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CITY COMMISSION AGENDA ITEM |
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Department: |
City Manager’s Office |
Commission Meeting Date: 4-3-2018 |
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Staff Contact: |
Diane Stoddard, Assistant City Manager Britt Crum-Cano, Economic Development Coordinator |
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Action Requested: |
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Executive Summary: |
Founded in 1921, the Lawrence Memorial Hospital (LMH) is a municipal hospital created as an instrumentality of the City under the City Hospital Statute (K.S.A. 12-1615). The Hospital’s main campus, located at 325 Maine Street, provides medical services and a 174-bed facility to serve the health care needs of Lawrence and the surrounding community.
LMH is a community-owned not-for-profit hospital and invests all excess revenues in services, equipment and facilities to further its mission to improve the health of the community. The hospital is led by a nine-member volunteer Board of Trustees, appointed by the Mayor and confirmed by the Lawrence City Commission. Throughout the years, additions have been made to the hospital and LMH services expanded to meet the increasing health care needs of the community. The City has supported this growth through past bond issuance under the Revenue Bond Act (through Series 1994, Series 1997, Series 1999, Series 2003, Series 2006, Series 2011, Series 2012, and Series 2013 bonds).
It should be noted that revenue bonds do not obligate the City to market or pay back the bonds. Revenue bonds will allow LMH to benefit from the interest on the revenue bonds being exempt from federal income taxation.
Due to LMH’s status as a municipal hospital and an instrumentality of the City, LHM is not subject to property taxes nor sales tax. Consequently, no local incentives are under consideration related to the bonds. Rather the request is being made so LMH can satisfy federal tax law requirements so interest on the bonds will be exempt from federal taxation.
Request Staff received a letter and application from LMH on February 5, 2018, requesting City assistance with Hospital Revenue Bond issuance to help meet the expanding healthcare needs of the community. LMH is requesting the City authorize issuance of Hospital Revenue Bonds to provide funds for:
Kansas Revenue Bond Act The state of Kansas allows cities and counties to issue revenue bonds, under statute K.S.A 12-1740 to 12-1749, for paying all or part of the cost of purchasing, acquiring, constructing, reconstructing, improving, equipping, furnishing, repairing, enlarging or remodeling facilities for agricultural, commercial, hospital, industrial, natural resources, recreational development, or manufacturing purposes.
City Policy As a municipal hospital created under the City Hospital Statute (K.S.A. 12-1615) the LMH request does not neatly fit within the City’s current economic development policy since the policy does not address the issuance of Hospital Revenue Bonds for an instrumentality of the City.
The City’s economic development policy (Resolution No. 7184, dated January 15, 2017) does specify criteria for issuance of Industrial Revenue Bonds (IRB), which are used to support commercial or industrial development. Under traditional commercial or industrial development, there is some incentive involved because there is some lost revenue being contemplated—a sales tax exemption and/or property tax exemption. That is not the case with this request because LMH as a city hospital is already exempt from sales tax on construction materials and property tax.
The City Commission may wish to address consideration or exemption of hospital revenue bonds issued from LMH, an instrumentality of the City, from economic development policy criteria when the policy is next updated.
Actions To-Date: The City Commission received the request at their February 6, 2018 meeting and referred it to the Public Incentives Review Committee (PIRC) for review and recommendation.
PIRC reviewed the request at their February 13, 2018 meeting and voted 6-0 to recommend the City Commission support the request by Lawrence Memorial Hospital (LMH) for assistance in issuing Hospital Revenue Bonds up to $65,000,000 to provide funds for land acquisition, construction, improvement, extension, repair, equipping and furnishing of a new 200,000 square foot medical facility to be located at the northeast of intersection of Sixth Street and Kansas Highway 10; Acquisition, improvement, extension, repair, equipping and furnishings of existing LMH facilities located at 1112 W. 6th Street and 404 Maine Street, Lawrence Kansas; and miscellaneous capital expenditures for LMH’s health care facilities in Lawrence, Kansas, including LMH’s main campus and other health care facilities locations.
City Commission Action Requested: Receive PIRC recommendation and approve first reading of Ordinance No. 9441, authorizing the issuance of up to $90,000,000 in hospital revenue bonds for Lawrence Memorial Hospital to provide funds to finance its new west facility and other improvements, and refund and redeem other outstanding bonds.
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Strategic Plan Critical Success Factor |
Safe, Healthy, and Welcoming Neighborhoods Core Services Collaborative Solutions Economic Growth and Security |
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Fiscal Impact (Amount/Source): |
There is no fiscal impact to the City as no local incentives are under consideration related to the bonds. Rather the request is being made so LMH can satisfy federal tax law requirements so interest on the bonds will be exempt from federal taxation. |
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Attachments: |
Applicant Request Letter & Application |
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Reviewed By: (for CMO use only) |
☐TM ☒DS ☐CT ☐BM |