Montgomery County commissioners have approved authorizing the issuance and sale of $120 million in revenue bonds to finance the construction of Dayton Children’s Hospital’s new patient tower.
The hospital is using tax-exempt bonds, cash reserves and donations pay for the $140 million project, which includes a new eight-story tower that will feature 260,000 square feet of space.
“It’s going to replace some of the inpatient space we have with space that is newer, better, safer and more amenable to providing quality clinical care in today’s day and age,” said David Miller, chief financial officer of Dayton Children’s.
This is the first time Dayton Children’s has issued bonds, officials said. County commissioners must approve a request to issue debt, though the county has no financial liability.
In October, Dayton Children’s announced it will build a new patient power and central utilities plant at its Valley Street campus. The project is expected to finish up by 2017.
The hospital is not increasing the number of patient beds, but the new space will replace facilities that are between 30 to 40 years old and were not designed to handle the wiring, equipment and technology of modern medicine, Miller said.
“Dayton Children’s will continue to be what it’s been in the past, we just recognize that every now and then that requires an upgrade in your facilities to keep care at the same level,” he said.
County commissioners last week approved the issuance of the revenue bonds.
Under federal law, any nonprofit entity can use tax-exempt bonds to finance capital projects, said Arik Sherk, a partner with Thompson Hine, a law firm that is acting as bond counsel on this issue.
The interest rate on bonds is tax exempt to the holders, meaning it is lower than conventional means of taking on debt, thereby reducing the financing costs of the project, Sherk said.
The governmental issuer (Montgomery County) issues the bonds and makes the proceeds from the sale available to the nonprofit (Dayton Children’s) to finance its capital project, he said.
Payment on the bonds comes from specific revenue the hospital pledged to this purpose, and the government issuer is never held liable for the debt.
“The county is willing to support the hospital through the issuance of the bonds because it will help the hospital improve its facilities and continue to provide exceptional pediatric care in the city,” Sherk said.
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