Grand Forks is set to help Altru Health System refinance a loan it took out before the COVID-19 pandemic.
City Council members unanimously agreed on Monday to issue up to $50 million worth of bonds on the hospital’s behalf. Their vote was at a Committee of the Whole meeting, which means it is preliminary and that council members are set to consider finalizing the move at their meeting next week. If they do that, the city would be under no financial obligation itself.
The money would help pay for the new hospital building the nonprofit is building on Columbia Road, construction that was paused in April.
Altru took out a short-term loan in November that’s due at the end of next month. Issuing longer-term bonds under the city’s banner means fewer taxes on the new loan and, presumably, a more favorable interest rate for the hospital, which would use the proceeds from the sale of the bonds to refinance the other loan.
“What it does is just extends our cash flow for this $50 million,” Interim Chief Financial Officer Craig Faerber said. “It doesn’t create any risk for the city and it doesn’t cost the city anything. But this would be very helpful with our long-term financing to extend this from a few months, now, to 15 years.”
Faerber did not throw out a figure after council member Bret Weber asked how much money the hospital would save via the city-issued bonds.
The hospital's finances were trending downward before the coronavirus reshaped American life, and the pandemic exacerbated that problem. Altru leaders shut down hospital operations last spring, which, rather than clinic appointments, are a primary source of revenue for the nonprofit.
“There was no choice,” Dr. Steven Weiser, the hospital’s president, told council members. “It wasn’t an easy decision, but it was a necessary decision.”
Altru administrators cut 160-plus staff in June as they scaled back the hospital’s expenses during the pandemic. Approximately $26 million worth of federal aid cut their losses approximately in half, Weiser said, and now it could ultimately turn a positive margin or break even.
“The operational adjustments that we’ve done now put us in the position where there’s a very high likelihood we’re going to end with a positive margin at the end of this year,” he told council members. “Which, in fact, when we look back at what our operational performance was pre-COVID and directly affected by COVID, know where we’re sitting from a financial perspective, that’s pretty incredible.”