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DATE:
SUBJECT:
Rf.OUEST
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City of Palo Alto
City Manager's Report
HONORABLE CIlY COUNCIL
CITY MANAGER DEPARTMENT: . ,<NANCE
JUNE 22, 1995 CMR:3I S:9S
STATUS OF L Y1TON GARDENS m JUNE 1.995 SEMIANNUAL
DEBT SERVICE PAYMENT ON INSURED BONDS
The iJUIPOS'l oflbis r<POfI is 10 infunn COllDC~ of the S".arus oflyttoo. Gardens ill semiannual
deb! .,,~ payment due June 1 C/. 1995. lyuoo Gardens Inc. (LGI) has lacked suffi<:ienl
fimds 10 make the last two full semiannual deb! service payments of $443,290. The Office
of Statewide Health I'1anoing (OSHP), the issuer of the boods. has covered the WI shortage
and made the debI service payments. However, as of June 6, 1995, [.of has sufficient funds
fOr the full deb< service payment due June 10, 1995.
JWX)MMENDADONS
This is an inbmatiooaI r<POfI and no Council action is required.
POucy WPLICAIIQNS
This report does DO( ~ any changes 10 existing City policies.
nEcunyE SUMMARY
WI is a California OOflproflt public benefit coq>oratioo, established in May 198() by
Canmunlty Housing Inc. (CHI). CHI. also • nonprofit public beI;efl( cOlpOl1ltion, was
created in February 1970 fOr the purpose of developing housing b: senior citizens with low
incomes.
Pace IoU
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Lytton Gardens ill is • sl::J1led nursing facility and coovalescen! bosrital, buill by CHI, and
IocaIed on Webster Street ill Palo Alto. In 0ct00er 1981, the City issue<l $9.6 millioo in City
of Palo Alto lDsmed Health F3cility Revenue Bonds, 10 acqulre, W<!S1l'\K:I and equip LytIoo
ill. ID Oclober 1982, and again in December 19$5, Ihe City B<!vance refunded Ihe l>oods.
The last Ilmmcing was in the principal amount of $IH rnil1ioo and had • $ 1.2 rniUioo
teser".e.
WI made its semiannual interest payments regularly until December 1989, wbcm, due 10
cashftow problems, it was nnabIe to make full payments. This caused BanI< 0( America. 1lle
Irustee, 10 apply funds in !be bond reserve ocwunt to meet the deb! servi<:e ob~gation. SlDce
tllat time, staffbss mooitored Wf, paY=tJlB"'.Mty With the trIIstee and bas period"!C8Ily
reporIed 10 QlunciI. h of June 10, 1994., !be resetVe was totally depleted. L.o! toold only
pay $291,602 ot"lhe total $443,290 and OSHP paid the difference 0($ 145,688. In December
1994. LGl could payooly 531,290 ot"the1olal $443,290 due ~mber 10, 1994. OSHP
paid !be difference ot"S0W6,OOO. The trIIstee bas ootitred the bond holders about the State',
intervention in providing fundi,S fur the semiomnual payments. It is impcrtanl to note that,
Ibrougbout !his process., all bocds hold ... tove continued 10 received their semiannual
payments.
Since January 1995, L.(Jl has aocumulated SUfficienlfunds fur the June 10, 1995 debt scrvi<:e
payment 0( $443,290. In addition, WI has also paid the S5,6OO moothly bood insurance
payment 10 maintain coverage by OSHP. ,.... result, OSHP Wlll not bavelo provid<o any
Iimds roc the June 10, 1995 clebt servke payment. LQI staff aur-;buIes the finan<ial tum
aronnd 10 !be redw:tion ot"$O.5 millioo in expense<, !be addition of 17 beds roc ~ patients,
and the odditicn ot" specialized health care programs.
Staffwill continue to monitor and report to C-ounciI on the stalllS ot"UlI and the City O(Palo
AJtoI Lytton Garclens Revenue Bonds.
FISCAL IMPACT
Ibm: is DO fiscal impacI sin<:e!be Lytton GarcIeos ill Boods are not a direct obligation ot"the
City o(Palo Alto.
f.NVIBONMENTAI. AssmmNT
Ibm: is DO need to do an environmental assessment for this report.
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~lated S1aff reports:
CMR:381:9J
CMR:38S:93
CMR:I08:94
CMR:363:94
CMR:S54:94
PREPARED BY, Lalo perez, Senior Financial Analyst
DEPARTMENT HEAD Al'PROYAL: ~ tio_ L' Q
Emil Harrison
DirecIor of Finance
arr MANAGER Al'PROY AL:
CC: nil