Debt refinanced for Ventura County Medical Center wing, saving estimated $34 million

Ventura County has refinanced $287 million in bonds issued primarily to pay for a new wing at Ventura County Medical Center, saving an estimated $34 million by the time the debt is due to be retired in two decades.

The county refinanced the debt after receiving the highest possible credit ratings from Moody's Investors Service and S&P Global, according to reports from the two prominent ratings agencies. Both companies cited the diversity of the county's economy and strong management of the county government's finances in their decisions. 

Armed with the positive reports, county officials said they were able to lock in a new interest rate of 2.78%, down from 4.13%.

Chief Financial Officer Kaye Mand said the refinancing deal, which closed Thursday, was done to take advantage of reduced interest rates in the market. 

"We did it because it's going to save the county money," Mand said. "That's a lot of money that can be put into services."

The action marks the first time that the county has refinanced the debt for a $305-million wing that opened in 2017 at VCMC's main hospital in Ventura. The structure was built to modern standards for seismic safety, as required under state law.

Mand said the interest rates were not favorable enough in the past to refinance the bonds that were originally issued in 2013 in the largest bond sale in the county government's history. The payments will drop to $16.5 million a year, down from $18.5 million, Auditor-Controller Jeff Burgh said.

The change in payments will slightly lower demands on the annual budget of more than $500 million for VCMC, a network of hospitals and clinics that has been struggling with cash-flow and revenue problems. 

Officials said the term of the 30-year debt did not change and is still set to expire in 2043. Although the total dollars saved over 22 years would reach an estimated $44 million, the figure is lowered to $34 million after counting the effect of inflation. 

Hoping for better news:  Ventura County board puts off budget until September

County Executive Officer Mike Powers said he appreciated the rating agencies' recognition of the local government's longstanding commitment to responsible fiscal practices, especially during the public health emergency for the coronavirus. 

He called the ratings a "validation of the work" that various county officials and employees are doing to keep the county government fiscally strong. He said taxpayers also deserve credit because they have continued to pay their taxes in the face of an unprecedented health and economic crisis to fund key services.

The county government has not been immune to the tax and funding losses that stem from the virus. Revenue losses are estimated at $40 million in the next fiscal year and the Board of Supervisors has postponed adoption of the county's budget until September to provide more time to assess the situation and nail down some solutions.

Coronavirus:  Hospitalization rate rises, lands Ventura County on monitoring list

Neither ratings firm raised any red flags about the effect of the virus on the quality of the county's credit. 

Moody's said the coronavirus crisis was not a key driver for its decision and analysts did not see any immediate significant credit risks as a result of the pandemic. S&P said the county's diverse employment base and reliance on property taxes — a generally stable source of revenues — limit exposure to the immediate effects of what its economists say is a virus-prompted recession.

Powers and Mand said the rating firms heavily scrutinized the county's performance in this year of the virus and asked more questions than normal.

"If they felt we would be really, really impacted by the coronavirus, they would have said that in our ratings," Mand said. 

Kathleen Wilson covers the Ventura County government, including the county health system, politics and social services. Reach her at kathleen.wilson@vcstar.com or 805-437-0271.