The city will continue to back millions of dollars in bonds for Wildflower Court, a non-profit nursing home adjacent to Bartlett Regional Hospital.
Eight of nine Juneau Assembly members Monday night voted against repealing an ordinance passed in January that authorized $14.2 million in bond refunding. In 1999, CBJ issued $18 million in revenue bonds for Wildflower Court. The corporation last year asked the city to assist in refinancing at a lower interest rate through the Alaska Municipal Bond.
After the Assembly approved the refinancing plan last month, City Attorney John Hartle noted a conflict of interest since CBJ Finance Director Craig Duncan is married to Wildflower Court Administrator Mille Duncan. Hartle recommend the Assembly repeal the ordinance and adopt a new one.
But CBJ Bond Counsel Cynthia Weed at K & L Gates in Seattle called it a “perceived” conflict and said CBJ’s conflict of interest code had not been breached. In a letter to Hartle, Weed said Duncan’s role was administrative and he had avoided making recommendations about the transaction. Weed said the Assembly did not need to repeal the original ordiance and re-enact another.
City Manager Rod Swope said the refinancing would save Wildflower Court more than $4 million over the remaining life of the bonds.
“The bonds that currently exist are $13 million in bonds and they’re asking for an additional million dollars that they will use to make improvements to the facilities. Kitchen, carpet, maintenance work,” Swope explained.
Even so, Assembly member Ruth Danner said the city should not get into the business of financing bonds for non-profit projects. She voted for the original ordinance last month, but Monday night she had changed her mind.
“This, I discovered after our meeting last month, will be the first ever non-profit to have municipal funding through the (Alaska Municipal) Bond Bank,” Danner said.
The nursing home corporation has met its debt service every year, according to Swope. CBJ owns the property Wildflower Court sits on and the corporation has pledged its building as collateral. Independent consultant Bob Bartholomew conducted a review of the risk to the city. In a memo, Bartholomew says Wildflower Court is in a strong financial position and there is no risk to other CBJ bonding capacity. (Bartholomew is a former Chief Operating Officer for the Alaska Permanent Fund.)
But Danner says the city may now get requests for such help from other non-profits.
“How will we draw the line for the next non-profit that wants this kind of support from the city and borough of Juneau?” she asked.
“I don’t know that you have to draw a line,” Swope replied. “I think you should be willing to hear any request.”
But Swope called this instance unique.
“This is really a quasi-governmental entity, in my regard. First of all the facility is located on property that we own, that they lease from us. Secondly, there’s a very close nexus in connection with Bartlett Regional Hospital, which is why I think we’re doing this. It’s critical to that facility, and they’ve made it clear it’s critical to that facility, so I think it’s a unique situation, unlike any other non-profit that would come forward and want this,” he said.
The city and borough owns Bartlett Regional Hospital. According to the hospital, more than 63 percent of Wildflower Court’s patients come from BRH.
