St. Luke’s University Health Network’s plan to sell as much as $450 million of bonds drew no public comment during a hearing Monday.
That is close to a half-billion dollars for a combination of new construction and refinancing.
The hearing started at 2:01 p.m.
“Let the record show that no members of the public have offered testimony,” Tina Smith, director of Northampton County’s Department of Community and Economic Development, said at 2:07 p.m., and the hearing ended.
The hospital system said earlier that half, or $225 million, of the bond sale would be “new money” and most of that would fund the expansion of St. Luke’s Anderson Campus in Bethlehem Township.
The rest would go toward refinancing older debt as St. Luke’s takes advantage of lower rates and gets rid of some variable-rate debt. The interest on variable-rate debt is reset periodically, putting St. Luke’s at risk of paying more.
The public hearing was held by telephone and led by Smith on behalf of Northampton County’s General Purpose Authority, which provides a conduit for interest-free debt. Most of the six elapsed minutes were taken up by Smith reading the hearing notice.
The GPA board and Northampton County Council had already approved the debt sale, making the hearing a formality. It was required because the debt will be tax-exempt, meaning buyers of the bonds will not pay federal income tax on the interest they receive.
That exemption allows governments and organizations with a public purpose — such as St. Luke’s — to pay less interest than a for-profit business would. Once the tax benefit is taken into account, a lower rate on a non-profit organization’s bond can be competitive with a taxable rate from a corporation.
To qualify for the exemption, St. Luke’s has to gain the approval of a public authority such as the GPA.
In addition to Anderson, the new money will go toward St. Luke’s Orthopedic Hospital in South Whitehall Township and other facilities. The public hearing notice lists facilities in Northampton County, Lehigh County, Monroe County and Bucks County.
The refinancing will cover a taxable loan, current principal $46.4 million, from Fulton Bank; $50 million of bonds from 2018; $103 million in variable-rate debt, and costs related to the bond sale.
The GPA approves the bonds and serves as a conduit for the tax exemption, but the responsibility to repay is St. Luke’s. The financial obligation does not rest on any of the counties or the state of Pennsylvania.