Private hospital’s $600 million bond float questioned

GRMC (PNC file photo)

The proposed bond float for the Guam Medical Regional City, the island’s only private hospital, came under fire Tuesday as Congressman Michael San Nicolas questioned the role of the Guam Economic Development Authority, a GovGuam agency, in a bond float for a private hospital.

“I’m curious about GEDA’s role in this process and the tax-exempt nature of the debt. What is GEDA’s role in this process? And how is the territorial tax-exempt status being applied to the debt. Is this government financing?” San Nicolas asked.

Tina Garcia, GEDA public finance manager, assured that there is no government liability tied to the borrowing and that GEDA is just hosting the public hearing.

When the congressman asked who will make the ultimate decision to issue a tax exemption, Garcia answered that the governor will make the final decision and that GEDA is just the conduit that gathers public comment.

“The governor is being asked to weigh in as to whether or not this particular debt has public benefit,” GEDA administrator Melanie Mendiola said.

The governor will then determine whether the bond issuance can be considered a public service and deserving of a tax exemption.

But San Nicolas said that in case of a default on the $600 million bond sale, the reputation of GovGuam can still be hurt because of its association with the bond float.

“I don’t understand how GEDA is able to bring us to a public hearing without any documentation illustrating public benefit and yet we’re going to participate in a $600 million offering not necessarily putting our credit on the line, but definitely having an involvement with a nonprofit entity going out and borrowing to acquire what was originally a for-profit hospital,” San Nicolas testified during the public hearing.

According to a notice released to the public, the $600 million bond float will be used to finance the costs of the acquisition of all or a portion of GRMC’s facilities and capital improvements.

An agreement has already been signed for GRMC to be acquired by a not-for-profit organization called Blue Continent Healthcare Guam Medical City (BCG) and Wednesday’s public hearing was to consider the issuance of one or more series of tax-exempt bonds for the purpose of financing the cost of the acquisition of GRMC by the non-profit group BCG.

But San Nicolas said the involvement of a non-profit itself raises a number of questions and issues.

“What about all the other nonprofit organizations out there? If GEDA is willing to have a public hearing for a nonprofit organization and sign up for triple tax-exempt status without any documentation showing that it’s for public benefit, is every other nonprofit organization going to be given the same kind of access to this kind of tax-exempt treatment, just by asking for a hearing?” the congressman asked.

He added that this point is important because the Catholic Church on Guam is also a nonprofit organization and they are hundreds of millions of dollars in debt because of all the lawsuits.

“Can the Catholic Church then now come to GEDA and proceed to go and get tax-exempt status because it’s going to be signed off by the governor? And can every other nonprofit organization be able to avail of that? This is a very big concern because I don’t feel like the risks are being properly vetted by GEDA,” San Nicolas said.