Tax-exempt certificates to pay off loan, fund capital improvements

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Talk about timing.

Healdsburg District Hospital put up $10.1 million in tax exempt certificates for sale on Sept. 9, a day when financial markets seemed reassured by the federal seizure of troubled mortgage giants Freddie Mac and Fannie Mae.

And then things went south.

But this week, amid one of the most turbulent financial periods in modern history, with state and local governments -- and Sebastopol's Palm Drive Hospital -- postponing bond sales because of the crisis, hospital representatives said they have found a buyer.

"It probably would not have been achieved if it was done two weeks later," said Kurt Hahn, a board member of the North Sonoma County Hospital District, owner and operator of the 103-year-old hospital.

"We were very fortunate," Hahn said.

The tax-exempt notes were purchased through a competitive process by UnitedHealth Group, the Minnesota-based health care giant, whose bid had the lowest repayment interest rate, Hahn said.

The hospital district will use the money to pay back $6.7 million in loans it owes Sonoma County, said Evan Rayner, the hospital's chief executive officer. The rest will be used for capital improvements and new equipment, he said.

The district was formed in 2001 to help manage the hospital, which almost closed in 1998, but since has been revived by private investors, community donations and a voter-approved parcel tax.

The district is to repay the notes with payments to UnitedHealth Group of between $455,000 and $503,000 a year, Hahn said. After 10 years, the payments drop to about $160,000 a year.

The sale was financed by UnitedHealth Group's $200 million California Health Care Investment Program, which was set up to invest in underserved and rural communities.

"It really reflects our commitment to health care in California, to improving access," said Dan Smith, California spokesman for UnitedHealth Group.

California regulators required the investment program as a condition of UnitedHealth's $8.1 billion purchase in 2005 of PacifiCare Health Systems, a Cypress-based provider of health care and benefits.

You can reach Staff Writer Jeremy Hay at 521-5212 or jeremy.hay@pressdemocrat.com.

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