Status of the Bond Payment that Somervell County Hospital District Owes- 5/22/2019Somervell County Salon-Glen Rose, Rainbow, Nemo, Glass....Texas

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Status of the Bond Payment that Somervell County Hospital District Owes- 5/22/2019

22 May 2019 at 10:22:34 AM

Wondered the other day whether Somervell County Hospital District had actually done a re-negotiation of the 14.4 million dollar certificates of obligation that Somervell County had gotten and were in Somervell County's name. When the Somervell County Hospital District was created, the responsibility for the bonds was transferred to the district but the Series 2008 Certificates, at that point, remained in the name of the County. At one point in 2016, when Somervell County Hospital District could not make the mandatory payment, they attempted to negotiate with Somervell County to make the payment for them. (See Feb 2 2016 Special Called Meeting, which was cancelled). This was not done. 

What ultimately, in 2016, Somervell County Hospital District ended up doing. because the other way which not only was illegal, but also, in the way, it was done, apparently violated the Texas Open Meetings Act, was approve another bank loan at the Feb 9 2016 hospital district meeting. 

So, to put a fine point on it, the contract when the District was created, was that Somervell County still held the COs, but the District was responsible to make the payments. The worrisome element is that if the District did or does not make timely payments, it may cause Somervell County's bond rating to go down, not sure whether Somervell County Hospital District would as well, since the CO's are not in their name. 

I asked Brian Watts, county auditor, in the last couple of days, whether it is still the case that the COS are in the name of the county and if so, if they appear at all on the Somervell County budget. As expected, the bonds continue to be in "the name of Somervell County since that was the name under which they were originally issued.... if the Hospital District failed to make the required debt service payments called for under the bond covenant, then the holder of the bonds could consider the obligation to be in default". See also the document that discusses the legal issues regarding this. 

I was interested to see where in the meetings these bond payments are discussed. I could not find, in 2017, 2018 or 2019, anything on any posted agenda or in the minutes around the timeframe when the bond payment is due, anything to indicate this was discussed.  Maybe I missed it, if you see this on an agenda or minutes, feel free to email with the reference.

The Somervell County Hospital District budget page does include the "Obligation of Debt Service 2019" with the principal and interest. What it doesn't show is how much is remaining, with a breakdown of how much principal and how much interest. 

Here are the previous numbers from 2017 and 2018

2017 bond payment (Budget)  

OBLIGATION OF DEBT SERVICE 2017 Bond Payment Principal $ (325,000) Bond Payment Interest $ (610,763)

2018 bond payment (Budget)

OBLIGATION OF DEBT SERVICE 2018 Bond Payment Principal $ (340,000) Bond Payment Interest $ (597,038)


Some background:

Back years ago, Somervell County, run then by Walter Maynard, voted to issue debt in the form of certificates of obligation, ostensibly for a public project. From

The Certificates of Obligation Act of 1971 allows some governmental entities—like cities, counties, and certain special districts—to issue debt without voter approval to fund any public project.

More specifically, certificates of obligation (COs) can be used “to fund the construction, demolition, or restoration of structures; purchase materials, supplies, equipment, machinery, buildings, land and rights of way; and pay for related professional services.” As provided for in Local Government Code 271, Subchapter C, COs are usually payable from property tax revenues or other taxable sources.

But the project was actually for then private Glen Rose Medical Center to manage, so there had to be a hearing through TEFRA to vote to get them as you can't just give public money to a private entity.  Here is the audio and transcript from the March 2008 Somervell County Commissioners Court meeting in which this was discussed. If you read the rough transcript or listen, you'll hear that Mike Ford, then Precinct 2 Commissioner, pushed to get the CofO approved BEFORE the public TEFRA vote, ie, BEFORE anyone in the public might go and weigh in on whether they wanted to loan this money to Glen Rose Medical Foundation, which was a private entity (Somervell County at that point owned the hospital premises and leased them to GRMF for one dollar a year). (At one point I had the documents on this, no longer, the originals are available in the Somervell County archives). 

Why did Somervell County do this for such a large amount 14.4 million? One reason was that  Chet Edwards, then US House Rep for our district, had said in 2006 he would get $700,00 for Somervell County, specifically to go to the hospital Instead he got $321,000.  How did that earmark process work?  As a side note, in 2006, Gary Marks, who was then the CEO of private GRMF and a Republican, endorsed Chet Edwards in Edward's re-election. Somervell County was to kick in half and Chet Edwards was to kick in half, but Edwards earmark was halved.Somervell County, as per above, voted to approve CO's for Glen Rose Medical Center.

At some point after that, Glen Rose Medical Center started a push to create a hospital district. Why? Because GRMC was going to have to start making payments on the $14.5 million dollar debt, as per a schedule (I no longer have that record but it was part of the GRMF addendum in records filed at the courthouse) . Here's more on that money from a post I did in Feb 2010. 

I don't see on the budget any place where it shows that the remainder of the monies owed on the CO are, including broken down into principal and interest but I may ask for it at some point through a pubilc information request. If anyone has it in the meantime feel free to send to

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