HomeMy WebLinkAbout0363.094~ W'
June 30, 1994
HONORABLE CITY COtrNCIL
Palo Alto, California
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J!~~OP LYT'roN alll!DBNS Jll.Jl~HIAl!NO"H DEBT 9ERVI~l\YHm!:LQU
n!llJ11'Jlll ItON!)S: PAYKE!{'t.l!lIDE ll'I OFPIC!Ull..nJlTEWIQD HEAf.TH PLA1ll!l1!l1
~ Il BV SLOPH! N'l:
Kembors of the Council:
'l'his is an informational report and no council action is required.
Repost iD~.
1..yt:.ton Gardens, lnc. (l.Gl) depleted its bond reset"ves and did not
have sufficient funds to mak.e its June 10, 1994 semiannual debt
se'rvice paYll'lent of $~43,290. The LGI shortfall of $145,688 was
paid by the Office of Statewide Uealth Planning and Developl'lHmt
(OSHPD), the insurer of the bonds. In order for OSHPD to continue
to fund the debt service payments, LOr nust continue to pay ita
annual insurance premiums of $66,800 to the Bank of America," the
trustee. CUrrently, the premium is paid throuqh December 1994.
Now that OSHPD has made a debt service payment, it has t~e legal
right to replace the Lytton Gardens manag~ment team or close the
facility. OSHPD has indicated it has no plans to pursue those
alternatives at this time.
»A2Jtground
LGI is a California nonprof.it public heraefit corporation,
established in May 1980 by Community Housing, Inc. (CIiI). CHI,
also a nonprofit public benefit corporation, was created in
February 1970 for the purpose of developing housing for senior
citizens with low "inoomes.
Lytton Gardens III is a skilled nursing facility and convalescent
hospital, built by CHI, and located on Webster street in Palo Alto.
CHR:363:94
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In O<>tober 1981, the city issued $9.6 million in city of palo Alto
Insura.d Health Facilit.y ROVenllQ Bonds, to acquire, construct and
equip Lytton Ill. In october 1982, and again in December 1986, the
City aav.t!lnco refunded the b-onds~ The last financing: 'Was in the
principal 8roount of $13.4 million and had a $1.2 million l."eserve.
WI made its semiannual intct"est payments rogularly until December
1989, when, doe to cashflow problems, it was unable to make full
papents. This caused the trustee to apply funds in t:'_he, bond
resorve account to ~aet the debt service obligation. SincQ that
tl~e, st3ff has monitored LGI's payment activity with the t~ustce
.elnd has periodically repor-ted to council. In August 1991
(CMR:387:91), staff reported tho bond reserve had been reduced to
$427,000. III July 1993 (CI!R:38S:93), staff reported that the
res&rvo balance was $278,500, and in January 13, 1994 (CMR:108:94J,
it had ba{ln further reduced to $29,142~ As of the debt servioe
p~y~Qnt dun June 10, 1994, the reserve h~s been totally depleted~
It should he noted that, thr-ouqhout this process, the holders of
t.ho bonds have continued to receive the semiannual payments on
tine.
Steff haa maintained contact with OSHPD, un and BanK of America,
_the trustee. At staff's l'cquest, LGI prepared the attached letter
to explain its opcr-ations and to address the City's concerns.
OSHPD has stated that it will be delivering a formal default notice
to LGX and ~ill continue to provide funding necessary to make the
se1!liannuf'll dobt service payments~ Now that OSHPD has mado a
p~yment, it hns the legal right to replace the LGI management team
or close the facility, as it deems necessary. A representative of
OSIJPD explained to staff that OSIlPD has no immediate plans for a
change in management at this time.
OSHPD hllis is~!.,.;ed 8. notice to standard " Poorl s, a hond rating
agency, and to the media, advising that payment has been made by
ita office to cover the debt service. It is a Btandard procedure
to disolose such information to rating agencies and to the public.
BonO IAlYrage. Payment
LOr :=ust continue to pay its annual insurance premiums of $661'800
to the trlJstee l in order for OSIiPD to continue to fund the
semiannual payments. It LGI were unable to pay the insurance
preMiums, then the trustee has the option to enter into a
supplement or admendment; to the contract ot insurance, extending
LGI's insurance coverage j or declare tho principal of all bonds
outstanding and interest accrued to be due and payable immediately.
Currently, LGI's premium is paid through December 1994.
CHR'36J:94 2
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Staff wilt continue to mo~ltor end report to Council on the status
of LaI and the City of Palo Alto/Lytton Gardens Revenue Bonda.
Re.pec ully Gubnitted.
Attachmont: Letter
Related Staff Reports:
CKR:363:94
eHIl: 381: 91
CHR: 504:91
CHR,233:9J
CIfR:385:93
CHR:108,94
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JUl-21-1994 B9:SS TO 32:58S5& P.02~3
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UircCitot or FLAanc&
City of Pal. Al10
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Pal. AI", CA 94101
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Oil Jut. 15, Ly!1DC Gardu$ H(' ... J~ evco. Cellltr feU .sb<.HI Qr l!"l.tliug
the e.alire StwJ+aIlhll.ll lattn.' p.s)~1e~1 Oil Its $1) (tllliQII b-oad. As
a resolt, the ~1U.il of c.tiromil ClJ·!I1ortt .. ,e l...N.u linuf.ln.;c !-1.hxt
bas mo:x!c I portico (II the f'3)"~Il.l OD ~ Huhh C("otu'!i i>fhatr.
J...Y"Qn Oudfns bas p~M it! IlCfrcllJID (or a,~ (;al.MMs'g( In~tJrance
progum. wblc:h f:JUy inlure.5 bolh the ptit.c[p.tl and jt;ltt:-$I, and
\-nll ({)nticue to 00 w iu V::~ MUle. 1'he Ctl1 of PUG Allo kGI i<.l
DiUl"~ to the 1I$IJlnce of tb~n bonds ill 1983, Ctl·J.1cI1i;lse IS
Qbll£l;ted 10 prQte~t bond.bQlden (10Rl lou.
The Hc.a.1th Cenler's beaded indc:bled...'le:u ",·u illCl.Hrtd to CO,"CI
rom.trucOon COlLs of lilt r01H $lory, 128 b.«1 ,\jUcd Cluniog (acHHy
11 yC-lJ-$ .:liJ.O, The fioo.ncial pCOMUUf lifT» (10m Ih hiGhtt.'\..b,~"
e'.4p!-C!.r.f'l prc.~ortion of patic:nlS uncd UDdu 111~ Swc"s Medi...co!-l
program for \lie poor. Aboo( 6(11';, of Lbc rtli.deQu lIe OD ~1cdL-C.aI.
compared 10 an e~tlm~(d IO~ 01 lh~ tim. L.,.·UC.:li C)t~(rl~ wu !nli.h.
Medi.CaJ rclmlHlf$t1 fOf nrvlc~' .at .. ule teuly ~1)9J Itn IIUG tha,
of privatel)' jOSUtM patleD1s. ~·Jlkh bu C'"f(j;led a shorudl in
''I!-VCinoe~.
CaJ·MOrtt3p.f:" .. p.mic:ipatiort .. .vJ1I lIol e"c:el !he d&Y.lo·<5"iy 0pu:.ition or the sk.iIlM DUts.iDll (.ac:ilitl. Our croon \\ilJ reml.io operJ and all
serv]("·u wtJI cO.QUaue as they hlve bi;.;o, II j" oar t>ehd tb:lll ;J.JI
~tltllU -reca:alr.ss of how they 6JC 11111.ued .+ sho\lld (('ceive ·the
bt..!t pouiblc. Ute we c::m proYide. We betieve h il tU~DriaJ tMl bJ8b
quality <:are be .readily ""aHable. to) all IMmben (o( the P4!0 Aho
eommunhy.
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1"". n. 1994
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As the DeW chh!f' uec®v$,; I em cCllofldtut we ca.o return Lytton Gu&.cs 10 financial
bealtb. S~ I joilled 1M Hwth C'e.t~er"t nwlasemeD.l team hi MIY. Wt b8\'e started
to ,PlIt in plftCO Hvetal ProuamJ 10 iolproye nVClIil61 withoul ('.om,promhlne m&
quality or ~mc:~. Ollr mattlY iDclcdes torPtli tltW a.llilMCS wiU! be.a1tb care
DOtWorb to ibmtO a .. tea&y .tr...aro of ['Orerra16, i.:mplnuodo8 " 1D()(e dfectlve bJ UiD.g
pmoen. an<! dorelopftll spoctalHy "me" ~ b005t nlvtlDU,". II Is my ekpertl~t. &$ a
tonaer e.r.~fiYf: ~Y"'Qp!'" ~riatrlc ilrO,ratIIl a.t St. Mary's 'HoS''pI!iJ in S"'t
Fnmcllco and l'Uatl8gl.ng 'Ild.iO .... .asC-U~U" ~CClS AI Sl.a.oford Ho.plLal, lb.1 improved
services wiU alao cnhaDco the Pa!(' Alto commlnllt)' at fttge.
If you or toembeiS of the City COWlcH bave My qUUtiODI [e~&Jcljdg tbe future e>f
LyttOb oa.roens. I wOuld welconle a.o opporruoil), to &dc!rel$ IMm.
8&&t It-galds,
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