Franklin Co to Call for Early SPLOST to Pay Hospital Bond

Franklin County will begin work to call in the next Special Purpose Local Option Sales Tax early in order to raise money for the ongoing hospital bond interest payments.

Earlier this year, St. Mary’s Healthcare in Athens and Ty Cobb released a joint statement announcing negotiations regarding the sale of the facility.

“As a vested partner the County is in support of the transaction which will keep the hospital open to serve the citizens of Franklin County,” noted Franklin County Manager Beth Thomas in a prepared press release. “The bondholders on the $39 million IBA Bonds have a first lien on the facilities and the revenue and the contemplated sales price for the hospital is substantially less than $39 million. This means that a sale will leave little or nothing to pay the Hospital Authority Certificates. Unfortunately, the payment obligation of the County will remain. Current payments on the Hospital Authority Certificates are approximately $625,000 per year through 2040.”

With approximately $8.3 million still outstanding, the County is now looking to a long term financial plan.

Last year, Ty Cobb Healthcare CEO Greg Hearn announced the hospital could not make its December 1 interest payment of $311,000 on that money and under the terms of the bond, it fell to the County to do so.

“The hospital has been losing money for some time and in December 2014, it was necessary for the County pay $311,166 to the trustee to prevent a payment default and keep the hospital open,” noted Thomas. “The trustee has now notified the County that $235,765 will be needed to pay interest due on June 1, 2015.”

Jim Pannell, of the law firm Gray, Pannell & Woodward LLC in Savannah has been serving as the County’s bond attorney for the hospital bonds and has been working with County Manager Beth Thomas on a plan for the County to be able to make the bi-annual interest payments without having to resort to raising the millage.

Pannell told Commissioners Monday there are two options available to the County for raising the capital needed to make those payments .

One, he said, would be to get voter approval to refinance the $8.5 million bond issue.

“One way to pay that obligation and the cheapest and cleanest way to pay that obligation is to go to the voters in November and ask them to authorize the Board of Commissioners to issue General Obligation bonds to refund and refinance that obligation.”

Pannell said the obligation is now bearing interest of 5%-6% and the County can borrow money cheaper than that under present market conditions.

But the best way, Pannell said is get voter approval to begin the next SPLOST a year early and use the penny sales tax to repay the debt.

“Another way is through the SPLOST,” he said. “It’s not uncommon for a county to renew the SPLOST a year in advance.”

Pannell said even if the voters reject renewing the SPLOST early, it would still give the county time to refinance.

Thomas said after looking at both options, the early SPLOST renewal appears to be the best way to go.

“After careful consideration of the various options, we feel that this financial plan is the most viable option,” said Thomas. “After working with our attorneys and financial advisors, this option presents a feasible way to generate capital and alleviate the burden on property taxes.”

Thomas said the County would not put the entire bond debt onto one SPLOST, but would spread it out over a number of SPLOST periods.

“The intent of the County is not to reduce any SPLOST funding in the areas of public safety,” noted Franklin County Commission Chair Thomas Bridges. “While we will have to determine the appropriate allocation among specific projects, the portion apportioned to the hospital will be sufficient to cover only debt service payments. I believe there is a misconception out there that the entire hospital debt will be placed on a ballot. This is not the case.”