|[December 17, 2013]
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) (the 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: Mayers Memorial Hospital has
maintained market share of approximately 38% over the last few years and
the nearest competitor is 70 miles away. Overall community support for
the hospital is strong as demonstrated by the 72% approval for the
November 2010 bond authorization.
ADDITIONAL DEBT PLANS: 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 borrowing
expected in 2014, increasing both GO and non-GO debt burdens further.
CONTINUED FINANCIAL WEAKNESS: The district's financial position remains
pressured, and weakened in fiscal 2013 after modest improvement in 2012.
The hospital benefits from its status as a critical access hospital,
providing favorable Medicare reimbursement, but continues to be
challenged by weak profitability and liquidity.
OPERATING STABILITY: Further deterioration of the district's operating
performance or liquidity could result in downward ratings pressure.
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 and encompasses 8,000 square miles,
an area larger than several states.
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)
declines in 2010 and 2011 were offset by strong growth in 2012, and
annual growth has averaged a healthy 2.5% since 2007. A proposed
expansion of the district's boundaries to better match its service area
has recently been delayed, but could increase AV by up to 20% if
Employment statistics for the hospital district are not available. For
Shasta County as a whole, unemployment levels have historically exceeded
state and ational averages and this gap increased during the recent
downturn. County employment levels have increased on a year-over-year
basis for nine consecutive months, but unemployment rates remain
elevated at 9.6% as of October 2013, and total employment levels are
well below pre-recession peaks. County income levels are also below
average, at roughly 75%-85% of state and national levels respectively.
CONTINUED FINANCIAL WEAKNESS
The district operates a 22-bed acute care hospital and a long-term care
facility with 99 skilled nursing beds. As a federally-designated
critical access hospital, the district receives favorable Medicare
reimbursement including recovery of capital costs, which will greatly
assist its ability to fund its replacement facility. Medicare accounted
for a high 64.9% of revenue in fiscal 2013. The next closest hospital is
70 miles away, and Mayers has maintained market share of approximately
The scope of business operations is small and therefore susceptible to
wide variances in performance especially in the rapidly changing
healthcare environment. Net patient revenue declined in fiscal 2013 to
$17.9 million from $18.8 million the prior year. Liquidity has dropped
substantially as there has been heavy capital spending that totaled $3.6
million in fiscal 2013 and $4 million in fiscal 2012, which was 5-6
times depreciation expense.
INCREASED BORROWING PLANNED
Overall debt levels are currently moderate at $1,548 per capita and 2.8%
of AV, but would more than double with increased borrowing of $30
million expected in 2014. An existing GO authorization would support
approximately $9 million of this amount, with the balance from an
anticipated federal loan. As a critical access hospital, the district
believes it would be eligible for federal reimbursement of approximately
two-thirds of principal and interest on the loan. The new debt would
allow the district 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. Debt service payments and defined contributions towards
employee pensions accounted for a low 7.5% of expenditures in 2012, and
are likely to rise following the district's planned increase in
Additional information is available at 'www.fitchratings.com'.
In addition to the sources of information identified in Fitch's
Tax-Supported Rating Criteria, this action was additionally informed by
information from Creditscope.
Applicable Criteria and Related Research:
--'U.S. Local Government Tax-Supported Rating Criteria' (Aug. 14, 2012).
Applicable Criteria and Related Research:
U.S. Local Government Tax-Supported Rating Criteria
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