Fitch Rates St. Tammany Parish Hosp. Service Dist. #2, LA GOs 'A+'; Upgrades Outstanding GOs
2009-05-13 16:50:04 -
Fitch Ratings assigns its 'A+' rating to the St. Tammany Parish Hospital Service District No. 2, Louisiana (the district) $17.5 million general obligation (GO) bonds, series 2009. Fitch also upgrades to 'A+' from 'A-' its rating on the district's $18.7 million in outstanding GO debt.
The series 2009 bonds are scheduled for a competitive sale on May 21st.
The Rating Outlook is Stable.
The bonds are secured by an unlimited ad valorem tax levied against all taxable property within the district. Series 2009 proceeds will finance the construction of a new cancer treatment facility.
Fitch upgrades the rating on the district's GO bonds in response to ongoing tax base and economic growth as the region continues its recovery from Hurricane Katrina in 2005, improved operations and a stronger financial profile, and manageable debt levels and capital needs. Also factored into the rating is the competitive healthcare environment in which the district operates-St. Tammany Parish (the parish) residents are served by eight healthcare providers of varying size and scope. Fitch believes this area on the north shore of Lake Pontchartrain in southeast Louisiana is poised for further population and economic growth, due to its location north of New Orleans, its favorable business climate, and well regarded public school system.
The district comprises approximately 447 square miles and includes Wards 6, 7, 8, and 9 of the parish. The municipalities of Slidell (population 27,185) and Pearl River are within the district. Slidell is roughly 20 miles north of New Orleans. The district owns and operates Slidell Memorial Hospital (the hospital), a full service, acute care not-for-profit community hospital. The hospital contains 182 beds and through a series of expansions, now features three medical office buildings, and an outpatient diagnostic center; the hospital offers roughly 30 specialized services. Employment currently totals more than 1,000, and the hospital has a medical staff of 296 physicians.
The hospital's financial profile has strengthened over the past several years, driven by gains in total patient services, expanded facilities, and increased service area population due to movement by residents from those areas in southeast Louisiana more at risk to severe hurricane damage. Liquidity has climbed since 2004, with cash and investments increasing from $10.4 million to $51.6 million at Dec. 31, 2008, or the equivalent of 168 days of operations. Net patient revenue also increased during this period, from $95.5 million in 2004 to $125.2 million in 2008. While acute admissions remained essentially flat from 2004-2007, outpatient registrations and emergency registrations saw gains during this period of 49% and 14%, respectively. The recession produced a dip in acute admissions in 2008 to 7,660 from 8,408 the prior year, and staff reports that acute admissions were down again for the first quarter of 2009. Staff also notes that certain services, e.g. imaging, continue to see increased volumes in 2009.
The district's direct tax-supported debt levels are modest at about $260 per capita and 0.5% of estimated market value. Payoff of GO debt is average, with 55% retired in 10 years. The district also has $7.5 million in a bank loan and slightly less than $5 million in capital leases outstanding. Following Hurricane Katrina in 2005 the district received $23.5 million in federal community disaster loan (CDL) proceeds, the repayment of which is scheduled for 2011. However, rules recently proposed in the federal register by the U.S. Department of Homeland Security indicate the possibility of forgiveness of these 2005 CDLs if certain requirements are met.
Tax base growth in the district averaged more than 6% in 2006 and 2007, following a storm-affected 13% decline in taxable values in 2005. Values jumped 35% to $722 million in 2008 due to a revaluation of properties.
Property tax collections are sound, and top taxpayer concentration is moderate at roughly 7% for 2008. The local economy has benefited over the past several decades from residential and business migration from New Orleans, and this trend accelerated following Hurricane Katrina. St.
Tammany Parish, which during the 1990s was the fastest growing parish in Louisiana, witnessed a nearly 20% gain in population from 2000-2008, and the district saw a 15% increase to roughly 140,000 during the same period. Parish income levels historically have exceeded the state average, and unemployment rates also have typically trended below state and national averages. The latest monthly unemployment rate for the parish of 4.2% (March 2009) was well below the state (5.7%) and U.S.
(8.5%) figures.
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Fitch RatingsSteve Murray, +1-512-215-3729Andy Kaaz,
+1-512-215-3730 (Austin)Media Relations:Cindy Stoller,
+1-212-908-0526 (New York) cindy.stoller@fitchratings.com : mailto:cindy.stoller@fitchratings.com
