withheld. From MBIA's perspective, they are insuring the bonds of the Medical Center based on the organization currently in place. The financial condition of the County is not considered in their decision making process. Therefore, if the County were to terminate the lease, MBIA feels the company should be involved in that decision. Deputy County Manager Atkinson explained that only two insurance companies were willing to insure revenue bonds, AMBAC and MBIA. Since the County has received notification from AMBAC that this firm was not interested in insuring the revenue bonds, the Connnissioners will have to decide on whether the bonds should be insured. When bonds are insured, the bonds become AAA bonds as opposed to A+ bonds, which is the current rating of the Medical Center. The difference projected in the two rates when going to market over the life of the bonds is approximately $2,000,000 in savings if the County insures the bonds with MBIA. Connnissioner Birzenieks noted there was a philosophical issue involved in this matter. He expressed concern for having to receive permission from an insurance company to terminate the lease. Finance Director Bruce Shell explained that if the lease was in place for the same amount of time as the bonds, there would be no problem. MBIA is concerned about a clause that allows either party to terminate the lease with 90 days notice. MBIA understands that changes will occur in the management and trustees of the Medical Center, but if the lease is terminated, they feel the clause is needed to protect their stockholders and company. Vice-Chairman Greer commented on other bond issues and he asked why the County was being requested to place this clause in the documents. Deputy County Manager Atkinson commented on this being only the second time that New Hanover County has insured bonds, and he stated that AMBAC was not interested in insuring the bonds because this company does not insure one institution that has a total outstanding debt of more than $150 million dollars. AMBAC prefers to spread the risk factor over a larger number of entities. NEW HANOVER COUNTY BOARD OF COMMISSIONERS SPECIAL MEETING, FEBRUARY 4, 1999 BOOK 27 PAGE 60 Connnissioner Birzenieks asked if this information had been provided to the Medical Center Board of Trustees. Deputy County Manager Atkinson responded for months, the assumption has been that New Hanover County was going to insure the bonds because there would be a savings of $2,000,000. The documents are already at the printers. If the Board decides not to insure the revenue bonds, this information will have to be removed from the documents. At every level of the process, the Medical Center and the County have understood that New Hanover County would insure the bonds. Nothing had changed until MBIA notified the County last Thursday that the proposed clause should be included in the documents. The Board will have to determined if it is cheaper to have an insured deal or non-insured deal. Connnissioner Howell asked if Bond Counsel was comfortable with the language proposed by MBIA. County Attorney Copley responded that Bond Counsel did not have a problem with the proposed clause. Connnissioner Birzenieks said it was far better to have insured bonds and he asked County Attorney Copley if she was comfortable with the proposed language being inserted in the documents. County Attorney Copley explained that if the Medical Center should starting losing money, MBIA can send in a financial consultant to determine the reason for a revenue shortfall, which is standard boiler plate language in all documents. Now, MBIA has said if New Hanover County should become angry with the Medical Center and terminate the lease, the County would be required to ask MBIA if they agree. If MBIA should say no, the County could say thank you and proceed with defeasing the bonds. The bottom line is if the County insures the bonds, the County will have some strings attached. Speaking as the County Attorney, Ms. Copley said it is difficult to believe that New Hanover County will ever decide to terminate the lease with the Medical Center. Connnissioner Birzenieks asked if there was a future revenue bond issue desired by the Medical Center, would this insurance company be involved? Deputy County Manager Atkinson responded that the insurance companies would review the revenue bond issue and check to see if the Medical Center was generating sufficient revenue to pay the debt service for all outstanding debt. If the ratios are in place, the bonds would be insured as done with any other bond issue. Chairman Caster requested direction from the Board. Motion: After discussion of the need to insure the bonds, Vice-Chairman Greer MOVED, SECONDED by Commissioner Howell to include the clause requested by MBIA in the bond documents. Upon vote, the MOTION CARRIED as follows: Ayes: William A. Caster, Chairman Robert G. Greer, Vice-Chairman Uldis "Buzz" Birzenieks, Connnissioner Charles R. Howell, Connnissioner Nays: None NEW HANOVER COUNTY BOARD OF COMMISSIONERS SPECIAL MEETING, FEBRUARY 4, 1999 BOOK 27 PAGE 61 ADJOURNMENT Motion: Connnissioner Birzenieks MOVED, SECONDED by Connnissioner Howell to adjourn. Upon vote, the MOTION CARRIED AS FOLLOWS: Ayes: William A. Caster, Chairman Robert G. Greer, Vice-Chairman Uldis "Buzz" Birzenieks, Connnissioner Charles R. Howell, Connnissioner Nays: None Chairman Caster adjourned the Emergency Session at 10:48 a.m. Respectfully submitted, Lucie F. Harrell Clerk to the Board · · · '"..{ '!~,rJf~ì\~~ . : ~ ",.ci:'\, MINUTES OF EMERGENCY MEETING, FEBRUARY 4, 1999 NEW HANOVER MEDICAL CE~TER REV~f'lUE BOND~ . . ' . .'" . ", :~"r",.;~~~$.\';"""'" ADJOURNMENT , " PAGE 61 . . , . ¡", S'·, . Motion: Commissioner Birzenieks MOVED, $ËCONDED by Commissioner Howell to adjourn. Upon vote, the MOTION CARRIEDAS FOL~p\\',S: Ayes: . ' . , 'WiIÜani. A:f'Caster, Chairmari ,Robert, G. Greer; Vice-Chairman , "Uldis "Bui2;',' Birzenieks: Coniniissioner to. , '",.(''' "'., .; ',,' 'Ç~ade$ R.'How¡;:ll, Co~i.ssioner . , . . .'.' -... * ',1,,_; . " ' Nays: None Chairman Caster adjourned the Emergency Session at 10:48 a.m. Respectfully submitted, ~v~ Lucie F~ Harrell Clètk,to the Board " ," ...., '.:,. . ; ", , , , .' " . ~ . .. , \.