Relates to permitting financing by the Nassau county interim finance authority for the benefit of the Nassau county health care corporation

Summary of provisions

Sections 1-3: Provide technical changes to the public authorities law regarding bonds, revenue anticipation notes, and related letters of credit and swap agreements issued in connection with such financing instruments issued by Nassau Health Care Corporation.

Section 4: Effective Date

Justification

The Nassau Health Care Corporation was created under the public authorities law and in September 1999 assumed responsibility for operation of Nassau University Medical Center ("NUM"), a general hospital licensed under Article 28 of the public health law, the A. Holly Patterson Extended Care Facility ("AHP"), a skilled nursing facility, and several Community Health Centers ("CHCs"), all of which previously had been operated by Nassau County.

NHCC's facilities provide an extensive range of acute care, nursing home, and ambulatory services to an indigent population in Nassau County. Its hospital provides more than 50% of the Medicaid discharges in Nassau County and is the primary provider for ambulatory care to the County's Medicaid and indigent population in its Emergency Room/ Trauma Center, Outpatient Department Clinics, Community Health Centers, and other programs.

A substantial portion of NHCC's debt consists of tax exempt and taxable variable rate demand bonds. The County guarantees to the Trustee and the owners of bonds the full and prompt payment of the principal and interest of the bonds. The County guaranty may be amended without consent of the bond owners.

In connection with a refinancing of the bonds, the Corporation entered into interest rate swap agreements with commercial banks to effectively convert interest payments on the tax-exempt and taxable variable rate demand bonds to a fixed interest rate. The fixed interest rates paid by the Corporation under the swap agreements are respectively 3.46% and 4.61% for the tax exempt and taxable bonds. The variable rate received for both is based on LIBOR. The swap agreements remain in place for the bonds and expire respectively, on

August 1, 2029 and August 1, 2012 for the tax exempt and taxable bonds.

In the current historically low interest rate environment with credit enhancement from NIFA, it is expected that NHCC's debt could be converted to low fixed rates, while eliminating the risks associated with the current swap agreements. The swap agreements expose the Corporation to market risk, in the event of changes in interest rates, and credit risk in certain circumstances, which could result in termination payments or substantial collateral calls, and NHCC would have difficulty posting such collateral. A fixed rate refunding of the variable rate debt and the termination of the related swaps will lock in interest rates and eliminate the risks associated with both variable rate debt and swaps. A NIFA refunding, including the financing of the swap termination payments, would save approximately $15-16 million compared to a refunding under the current County structure, in which the interest rates would be fixed, but at a higher interest than the NIFA structure. A NIFA refunding, under current market conditions, would be present value neutral while eliminating all risk from NHCC's debt portfolio. It also is expected that NHCC's cash flow borrowings and new borrowings would have a similar favorable interest rate, and therefore result in savings.

This bill is designed to achieve stability by authorization NIFA to refund and support through guaranties and other means the bonds, revenue anticipation notes, and related letters of credit and swamp agreements issued in connection with NHCC's financing instruments.

Legislative history

New bill.

Fiscal implications

None to State. Debt service savings or elimination of risk will have positive impact on NHCC's fiscal stability.

Effective date

Immediately.