|[December 19, 2012]
Fitch Affirms Mayers Memorial Hospital District, CA GO Bonds at 'BBB-'; Outlook Stable
SAN FRANCISCO --(Business Wire)--
Fitch Ratings takes the following rating action on Mayers Memorial
Hospital District, CA (News - Alert) (district):
--$5 million general obligation (GO) bonds, 2010 election, 2011 series A
affirmed at 'BBB-'.
The Rating Outlook is Stable.
The bonds are general obligations of the district, secured by an
unlimited ad valorem tax pledge on all taxable property in the district.
KEY RATING DRIVERS
NARROW TAX BASE: The district is geographically large but sparsely
populated with economic concentration in natural resources including
timber and energy production, food processing and other land-based
STRONG MARKET SHARE AND VOTER SUPPORT: Over 65% of service area
residents receive their medical care at the hospital and the nearest
competitor is more than 50 miles away. Overall community support for the
hospital is strong as demonstrated by the 72% approval for the November
2010 bond authorization.
GROWING DEBT BURDEN: Direct debt levels have risen sharply since 2010
with the issuance of both GO and non-GO debt. State-mandated seismic
improvements are likely to be funded with substantial new debt to be
issued within the next year, increasing debt burdens further.
WEAK BUT IMPROVING FINANCIAL PERFORMANCE: The district's financial
position remains pressured but saw modest improvement in fiscals 2011
and 2012. The hospital benefits from its status as a critical access
hospital, providing a sound base of revenue, but continues to be
challenged by low profitability and liquidity.
Mayers Memorial Hospital District spans the upper northeast corner of
Shasta County, approximately 70 miles northeast of Redding, with
portions in adjoining Modoc and Lassen Counties. The district has a
population of approximately 14,000 in a largely rural 8,000 square mile
LIMITED ECONOMY; INDUSTRY CONCENTRATION
The district's tax base is largely rural and agricultural in nature,
with most of the top taxpayers in the timber, food processing,
agricultural and recreational industries. Assessed valuation (AV)
declined an aggregate 5% in fiscals 2010 and 2011, but shows strong
growth prospects due to recent major investments in wind farms within
the district and the proposed expansion of the district's boundaries.
Management reports that revenues from the district's share of the 1%
countywide property tax increased by 20% in 2012 due to AV growth and
estimates that the proposed expansion of the district's boundaries would
provide a further 20% AV increase if approved.
Employment statistics for the hospital district are not available. For
the Redding MSA and Shasta County as a whole, unemployment levels have
historically exceeded state and national averages and this gap increased
during the recent downturn. Employment levels have shown recent
improvement with 14 consecutive months of year-over-year gains, but
unemployment rates remain elevated at 11.5% as of October 2012.
Statistics for Redding, the county seat and the regional population
center (though not in the district) show population and income levels at
roughly 75%-85% of state and national levels respectively. Given the
rural character of the hospital district, income and wealth levels are
likely to be even lower than for Redding.
WEAK BUT IMPROVING FINANCIAL PERFORMANCE
The district operates a 121-bed health facility with 22 acute and 99
skilled nursing beds. As a federally-designated critical access
hospital, the district receives Medicare payments based on the actual
cost of services, helping to stabilize its operations and finances. The
next closest hospital is 70 miles away, and approximately 65% of service
area residents receive their medical care at Mayers Memorial Hospital.
Following several years of deteriorating financial performance, the
district has seen improved operating over the past two years and
recorded a small operating surplus in 2011. Investments in service
improvements and staff retention contributed to a small operating
deficit in 2012, but net assets continued to show positive results.
Liquidity has improved significantly over the past two years but remains
weak at 22.6 days cash on hand (unaudited) at the end of fiscal 2012.
GROWING DEBT BURDEN
Overall debt levels are currently moderate at $1,548 per capita and 2.8%
of AV, but could more than double with the planned issuance of $9
million in remaining GO bond authorization and more than $20 million in
new non-GO debt. The new money issuances would support the district's
efforts to meet state mandates for seismic strengthening of acute care
facilities prior to a 2020 deadline. The district has no pension or
other post-employment benefit liabilities.
Additional information is available at 'www.fitchratings.com'.
The ratings above were solicited by, or on behalf of, the issuer, and
therefore, Fitch has been compensated for the provision of the ratings.
In addition to the sources of information identified in Fitch's
Tax-Supported Rating Criteria, this action was additionally informed by
information from Creditscope and IHS (News - Alert) Global Insights.
Applicable Criteria and Related Research:
--'Tax-Supported Rating Criteria' (Aug. 14, 2012);
--'U.S. Local Government Tax-Supported Rating Criteria' (Aug. 14, 2012).
Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
U.S. Local Government Tax-Supported Rating Criteria
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