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City of Palo Alto
City Mall!lg~E's R_eyort
TO: HONOR>.BLE CITY COlJNCIL
FROM: CITY MANAGER DEPARTMENT: FINANCE
DATE: DECEMBER 5,1994 CMR:554:94
SUBJECf: STATUS m" LYTTON GARDENS III SEMI-ANNUAL DEBT
SFJl.VlCE PA YM~NT ON INSURED BONDS; PAYMENT MADE
BY OFFICE OF STATEWIDE HEALTH PLANNING
REOUEST
'n,e pl!IIK'se ofthi~ report i:i to inform Council of the status of the Lytton (1[;rdens IH semi
annual debt service pa~'menti due Dtccmber 10, 1994. L)11011 G5Idt'llS lnc. (L01) lllCh
s,Jffident funds to make. t.he. 'P~yml;!nt of $443.290. The OfflC'~ ()f St~tc\"id.;. Hl.!a!t~) P!:<.1u:ing
(OSHP~ hs.:s pwcesse.d a r~queS:l for the State Control!er's Ofti{:e to p<1)' S.JDti,OQU to o.,'o\'o:r th<! Ull
shortage and ma~~ the debt s!!n'lce paYineni.
RECO~'1ENDATIONS
This is an informational report and no COllilcil action is required.
POLICY IMPLICATIONS
This report does l10t propo~ any changes to exiS!ing City policies.
EXECUTIVE SUMMARY
LGl ~ a California nonprofit public benefit C(1J1Xw'cJ:.iOn, established in May 1980 by Community
Housing [nco (C~n). CHI, also a nonprofit public benefit corporatiuD, was created in February 1970
for the purpose of developir.g; housing for senior citizens \'\1th 10\'1-' incomes-.
Lytton Garden.« III is a skilled nursing faciEt}, and convalescent ho:.piw, built by CHI, and located
en We~.er Street in P?Jo Alto. In October 1981, the City i~ued 59.6 milJiun in City of Palo Al!O
Insured Health Fad!it)' Revenue Bonds. to acquire, construct and ~u.ip Lytton HI. In October 1982,
and again in Decemlxr 1986, the City advance refunded the bonds. The iast tinancing was in the
prindpal amount of $13.4 million and had a $1.2 million regen'e.
LUI made its semiannual interest payments regularly until December 1989, when, dll .. ~ to ea.<Jttlo\.\'
problems, it was unable to ma.1.::e full pa),mellts. This caused Bank of America., th~ (IUstce, to apply
funds in the bond reserve account to meet the debt service obligation. Since that time. staff has
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monitored LOT's payment activity ,"1th the t!ustee and has periodically reportfd to Coun.cil
(CMR:387:9l. CMR:385:93, CMR:IOS:94. CMR:J6J:94). As of June 10. 1994, the reserve was
t.'>1Bl1y dq>letal LGI could pay only $297,602 afthe total $443,290 due on June 10, 1994. OSHP
paid the difference of 5145,688.
Staffwas ootif:al by OSHP Liat a request for $4(16,000 luis been submi"ed to the State ControUer's
Office, to cover the difIerence Dfthe $443,290 pa)ment due on Dec:ember 10, 1994. Tbe tru.)1~
holds itpprOxim.ately S37,000 in the .account on behalf of Lytton Gardens Ill, v.1tich hopes to come
up with an additional $140, 000 by the due date. OSHP "ill keep its request at $406,000 to ensure
full payment to the bond holders:. 1bc trustee has 81so notified the bond holders about the State's
intervention In providing fundLng for the s!!miannual payment'), It should be noted that, throughout
this pn,.;e!:.", ali Nnd r.c.ldm have continued to rece~vd th.eiT 5~mjar..nual payment':>. Alc;o, OSHP
has the rig..~t to cha;l~':' L~1tI')l1 Garden:.:; man.agementte~.lJ11 or c;:lose Ih'l' facility, OSHP ha.s :ndjcOited
it ius no plar.s to p;,u"ue U1o,<;e ~lt:?m~.t;\'es at this. time
SLaff ",ilJ ..:ortinue to monitor and report to Council on the status tlf LG! and the City of Palo AHa,,'
LyTton (hlJd;;on.; l~("ven1Je Bonds.
flS<:AL L'!PACT
There is no fiscal impal't, since the Lynon Garden5 III H(lnds are not fl d)TCct obhgation .of tile City
of Palo Alto.
ENYIRONMENTAI" ASSI=;!iSMENT
.''\II en vironmental as.:oessmeni is not req u.ired for thi s: rrport
PREPARED BY: Lalo Pere?..., Financial Analyst
DEPARTMENT HEAD APPROVAL:' c;-... rfidl.
I::.ml .' If''';;'lson
Oireclor of Finance
CITY MANAGER APPROVAL:
CC: n/a
CMIUSH4
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