Who Actually Owns the Debt on the $14.4 Mil Certificates of Obligation? Somervell County Owns the Bonds


 
Thanks, Mike Ford!

Who Actually Owns the Debt on the $14.4 Mil Certificates of Obligation? Somervell County Owns the Bonds
 


14 November 2013 at 2:56:08 PM
salon

I had thought that, since Somervell County no longer budgeted for the 14.5 Million CO that Mike Ford illegally voted for, that they had actually transferred the paper debt to Somervell County Hospital District's name, making them the ones now responsible to pay that back. Not so. To be more precise, Somervell County still has the bonds, and Somervell County Hospital District is responsible to pay the money BACK to the county; if the hospital fails to pay, it could cause Somervell County to get a lowered bond rating since they hold the notes.

One of our alert readers was listening to the audio of the joint Somervell County/Somervell County Hospital District meeting from last week and heard the attorney say that the district owes the county around 14 million dollars.

AUDIO

If the county actually still has debt in their name, then they are the ones ultimately responsible for paying it. Reminds me of cosigning on a loan with your 18 year old son. You might tell your son he has to pay back that car payment, to you or to the bank, but if he doesn't, who's responsible? You.

Here are the relevant documents showing that the Certificates of Obligation remain in Somervell County's name.

Here's the agreement from 2008 with Southwest Securities

Here is the Series 2008 Certificate of Obligation Order and Exhibits

Here is the maturity schedule of payments.

So what does the Somervell County Hospital District have to do with this, since even now the CO's are not in their name but Somervell County? An Asset Transfer agreement to pay back the county

 

P.S. To put a fine point on this, Mike Ford, when commissioner, had no problem, even when told by Judge Maynard that they shouldn't have a vote on 14.4 million BEFORE a required IRS hearing, in pushing ahead to fund his Pet Project, the hospital. Remember that Glen Rose Medical Center was then a private hospital leasing the building and equipment FROM Somervell County for, like, 10 bucks a year, and was supposed to start paying BACK this money. Instead, GRMC gave up the ghost and put the hospital into county hands after the first attempt to foist it onto us as a hospital district failed. (One commissioner told me he thought the whole thing should have put up for a county-wide vote before putting us into this kind of indebtness). It is pretty rich for Mike Ford to whine about whether the county would get BACK the assets, etc, should the Hospital District be dissolved, when SOMERVELL COUNTY OWNS IT ANYWAY AND IT IS DUE TO HIM THAT WE DO.

Update 2/1/2016. Verified with Brian Watts, Somervell County Auditor, that the Asset Transfer Agreement from 2013 still applies.Short answer: Yes.  

From: Brian Watts]
Sent: Thursday, November 14, 2013 2:39 PM
To: 'Dxx Hxxxxx'
Subject: RE: Open Records Request- Nov 11 2013

The Bonds remain in the name of Somervell County.  Only the holders of the bonds could allow a name change, and as such, the County became a de-facto guarantor of the bonds and would be liable should the Hospital District fail to make the required debt service payments.

The County filed a “Material Event” notice with the SEC in accordance with SEC Rule 15c-2-12 informing the bond holders that the hospital district “assumes any outstanding indebtedness incurred by a county, municipality, or other governmental entity in which all or part of the district is located in providing hospital care for residents of the territory of the district before the district’s creation” which is allowed under Section 286.073(a) of the Texas Health and Safety Code.  That notice was filed with the SEC on 6/14/2013.

Probably more info than you wanted, but wanted to be complete.


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Comments!  
1 - concernedcitizen   15 Nov 2013 @ 8:40:17 AM 

The delivered petition was neat, well organized, complete with voter registration numbers. The process should have taken hours NOT weeks for verification process. 

We taxpayers (own and owe) the $14.5 million note on the hospital. The Hospial District pays the County back with OUR tax dollars. Isn't that redundant!  Full  circle. Always the taxpayer paying. 

Dissolution Of hospital district takes this convoluted (very complicated and difficult to understand. : having many twists and curves) process to a more simplified process. A process that better serves the community and taxpayer. 


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2 - salon   15 Nov 2013 @ 10:15:00 AM 

@concernedcitizen. Great comment. Yes, on the simplification. I remember after the election reading someplace (in the paper?) that a person thought that creating a hospital district was going to get rid of the debt. Nope. WE owe the money on that debt service. Whether we pay the money to the county through our county taxes or pay it to the district through district taxes, the debt still exists. The difference is that the money is in the NAME of the county, NOT the district, so, as you said, it's just one more layer of paying money to discharge the debt. The fact that the county owes the money certainly does undercut Mike Ford's argument about taking the debt back. You can't take back something you already have.

Interesting to me as well is that the document of the agreement showing that the district is paying back the county's debt is that, despite it also talking about debt liabilities, it is called an "ASSET TRANSFER AGREEMENT".


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3 - concernedcitizen   15 Nov 2013 @ 7:26:33 PM 

The attorneys for the hospital distrct is being PAID by "US TAXPAYERS"!  Against us!  How wrong is that?!


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4 - concernedcitizen   15 Nov 2013 @ 7:31:15 PM 

That's another reason to dissolve the hospital district. All of us can list reasons!


Latest Blog Post by concernedcitizen -Williams convicted of Capitol murder--now awaiting sentencing
5 - salon   31 Jan 2016 @ 11:38:52 AM 

One more comment on this, from 2016. So far as I know, the bonds are still owned by Somervell County but all responsibility for paying them is with the District. The District is a completely separate taxing authority and, while the county would be responsible if someone sued over a non-payment, the county can also force the District to make those payments. 

"The Series 2008 Certificates are not extinguished and remain in the name of the County, although the District would be the party to refund or defease the 2008 Certificates. Should the District fail to make the requisite debt service payments for the Series 2008 Certificates, then the holders of such obligations could bring an action against the County for payment. The County may be able to raise certain immunity defenses, as well as defending itself on the basis that Chapter 286 has transferred the responbility for the Series 2008 Certificates to the District and the County no longer has the authority to levy a tax for payment of the debt service. In addition, the County could bring a mandamus action against the District to compel it to carry out its statutory duty to levy the tax and make payments on the Series 2008 Certificates.  - 


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