A health care district in Alameda County issued $125 million in bonds to reinforce its hospitals against natural disasters.
The bonds, sold by Washington Township Health Care District, mature between 2034 and 2053, yielding between 3.62% and 4.7%. They received a rating of A2 from Moody’s Investors Service. Simultaneously, Moody’s downgraded the district’s issuer rating and revised its outlook from stable to negative.
The downgrade reflects “expectations of still modest financial performance in fiscal 2024,” and an increase in debt “that will result in suppressed days’ cash and cash to debt,” according to Moody’s.
The district will use the bond proceeds to earthquake-proof its flagship hospital. The bonds are intended to “ensure the hospital remains open and accessible to provide life-saving care during a major disaster,” according to the official statement accompanying the sale of the bonds. The securities will also finance the construction of modern operating rooms, and infant intensive care facilities.
Municipalities in the Bay Area have long worried about the threat from earthquakes. In the past 150 years, the area has recorded 22 earthquakes of a strong enough magnitude to cause damage to buildings and other infrastructure. The Association of Bay Area Governments predicts that there is a 72% likelihood of a quake with a magnitude of 6.7 or greater hitting the region in the next 30 years. (For comparison, the earthquake that killed almost 3,000 people in Morocco last weekend had a magnitude of 6.8)
The most deadly Bay Area earthquake occurred in 1906, when a quake with an estimated magnitude of 7.9 killed 700 people. The true toll was likely at least three times higher, according to the U.S. Geological Survey.
The district serves more than 300,000 people across 124 miles of southern Alameda County, which lies between San Jose and Oakland. The bonds are general obligations of the district, payable by Alameda County property taxes.
BofA Securities, Inc served as underwriter on the issuance, purchasing the bonds for more than $127 million. The price reflected an original issue premium of $3 million and discount of $650,000.