MINUTES

STATE OF NORTH CAROLINA BOARD OF COMMISSIONERS

COUNTY OF HENDERSON JUNE 14, 2001

The Henderson County Board of Commissioners met for a special called meeting at 3:00 p.m. in the Commissioners= Conference Room of the Henderson County Office Building at 100 North King Street, Hendersonville, North Carolina.

Those present were: Chairman Bill Moyer, Vice-Chair Marilyn Gordon, Commissioner Grady Hawkins, Commissioner Don Ward, Commissioner Charlie Messer, County Attorney Angela S. Beeker, and Clerk to the Board Elizabeth W. Corn.

Also present were: Assistant County Attorney Jennifer O. Jackson and Finance Director J. Carey McLelland.

Also present from Pardee Hospital were: George Jones, James Maher, Bill Dunn, Betty Strickland, John Bell, John Hester, Robert P. Goodwin, Jack Swanson, Gary Jones, and Charles Albers.

Absent was: County Manager David E. Nicholson.

CALL TO ORDER/WELCOME

Chairman Moyer called the meeting to order and welcomed those in attendance, stating that the purpose of the meeting was a joint meeting with the Hospital Board of Directors to discuss terms of the Hospital Lease and the issuance of Revenue Bonds. Chairman Moyer stated that the Board of Commissioners needed to add a closed session to the end of the agenda and also add a discussion item on the Trolley Project to the agenda. Chairman Moyer made the motion to approve the adjusted agenda. All voted in favor and the motion carried.

Hospital Revenue Bonds

Bill Dunn, Chairman of the Hospital Board, thanked the Commissioners for holding this special meeting today. The original proposal they had was for $10 million for 15 years. They have since modified that request to $15 million for 20 years. They gave their annual report in February to the Commissioners and mentioned that they were thinking about increasing the amount to $15 million for 20 years. They were present today to request the Board=s approval to proceed.

They plan to utilize these funds for three projects: medical office building, parking deck and the emergency room and that is essentially in order of the completion. The medical office building is scheduled to be completed next month, the parking deck is scheduled to be complete about September of this year, and the emergency room is scheduled to start upon the completion of the parking deck and be completed by the end of next year, 2002.

The construction costs will come from:

Revenue bonds $15,000,000.00

Hospital reserves 4,260,000.00

Contributions 3,400,000.00

Total = $22,660,000.00

Mr. Dunn explained that revenue bonds are secured by the revenue of the hospital, no property of the hospital will be placed as collateral for the bonds. The source of repayment is the revenue proceeds of the hospital. The bonds will be backed by a letter of credit from BB&T.

Allen Scarsbrick, Vice-President of the Public Finance area of BB&T, discussed the difference between a fixed rate issue and a variable rate issue. This will be a variable rate issue and he reviewed the advantages to Pardee of that. Pardee can fix a portion of this if they wish.

Mr. Dunn requested the Board of Commissioners approve a resolution approving the $15 million in revenue bonds.

Steve Pennock stated that these are estimated costs.

Chairman Moyer made the motion to adopt the amended reimbursement resolution with the change Anot to exceed $15.3 million@. All voted in favor and the motion carried.

Hospital Lease Issues

1. Extension of Lease

Bill Dunn explained that as a result of the bond issuance, the issue of extension of the lease has come up. The lease between the Hospital and Henderson County was done in 1998 for 15 years. We are three years into that lease. The lease needs to be for at least as long (if not exceed) the term of the bonds. The Hospital requested that the lease be extended at least 50 years or longer.

2. Investment Policy

Bill Dunn stated that the hospital needs to modify the investment policy of the Hospital for a couple of different primary reasons. The main reason is to enhance the returns. He referred to Pardee Hospital=s capital reserve and the employee pension fund. He stated that David Young and Michael Drake from Young Drake Associates were present in the meeting. David Young came forward and addressed the issue of investments the hospital is allowed to participate in as well as portfolios, equities, stocks, risks, liabilities, etc. About a year ago his firm came in to evaluate the hospital=s investments and where they might go in the future. They have offered recommendations as to how the Hospital can approve their investments. They proposed that Pardee move forward with their pension fund monies immediately to allow more of a 50%/50% stock/bond ratio with the flexibility of going as high as 65% stocks 35% bonds and on the Board designated fund they recommended a target of 50% stocks/50% bonds.

Commissioner Hawkins mentioned the limitations and Commissioner Ward mentioned safeguards.

Bill Dunn stated that they have had a situation where they were underfunded in their pension fund. The monies had to come out of the Hospital=s capital reserves and earnings. They want to avoid having underfunding in the future and asked for a change to the Articles of Incorporation to be in agreement with the Lease.

Mr. Dunn referred to the letter from Pardee Hospital (himself) to Chairman Moyer, dated March 30, 2001, where he asked for the Board=s suggestions and, hopefully, their approval of the following suggestions:

Articles of Incorporation

1) The registered office and register agent of the corporation should be changed to the administrative offices of the hospital and an individual within the hospital who can quickly react to civil process and other legal notice. (Article VI) It is currently listed as David Nicholson.

2) The limitations on the authority of the hospital should be loosened to allow the hospital to invest in securities and other investments as authorized by law. (Article VIII) The language contained in paragraph 2.10 of the Lease Agreement may suffice.

3) Some thought should be given to enabling the corporation to hold title to real property (Article VIII)

Lease Agreement

1) The definition of APermitted Liens@ should be modified to clearly allow the hospital to pledge its revenues to secure a bond issue which is duly approved by the Local Government Commission. (Article I)

2) The corporation should be able to create and jointly own a limited liability company or for-profit corporation in association with another entity or entities. (Section 2.9)

3) The language with regard to investments may be sufficient to provide the corporation with the needed authority. This language does need a hard look once a standard has been accepted for the corporation=s investments. (Section 2.10)

4) The ability of the corporation to freely joint venture should be granted. The language contained in the Lease Agreement should be rewritten to reduce the administrative requirements and simply allow the corporation to enter into joint venture as allowed by applicable law and within the financial limitations imposed by Section 2.12 of the Lease. (Section 2.11)

5) The lease term must be extended. The length of this term will, obviously, affect the proposed bond issue. Generally, this Board should have a longer look into the future when making critical decisions, and parties dealing with the Board should know that they are dealing with the entity with authority to make long-term commitments. Additionally, the Board has a concern about the reasonable expectations of donors, both past and current, who have made or pledged gifts to the hospital or the Foundation for the benefit of the hospital. The Board would ask that the commissioners consider a term that is long enough to enable the hospital to assure donors that the use of the hospital=s facilities will remain basically the same during their lifetime. We consider this to be a minimum of fifty (50) years and would prefer a longer term if the commissioners would be willing to grant such (Section 3.2)

6) The limitations on subleasing should be modified to, at least, permit the corporation to sublease portions of the facility to wholly-owned subsidiaries without limitation. (Section 6.2)

Chairman Moyer thanked the Hospital Board and Staff for their presentation and for their attendance today but stated that the Board of Commissioners needed to have some discussion on some of these items before taking action. Chairman Moyer asked for a more specific list of items the Hospital Board wished the Board of Commissioners to change, a, b, c. or whatever. The Board is receptive to seeing what the Hospital needs or wants.

Bill Dunn stated that they would be glad to modify their request in the form of a more specific request. The more immediate need is the lease term extension.

Commissioner Hawkins stated the need for another future joint meeting of both Boards to address some of these issues.

Chairman Moyer stated that the Lease Extension will be placed on the Board of Commissioners= next regularly scheduled meeting agenda, for June 20, 2001 for action and the Board will await specifics on the other items from Pardee.

Bill Dunn stated that in light of that, they would probably wait and see what Bond Council recommends.

TROLLEY ISSUE

Chairman Moyer stated that in light of the June 13 letter he had received from David White, he felt the Board should revisit the issue. The issue as presented to him was that there is money which is not county money, NC DOT money which they could apply to this project and the State has apparently authorized the use of $13,000 of the money which would otherwise go back to the State. It is not county money. It will definitely go back to the State if it is not used for this project.

Prior correspondence talked about the Citizens for Transportation Planning running the project but the most recent letters talked about the Alternative Transportation Committee (ATC) would overseeing the project in conjunction with Apple Country Transportation.

Following much discussion, Chairman Moyer made the motion to allow the use of the $13,000 of State money for the trial period of the trolley, with no promise of continued funding next year. He then added that he thought the Board should state for the record that they hoped that it would be oriented towards the elderly and the working people. A vote was taken and the motion carried four to one with Commissioner Hawkins voting nay.

The Transportation Advisory Committee has not discussed the Trolley Issue at all.

CLOSED SESSION

Chairman Moyer made the motion for the Board to go into closed session as allowed pursuant to NCGS 143-318.11 for the following reasons:

1. (a)(3) To consult with an attorney employed or retained by the public body in order to preserve the attorney-client privilege between the attorney and the public body, which privilege is hereby acknowledged.

All voted in favor and the motion carried.

Chairman Moyer made the motion for the Board to go out of closed session. All voted in favor and the motion carried.

ADJOURN

Commissioner Hawkins made the motion to adjourn the meeting at 4:58 p.m. All voted in favor and the motion carried.

Attest:

Elizabeth W. Corn, Clerk to the Board William L. Moyer, Chairman