Catholic Health is seeking authority to issue up to $90 million worth of tax-exempt bonds to pay for construction of its new hospital in Lockport and projects at other hospitals in its system.
The lion's share of the money will help finance the construction of the new Lockport Memorial Campus of Mount St. Mary's Hospital.
When Catholic Health obtained state Health Department approval for the new hospital, the application envisioned a $37.9 million, 30-year bond issue at 4% annual interest as the largest part of the funding for the new hospital.
But now the cost of the project again has been revised upward, this time from $66 million to $73 million, and the bond issue would pay $59.9 million toward it, according to the company's application to the Niagara County Industrial Development Agency.
There are 10 other projects on Catholic Health's list, according to the application, bringing the total cost of the health agency's plans to a shade under $100 million. The bonds would cover $84.4 million of the expense.
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State grants, tax credits and $9.56 million in Catholic Health's own cash would cover the remainder of the projects' costs.
In addition to the Lockport hospital, the other projects include a $15.7 million upgrade of the cardiac catheterization labs at Mercy Hospital; $3.1 million worth of pathology equipment and facility upgrades at Sisters of Charity Hospital; and elevator modernization and brick repointing at Mercy, Sisters, Mount St. Mary's and Kenmore Mercy hospitals.
The elevator and brick projects total about $4 million each.
"They're piggybacking on this project to do some projects at hospitals in Erie County they otherwise wouldn't be doing," NCIDA attorney Mark J. Gabriele said.
He said the $90 million bond authorization figure is a ceiling, and Catholic Health may not actually borrow that much.
The burden of paying off the bonds would fall on Catholic Health, not Niagara County.
"We don't owe anything. We don't loan anything," Gabriele said.
Tax-exempt bonding means the investors who buy the bonds won't have to pay income tax on the interest they earn.
Catholic Health's application for state approval of the new Lockport hospital stated that although the organization lost $65 million in 2020 and $40.6 million from January through April of this year, it had $170 million in cash on hand as of April 30.
Catholic Health also gave the state a budget for the Lockport hospital, projecting a profit of $3.3 million there in the first year of operations.
“As before, during times of uncertainty, Catholic Heath has worked to improve access to needed healthcare services while transforming care throughout the region,” said Mark Sullivan, president and CEO of Catholic Health in a statement to The News late Thursday. “With this bond financing, we will be making a significant investment in Eastern Niagara Country to maintain high quality healthcare services for the more than 80,000 residents who live in that community, while also funding several important infrastructure projects at our aging hospitals in Erie County to keep them strong.”
One of the questions on the NCIDA application is whether the Lockport hospital project is financially feasible without the NCIDA's assistance. Catholic Health checked "yes."
"Consistent with the (county) agency's mission, it should undertake the project because the project will improve access to vital health care services in the Niagara region, including underserved areas of Niagara County, by providing lower-cost financing for the project, and would not require Catholic Health to seek such financing through another conduit issuer," said the application, signed by David P. Macholz, Catholic Health's chief financial officer.
An NCIDA subsidiary, the Niagara Area Development Corp., would issue the bonding authority. The NCIDA board has called a special meeting on Sept. 29 to vote on the deal.
Groundbreaking is expected this fall on the new hospital off Shimer Drive in the Town of Lockport, which the bond application calls a "63,000-square-foot micro-hospital."
It will begin with 10 private rooms, space for 10 more, and a full emergency department, imaging and lab services, a primary care clinic and a helipad for emergency transfers.
The document reveals that Catholic Health's acquisition cost for the hospital site will be $880,000.
The 10-bed figure roughly matches the average daily number of inpatients at the bankrupt Eastern Niagara Hospital, which signed a management agreement with Catholic Health after filing Chapter 11. It will close when the new Catholic hospital opens, which is supposed to happen early in 2023.
Last month, a state Health Department grant gave Catholic Health $14 million for the new hospital and $4 million to keep Eastern Niagara afloat. Also last month, the First Niagara Foundation made a $500,000 grant for the new hospital.
The tax-exempt bonding authority also needs to be approved by Niagara County Manager Richard E. Updegrove, and by Erie County Executive Mark C. Poloncarz, since some of Catholic Health's work is to be done on its Erie County facilities.
Gabriele said a group of bond attorneys concluded it's legal for Catholic Health to use some of the bond proceeds in Erie County, even though the authority to issue the bonds will be granted by a Niagara County agency.
Updegrove and Poloncarz are required to hold public hearings before signing the approvals, said Susan C. Langdon, NCIDA executive director.
