Citing a lack of support, Onorato yanks proposed UPMC bond
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Allegheny County Executive Dan Onorato withdrew legislation today that had it passed would have allowed UPMC to borrow up to $335 million through the county financing authority.
A spokeswoman for Mr. Onorato said today that Mr. Onorato pulled the bond legislation in response to inadequate support for the measure on county council.
Council's economic development and housing committee had recommended approving the borrowing, but council President Jim Burn last week sent the proposal back to that committee for further study.
The matter had been scheduled for discussion before the committee this afternoon.
UPMC, the region's largest medical care provider, has come under fire from members of council and from many community leaders over its refusal to bargain on a new contract with Highmark, the region's largest health insurer. Expiration of the agreement between the two health-care giants will mean that Highmark customers would face much higher "out-of-network" charges for treatment by UPMC doctors and at its hospitals.
UPMC has said it will no longer contract with Highmark because the health insurer is acquiring West Penn Allegheny Health System, making it a direct competitor for patients.
The decision by county officials not to move forward on the sale of tax-free bonds for UPMC through the county's hospital development authority leaves the health-care provider with other options. Similar authorities, able to offer bonds at lower interest rates, operate in Washington, Beaver and Dauphin counties. State agencies also offer such funding.
The decision to withdraw the financing proposal means that the county authority will forego a $90,000 up-front fee and annual payments of $50,000 for up to 30 years. Money raised in that manner is used to pay salaries and support other projects offered through the county's Economic Development department.
A little more than half of the new lending would be used to replace existing higher-interest or maturing bonds, UPMC treasurer C. Talbot Heppenstall Jr. told the council. About $152 million would be used for new projects. These would include additions to UPMC Magee-Womens and UPMC Shadyside hospitals and a new hospital under construction in Monroeville.
While $152 million is a large amount, it represents less than one third of the $500 million UPMC will spend on new construction and capital improvements in the coming year, he said.
UPMC previously had borrowed about $1.7 billion through the county authority, which offers charitable institutions an opportunity to sell bonds at lower rates, because interest payments are tax free to buyers. The authority also has overseen financing totaling more than $900 million for the region's other major hospitals.
All the bonds sold through the authority are "limited obligation," meaning the borrowers, not the county, are responsible for paying them.
First Published November 10, 2011 3:57 pm
