$12,045,000 aspen valley hospital district … · sherman & howard l.l.c. also has acted as...
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NEW ISSUE RATING: Moody’s: “Aa2” BOOK-ENTRY ONLY See “RATINGS” BANK QUALIFIED-2010A BONDS
In the opinion of Sherman & Howard L.L.C., Bond Counsel, assuming continuous compliance with certain covenants described herein, interest on the 2010A Bonds is excluded from gross income under federal income tax laws pursuant to Section 103 of the Internal Revenue Code of 1986, as amended to the date of delivery of the 2010A Bonds (the “Tax Code”), interest on the 2010A Bonds is excluded from alternative minimum taxable income as defined in Section 55(b)(2) of the Tax Code, and interest on the 2010A Bonds is excluded from Colorado taxable income and Colorado alternative minimum taxable income under Colorado income tax laws in effect on the date of delivery of the 2010A Bonds as described herein. See “TAX MATTERS – 2010A Bonds.”
In the opinion of Bond Counsel, interest on the 2010B Bonds is included in gross income pursuant to the Tax Code. The owners of the 2010B Bonds will not receive a tax credit as a result of holding the 2010B Bonds. In the opinion of Bond Counsel, assuming continuous compliance with certain covenants described herein, interest on and income from the 2010B Bonds is exempt from all taxation and assessments in the State of Colorado. See “TAX MATTERS—2010B Bonds.”
The District has designated the 2010A Bonds as “qualified tax-exempt obligations” for purposes of Section 265(b)(3) of the Tax Code. See “FINANCIAL INSTITUTION INTEREST DEDUCTION.”
$12,045,000 ASPEN VALLEY HOSPITAL DISTRICT
(PITKIN COUNTY, COLORADO) TAX-EXEMPT GENERAL OBLIGATION BONDS
SERIES 2010A
$37,955,000 ASPEN VALLEY HOSPITAL DISTRICT
(PITKIN COUNTY, COLORADO) TAXABLE GENERAL OBLIGATION BONDS
(DIRECT PAY BUILD AMERICA BONDS) SERIES 2010B
Dated: Date of Delivery Due: December 1, as shown herein
The Aspen Valley Hospital District, Pitkin County, Colorado (the “District”) Tax-Exempt General Obligation Bonds, Series 2010A (the “2010A Bonds”) and Taxable General Obligation Bonds (Direct Pay Build America Bonds), Series 2010B (the “2010B Bonds” and together with the 2010A Bonds, the “Bonds”) are issued as fully registered bonds in denominations of $5,000, or any integral multiple thereof. The Bonds initially will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”), securities depository for the Bonds. Purchases of the Bonds are to be made in book-entry form only. Purchasers will not receive certificates representing their beneficial ownership interest in the Bonds. See “THE BONDS--Book-Entry Only System.” The Bonds bear interest at the rates set forth on the inside cover hereof, payable to the registered owner of the Bonds (initially Cede & Co.) semiannually on June 1 and December 1 of each year, commencing June 1, 2011, to and including the maturity dates shown below, unless the Bonds are redeemed earlier. The principal of the Bonds will be payable upon presentation and surrender at the principal corporate trust office of UMB Bank, n.a., or its successor as the Paying Agent for the Bonds. See “THE BONDS.”
The maturity schedule for each series of the Bonds appears on the inside cover page of this Official Statement.
The 2010A Bonds are not subject to redemption prior to maturity. The 2010B Bonds are subject to redemption prior to maturity at the option of the District, are subject to extraordinary optional redemption, and also are subject to mandatory sinking fund redemption as described herein. See “THE BONDS--Redemption Provisions.”
Proceeds of the Bonds will be used to: (i) finance a portion of the costs of acquiring, improving, constructing, equipping and furnishing hospital facilities and (ii) paying the costs of issuing the Bonds. See “SOURCES AND USES OF FUNDS.”
The Bonds constitute general obligations of the District. All of the taxable property in the District is subject to the levy of an ad valorem tax to pay the principal of, interest, and premium, if any, on the Bonds without limitation as to rate and in an amount sufficient to pay the Bonds when due. See “SECURITY FOR THE BONDS” and “LEGAL MATTERS--Certain Constitutional Limitations.” The Bonds do not and never shall constitute general obligations of the City of Aspen, Colorado or Pitkin County, Colorado.
This cover page contains certain information for quick reference only. It is not a summary of the issue. Investors must read the entire Official Statement to obtain information essential to making an informed investment decision.
The Bonds are offered when, as, and if issued by the District and accepted by the initial purchaser, subject to the approval of legality of the Bonds by Sherman & Howard L.L.C., Denver, Colorado, Bond Counsel, and the satisfaction of certain other conditions. Sherman & Howard L.L.C. also has acted as special counsel to the District in connection with this Official Statement. Certain legal matters will be passed upon for the District by Elaine Gerson, Esq., General Counsel. It is expected that the Bonds will be available for delivery through the facilities of DTC, on or about December 15, 2010.
This Official Statement is dated December 9, 2010.
MATURITY SCHEDULES (CUSIP© 6-digit issuer number: 045333)
$12,045,000 ASPEN VALLEY HOSPITAL DISTRICT
(PITKIN COUNTY, COLORADO) TAX-EXEMPT GENERAL OBLIGATION BONDS
SERIES 2010A
Year (December 1)
Principal Amount
Interest Rate
Yield
CUSIP©
No. Year
(December 1)Principal Amount
Interest Rate
Yield
CUSIP©
No. 2011 $1,950,000 2.00% 0.63% CH2 2015 $850,000 2.00% 1.85% CM1 2012 1,925,000 2.00 0.95 CJ8 2015 1,210,000 4.00 1.85 CQ2 2013 675,000 2.00 1.25 CK5 2016 575,000 3.00 2.10 CN9 2013 1,290,000 3.00 1.25 CP4 2016 1,550,000 4.00 2.10 CR0 2014 2,020,000 2.00 1.57 CL3
$37,955,000 ASPEN VALLEY HOSPITAL DISTRICT
(PITKIN COUNTY, COLORADO) TAXABLE GENERAL OBLIGATION BONDS
(DIRECT PAY BUILD AMERICA BONDS) SERIES 2010B
Year
(December 1) Principal Amount
Interest Rate
Yield
CUSIP©
No. Year
(December 1)Principal Amount
Interest Rate
Yield
CUSIP©
No. 2017 $2,205,000 3.661% 3.661% CY5 2020 $2,380,000 4.373% 4.373% CU3 2018 2,255,000 4.073 4.073 CS8 2021 2,445,000 4.523 4.523 CX7 2019 2,315,000 4.273 4.273 CT6
$10,640,000 5.573% Term 2010B Bonds due December 1, 2025 – Price: 100% - CUSIP No. CV1
$15,715,000 6.049 % Term 2010B Bonds due December 1, 2030 – Price: 100% - CUSIP No. CW9
\ _______________ © Copyright 2010, American Bankers Association. CUSIP data herein is provided by Standard & Poor’s, CUSIP Services Bureau, a division of The McGraw-Hill Companies, Inc.
USE OF INFORMATION IN THIS OFFICIAL STATEMENT This Official Statement, which includes the cover page and the Appendices, does not constitute an offer to sell or
the solicitation of an offer to buy any of the Bonds in any jurisdiction in which it is unlawful to make such offer, solicitation, or sale. No dealer, salesperson, or other person has been authorized to give any information or to make any representations other than those contained in this Official Statement in connection with the offering of the Bonds, and if given or made, such information or representations must not be relied upon as having been authorized by the District or the Underwriter. The District maintains an internet website; however, the information presented there is not a part of this Official Statement and should not be relied upon in making an investment decision with respect to the Bonds.
The information set forth in this Official Statement has been obtained from the District, from the sources referenced throughout this Official Statement and from other sources believed to be reliable. No representation or warranty is made, however, as to the accuracy or completeness of information received from parties other than the District.
The Underwriter has provided the following sentence for inclusion in this Official Statement. The Underwriter has reviewed the information in this Official Statement pursuant to its responsibilities to investors under the federal securities laws, but the Underwriter does not guarantee the accuracy or completeness of such information.
This Official Statement contains, in part, estimates and matters of opinion which are not intended as statements of fact, and no representation or warranty is made as to the correctness of such estimates and opinions, or that they will be realized.
The information, estimates, and expressions of opinion contained in this Official Statement are subject to change without notice, and neither the delivery of this Official Statement nor any sale of the Bonds shall, under any circumstances, create any implication that there has been no change in the affairs of the District, or in the information, estimates, or opinions set forth herein, since the date of this Official Statement.
This Official Statement has been prepared only in connection with the original offering of the Bonds and may not be reproduced or used in whole or in part for any other purpose.
The Bonds have not been registered with the Securities and Exchange Commission due to certain exemptions contained in the Securities Act of 1933, as amended. In making an investment decision investors must rely on their own examination of the District, the Bonds and the terms of the offering, including the merits and risks involved. The Bonds have not been recommended by any federal or state securities commission or regulatory authority, and the foregoing authorities have neither reviewed nor confirmed the accuracy of this document.
THE PRICES AT WHICH THE BONDS ARE OFFERED TO THE PUBLIC BY THE UNDERWRITER (AND THE YIELDS RESULTING THEREFROM) MAY VARY FROM THE INITIAL PUBLIC OFFERING PRICES OR YIELDS APPEARING ON THE INSIDE COVER PAGE HEREOF. IN ADDITION, THE UNDERWRITER MAY ALLOW CONCESSIONS OR DISCOUNTS FROM SUCH INITIAL PUBLIC OFFERING PRICES TO DEALERS AND OTHERS. IN ORDER TO FACILITATE DISTRIBUTION OF THE BONDS, THE UNDERWRITER MAY ENGAGE IN TRANSACTIONS INTENDED TO STABILIZE THE PRICE OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
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ASPEN VALLEY HOSPITAL DISTRICT PITKIN COUNTY, COLORADO
Board Of Directors John Sarpa, President
Barry Mink, M.D., Vice President Chuck Frias, Treasurer
Melinda Nagle, M.D., Director Lee Schumacher, Director
Administrative Officials
David Ressler, Chief Executive Officer Terry Collins, Chief Financial Officer
Elaine Gerson, Internal Legal Counsel
Nell Strijbos-Arthur – Secretary to the Board of Directors
Bond and Special Counsel
Sherman & Howard L.L.C.
Denver, Colorado
Registrar and Paying Agent
UMB Bank, n.a. Denver, Colorado
UNDERWRITER
RBC Capital Markets, LLC Denver, Colorado
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TABLE OF CONTENTS
PAGE INTRODUCTORY STATEMENT .................................................................................................1
General .........................................................................................................................................1 The District ..................................................................................................................................1 Security ........................................................................................................................................2 Purpose of the Bonds ...................................................................................................................3 The Bonds; Redemption Provisions.............................................................................................3 Taxable Build America Bonds.....................................................................................................3 Authority for Issuance..................................................................................................................4 Professionals ................................................................................................................................4 Tax Status of Interest on Bonds ...................................................................................................4 Continuing Disclosure Information Concerning the District.......................................................5 Certain Risks................................................................................................................................5 Additional Information ................................................................................................................6
SOURCES AND USES OF FUNDS...............................................................................................7 Sources and Uses of Funds ..........................................................................................................7 The Project ...................................................................................................................................7
THE BONDS ...................................................................................................................................8 General .........................................................................................................................................8 Designation of the 2010B Bonds as “Build America Bonds” .....................................................8 Payment Provisions......................................................................................................................8 Redemption Provisions ................................................................................................................9 Tax Covenants ...........................................................................................................................12 Defeasance .................................................................................................................................13 Bond Resolution Irrepealable ....................................................................................................14 Amendment of Bond Resolution ...............................................................................................14 Book-Entry Only System...........................................................................................................15
SECURITY FOR THE BONDS....................................................................................................16 General Ad Valorem Property Tax Pledge ................................................................................16 Pledge of Revenues; Priority .....................................................................................................17 Limitations on Remedies Available to Owners of Bonds..........................................................17
DEBT SERVICE SCHEDULE......................................................................................................19 THE DISTRICT.............................................................................................................................20
General .......................................................................................................................................20 Inclusion, Exclusion, Consolidation and Dissolution ................................................................20 District Powers...........................................................................................................................21 Governing Board........................................................................................................................22 Conflicts of Interest....................................................................................................................22 Administration ...........................................................................................................................23 Employees and Benefits.............................................................................................................23 District Insurance Coverage.......................................................................................................24 Existing Facilities.......................................................................................................................24
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Future Capital Expenditures ......................................................................................................25 Services Provided.......................................................................................................................26 Medical Staff..............................................................................................................................26 Service Area and Competition ...................................................................................................29 Aspen Valley Medical Foundation ............................................................................................29
DISTRICT FINANCIAL INFORMATION..................................................................................31 Sources of District Revenues .....................................................................................................31 Budget Process...........................................................................................................................31 Financial Statements ..................................................................................................................31 History of District Revenues and Expenses...............................................................................32 Budget Summary and Comparison ............................................................................................34 Management’s Discussion and Analysis of Recent Financial and Operational Performance ...35
PROPERTY TAXATION, ASSESSED VALUATION AND OVERLAPPING DEBT .............36 Ad Valorem Property Taxes ......................................................................................................36 Ad Valorem Property Tax Data .................................................................................................41 Mill Levies Affecting Property Owners Within the District .....................................................42 Estimated Overlapping General Obligation Debt ......................................................................43
DISTRICT DEBT STRUCTURE..................................................................................................45 Required Elections .....................................................................................................................45 General Obligation Debt ............................................................................................................45 Revenue and Other Financial Obligations .................................................................................45 Selected Debt Ratios ..................................................................................................................47
ECONOMIC AND DEMOGRAPHIC INFORMATION .............................................................48 Population and Age Distribution ...............................................................................................48 Income........................................................................................................................................49 Employment...............................................................................................................................50 Major Employers .......................................................................................................................52 Retail Sales.................................................................................................................................53 Building Permit Activity............................................................................................................53 Foreclosure Activity...................................................................................................................54 Recreation and Tourism.............................................................................................................55
TAX MATTERS............................................................................................................................58 2010A Bonds .............................................................................................................................58 2010B Bonds..............................................................................................................................59
FINANCIAL INSTITUTION INTEREST DEDUCTION............................................................61 LEGAL MATTERS.......................................................................................................................62
No Litigation..............................................................................................................................62 Sovereign Immunity...................................................................................................................62 Approval of Certain Legal Proceedings.....................................................................................63 Certain Constitutional Limitations.............................................................................................63 Police Power ..............................................................................................................................64
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RATING ........................................................................................................................................64 INDEPENDENT AUDITORS.......................................................................................................65 UNDERWRITING ........................................................................................................................65 OFFICIAL STATEMENT CERTIFICATION..............................................................................65 APPENDIX A - Audited Basic Financial Statements for the years ended December 31, 2009
and 2008........................................................................................................ A-1 APPENDIX B - Book-Entry Only System...............................................................................B-1
APPENDIX C - Form of Continuing Disclosure Certificate....................................................C-1 APPENDIX D - Form of Opinion of Bond Counsel ............................................................... D-1
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INDEX OF TABLES
NOTE: Tables marked with an (*) indicate Annual Financial Information to be updated pursuant to SEC Rule 15c2-12, as amended. See Appendix C.
Table Page
Sources and Uses of Funds ............................................................................................................. 7 Debt Service Requirements........................................................................................................... 19 Active, Provisional, Consulting, Affiliate and Honorary Medical Staff Profile June 30, 2010 ... 27 Active, Provisional, Consulting and Emeritus Medical Staff Profile June 30, 2010.................... 28 Top 20 Physicians Rated by Discharge Volume (Year Ended December 31, 2009) ................... 29 *Statement of Revenues, Expenses and Changes in Net Assets for 2005-2009........................... 33 *General Fund Budget Summary and Comparison (1)(2)............................................................ 34 *History of Assessed Valuations and Mill Levies for the District ............................................... 41 *Property Tax Collections in the District ..................................................................................... 41 *2010 Assessed Valuation of Classes of Property in the District................................................. 42 *Ten Largest Taxpayers in the District for 2010 .......................................................................... 42 Sample Mill Levies Affecting Property Owners Within the District - 2009 ................................ 43 Estimated Overlapping General Obligation Indebtedness............................................................ 44 Selected Debt Ratios of the District as of the Date of the Issuance of the Bonds ........................ 47 Population ..................................................................................................................................... 48 Age Distribution............................................................................................................................ 49 Annual Per Capita Personal Income ............................................................................................. 49 Median Household Effective Buying Income............................................................................... 50 Percent of Households by Effective Buying Income Group - 2010 ............................................. 50 Labor Force and Employment ...................................................................................................... 51 Average Number of Employees Within Selected Industries – Pitkin County.............................. 52 Selected Major Employers in the City of Aspen .......................................................................... 53 Retail Sales (in thousands)............................................................................................................ 53 Building Permit Issuances in the City of Aspen ........................................................................... 54 Building Permits Issued in Pitkin County..................................................................................... 54 History of Foreclosures - Pitkin County ....................................................................................... 55 Historical Skier Visits ................................................................................................................... 56 Mountain Statistics – Aspen/Snowmass ....................................................................................... 57
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OFFICIAL STATEMENT
$12,045,000
ASPEN VALLEY HOSPITAL DISTRICT (PITKIN COUNTY, COLORADO)
TAX-EXEMPT GENERAL OBLIGATION BONDS SERIES 2010A
$37,955,000
ASPEN VALLEY HOSPITAL DISTRICT (PITKIN COUNTY, COLORADO)
TAXABLE GENERAL OBLIGATION BONDS (DIRECT PAY BUILD AMERICA BONDS)
SERIES 2010B
INTRODUCTORY STATEMENT
General
This Official Statement, including the cover page and appendices, is furnished by the Aspen Valley Hospital District, Pitkin County, Colorado (the “District”), a quasi-municipal corporation and political subdivision of the State of Colorado (the “State”), to provide information about the District and its $50,000,000 General Obligation Bonds, Series 2010, consisting of $12,045,000 Tax-Exempt General Obligation Bonds, Series 2010A (the “2010A Bonds”) and $37,955,000 Taxable General Obligation Bonds (Direct Pay Build America Bonds), Series 2010B (the “2010B Bonds” and, together with the 2010A Bonds, the “Bonds”). The Bonds will be issued pursuant to a resolution adopted by the Board of Directors of the District (the “Board”) prior to the issuance of the Bonds (the “Bond Resolution”).
The offering of the Bonds is made only by way of this Official Statement, which supersedes any other information or materials used in connection with the offer or sale of the Bonds. The following introductory material is only a brief description of and is qualified by the more complete information contained throughout this Official Statement. A full review should be made of the entire Official Statement and the documents summarized or described herein. Detachment or other use of this “INTRODUCTION” without the entire Official Statement, including the cover page and appendices, is unauthorized.
The District
Aspen Valley Hospital District (the “District”), located in the City of Aspen (the “City”) and Pitkin County, Colorado (the “County”) has been in existence under various governance since 1890. The District was formed and approved by the Board of County Commissioners of the County on August 5, 1974. On January 1, 1977, the District assumed the operations of Aspen Valley Hospital. The District is a quasi-municipal corporation and political subdivision of the State of Colorado organized pursuant to the laws of the State, particularly Article 1 of Title 32, Colorado Revised Statutes, as amended, and presently owns and operates an
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acute care hospital which is known as Aspen Valley Hospital (the “Hospital Facility” or “Hospital Facilities”), located in the City. The Hospital Facility was constructed in 1977 and was originally licensed to accommodate 49 beds. The Hospital Facility as presently configured has 25 licensed beds. The geographic boundaries of the District include substantially all residential and commercial property in Pitkin County, including, the City, the Town of Snowmass Village, Woody Creek, Old Snowmass and parts of the Town of Basalt. The geographic boundaries of the District define the real property in Pitkin County which is subject to ad valorem taxation by the District and which residents and property owners within Pitkin County are allowed to participate in District elections. The geographic boundaries of the District do not define its service area. The District’s current population is estimated to be approximately 14,384. The District’s 2010 preliminary certified assessed valuation is $3,649,568,110 (subject to change on or before December 10, 2010). See “THE DISTRICT.”
Security
General. The Bonds constitute general obligations of the District. All of the taxable property in the District is subject to the levy of an ad valorem tax to pay the principal of and interest on the Bonds without limitation as to rate and in an amount sufficient to pay the Bonds when due, subject to the limitations contained in the authorizing question adopted at an election held on November 2, 2010 (the “Election”). The District will covenant in the Bond Resolution to levy such taxes in an amount which, together with other legally available funds of the District, if any, is sufficient to pay debt service on the Bonds. See “SECURITY FOR THE BONDS” and “LEGAL MATTERS--Certain Constitutional Limitations.”
Election. At the Election, the electors of the District approved the issuance of general obligation bonds in an amount not to exceed $50,000,000 with a total repayment cost not to exceed $86,850,000 and a maximum annual repayment cost not to exceed $4,363,000. The electors also approved increased ad valorem property taxes to pay debt service on such bonds, provided that the annual amount of such taxes cannot exceed $4,363,000. The District may not exceed these limitations for any reason. See “SECURITY FOR THE BONDS” and “LEGAL MATTERS--Certain Constitutional Limitations.”
Additional Bonds. After issuance of the Bonds, the District will have outstanding $50,000,000 in general obligation debt, consisting of the Bonds. After issuance of the Bonds, the District will have no remaining voter authorization from the Election. However, the District may seek voter authorization to issue additional general obligation bonds at any time in compliance with existing law.
In addition to the Bonds, the District has two series of revenue bonds outstanding, which bonds are payable solely from hospital revenues. In 2003, the District issued its Aspen Valley Hospital District Variable Rate Demand Revenue Bonds, Series 2003 (the “Series 2003 Bonds”) and in 2007, the District issued its Aspen Valley Hospital District Refunding Revenue Bonds, Series 2007 (the “Series 2007 Bonds”), which were issued on a parity with the Series 2003 Bonds. The District’s revenue bonds are payable solely from the “net revenues” of the District and are not payable from general ad valorem property taxes imposed for the payment of the Bonds. See “DISTRICT DEBT STRUCTURE--Revenue and Other Financial Obligations.”
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Purpose of the Bonds
The proceeds of the Bonds will be used (i) finance the acquisition, improvement, construction, equipping and furnishing of certain improvements to the Hospital Facility (the “Project”), and (ii) to pay the costs of issuance of the Bonds. See “SOURCES AND USES OF FUNDS.”
The Bonds; Redemption Provisions
The Bonds are issued solely as fully registered certificates in the denomination of $5,000, or any integral multiple thereof. The Bonds initially will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”), the securities depository for the Bonds. Purchases of the Bonds are to be made in book-entry form only. Purchasers will not receive certificates representing their beneficial ownership interest in the Bonds. See “THE BONDS--Book-Entry Only System.” The Bonds mature and bear interest (calculated based on a 360-day year consisting of twelve 30-day months) as set forth on the inside cover page of this Official Statement. The payment of principal and interest on the Bonds is described in “THE BONDS--Payment Provisions.”
The 2010A Bonds are not subject to redemption prior to maturity. The 2010B Bonds are subject to redemption prior to maturity at the option of the District, are subject to mandatory sinking fund redemption, and are also subject to extraordinary optional redemption. See “THE BONDS--Redemption Provisions.”
Taxable Build America Bonds
The 2010B Bonds are expected to be issued as Direct Pay Build America Bonds. See “THE BONDS--Tax Covenants.” Accordingly, the District expects to receive revenue from the United States Treasury related to the interest payable on the 2010B Bonds.
Build America Bonds Generally. In February 2009, as part of the American Recovery and Reinvestment Act of 2009 (the “Recovery Act”), Congress added Sections 54AA and 6431 to the Tax Code, which permit state or local governments to obtain certain tax advantages when issuing taxable obligations that meet certain requirements of the Tax Code and the related Treasury regulations. Such bonds are referred to as “Build America Bonds.” A Build America Bond is a qualified bond under Section 54AA(g) of the Tax Code (a “Qualified Build America Bond”) if it meets certain requirements of the Tax Code and the related Treasury Regulations and the issuer has made an irrevocable election to have the special rule for qualified bonds apply. Interest on Qualified Build America Bonds is included in gross income for federal income tax purposes, and owners of Qualified Build America Bonds will not receive any tax credits as a result of ownership of such Qualified Build America Bonds when an issuer has elected to receive the BAB Credit, as defined in “THE BONDS--Designation of the 2010B Bonds as Build America Bonds.”
The 2010B Bonds as Qualified Build America Bonds. In the Bond Resolution, the District has made an irrevocable election to treat the 2010B Bonds as Qualified Build America Bonds. As a result of this election, interest on the 2010B Bonds will be includable in gross income of the holders thereof for federal income tax purposes and the holders of the 2010B
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Bonds will not be entitled to any tax credits as a result of either ownership of the 2010B Bonds or receipt of any interest payments on the 2010B Bonds. See “TAX MATTERS--2010B Bonds.”
Authority for Issuance
The Bonds will be issued pursuant to the Constitution and laws of the State, particularly Title 32, Article 1, Part 1, Colorado Revised Statutes (“C.R.S.”), the Supplemental Public Securities Act (Title 11, Article 57, Part 2, C.R.S.) and the Bond Resolution. The 2010B Bonds also will be issued pursuant to Article 59.7 of Title 11, C.R.S., as amended.
Professionals
Sherman & Howard L.L.C., Denver, Colorado, has acted as Bond Counsel in connection with the execution and delivery of the Bonds and also has acted as special counsel to the District in connection with this Official Statement. The fees of Sherman & Howard L.L.C. will be paid only at closing from the proceeds of the Bonds. Certain legal matters will be passed on for the District by the District’s general counsel, Elaine Gerson, Esq. Grant Thornton LLP, independent certified public accountants, Wichita, Kansas, have audited the District’s basic financial statements which are attached hereto as Appendix A. See “INDEPENDENT AUDITORS.” UMB Bank, n.a., will act as the paying agent and registrar for the Bonds (the “Paying Agent” and “Registrar”). RBC Capital Markets, LLC, will act as the underwriter for the Bonds (the “Underwriter”). See “UNDERWRITING.”
Tax Status of Interest on Bonds
2010A Bonds. In the opinion of Sherman & Howard L.L.C., Bond Counsel, assuming continuous compliance with certain covenants described herein, interest on the 2010A Bonds is excluded from gross income under federal income tax laws pursuant to Section 103 of the Internal Revenue Code of 1986, as amended to the date of delivery of the 2010A Bonds (the “Tax Code”), interest on the 2010A Bonds is excluded from alternative minimum taxable income as defined in Section 55(b)(2) of the Tax Code, and interest on the 2010A Bonds is excluded from Colorado taxable income and Colorado alternative minimum taxable income under Colorado income tax laws in effect on the date of delivery of the 2010A Bonds as described herein. See “TAX MATTERS.”
The District has designated the 2010A Bonds as “qualified tax-exempt obligations” for purposes of Section 265(b)(3) of the Tax Code. See “FINANCIAL INSTITUTION INTEREST DEDUCTION.”
2010B Bonds. In the opinion of Sherman & Howard L.L.C., Bond Counsel interest on the 2010B Bonds is included in gross income under current federal income tax laws and the owners of the 2010B Bonds will not receive a tax credit as a result of owning the 2010B Bonds. In the opinion of Bond Counsel, interest on and income from the 2010B Bonds is exempt from all taxation and assessments in the State of Colorado. Bond Counsel’s opinion regarding the status of the 2010B Bonds under Colorado law specifically assumes that the District will comply with the covenants described under the heading “TAX MATTERS” and the failure to comply with these covenants could result in the interest on and income from the 2010B
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Bonds becoming subject to taxation and assessments in the State of Colorado. See “TAX MATTERS.”
Continuing Disclosure Information Concerning the District
The District will execute a continuing disclosure certificate (the “Disclosure Certificate”) at the time of the closing for the Bonds. The Disclosure Certificate will be executed for the benefit of the beneficial owners of the Bonds and the District will covenant in the Bond Resolution to comply with its terms. The Disclosure Certificate will provide that so long as the Bonds remain outstanding, the District will provide the following information to the Municipal Securities Rulemaking Board, acting through its Electronic Municipal Market Access (“EMMA”) system: (i) certain annual financial information and operating data; and (ii) notice of certain material events. The form of the Disclosure Certificate is attached hereto as Appendix C.
The District made similar undertakings when it issued prior revenue obligations. For the past five fiscal years, the District reports that it has complied in a timely fashion with the terms of the Continuing Disclosure Certificate.
Certain Risks
The purchase of the Bonds involves certain investment risks that are discussed throughout this Official Statement. Accordingly, each prospective purchaser of the Bonds should make an independent evaluation of all of the information presented in this Official Statement in order to make an informed investment decision. Certain risks with respect to the payment of debt service on the Bonds are discussed in the sections entitled “SECURITY FOR THE BONDS--General Ad Valorem Property Tax Pledge,” “SECURITY FOR THE BONDS--Limitations on Remedies Available to Owners” and “PROPERTY TAXATION, ASSESSED VALUATION AND OVERLAPPING DEBT--Property Tax Data;” however, the discussion of risks associated with the Bonds is not limited to those sections. Risks associated with the District’s operations also are discussed throughout this Official Statement. Investors must review the entire Official Statement in order to make an informed investment decision.
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Additional Information
This Introduction is only a brief summary of the provisions of the Project, the Bonds and the Bond Resolution and other documents described in this Official Statement; a full review of the entire Official Statement should be made by potential investors. Summary descriptions of the Bonds, the Bond Resolution and other documents described in this Official Statement are qualified by reference to such documents. This Official Statement speaks only as of its date and the information contained herein is subject to change. Additional information is available from the District or the Underwriter as follows:
The District Underwriter Aspen Valley Hospital District RBC Capital Markets, LLC 0401 Castle Creek Road 1200 17th Street, Suite 2150 Aspen, Colorado 81611 Denver, Colorado 80202 Attention: Chief Financial Officer Attention: Terry Casey Telephone: (970) 544-1261 Telephone: (303) 595-1204
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SOURCES AND USES OF FUNDS
Sources and Uses of Funds
The proceeds from the sale of the Bonds are expected to be applied as shown in the following table.
Sources and Uses of Funds
Sources 2010A Bonds 2010B Bonds Par amount of Bonds....................................................... $12,045,000.00 $37,955,000.00 Plus: Net reoffering premium ........................................ 499,826.55 0.00 Less: Net original issue discount ................................... $12,544,826.55 $37,955,000.00
Total Uses The Project ...................................................................... $12,442,025.12 $37,631,062.43 Costs of issuance (including underwriting discount) ...... 102,801.43 323,937.57
Total............................................................................ $12,544,826.55 37,955,000.00 Source: The Underwriter. The Project
A portion of the proceeds of the Bonds will be utilized to acquire, improve, construct, equip and furnish Hospital Facilities as approved by the voters of the District at the Election (the “Project”). Such improvements include, but are not limited to, (i) modernizing and expanding the Hospital Facilities to meet contemporary standards for treatment and technology, (ii) enhancing the quality, safety and privacy of patient care; and (iii) rightsizing and reconfiguring of Hospital Facilities to meet the present and future healthcare needs of the community.
On July 12, 2010, the City of Aspen approved the District’s Master Facility Plan Phase II Expansion and Renovation Project. The start date of construction of the Project is expected to be on or about December 1, 2010, with an estimated 28 month construction period. The estimated cost of the Project is approximately $75,137,000, with a portion of the Project to be funded with the proceeds of the Bonds and the remainder with District funds or private contributions. Specifically, the Project is expected to: expand the Hospital Facility by 62,200 square feet, while also renovating another 26,330 square feet, create an additional 15,500 square feet in employee housing units to provide an additional 18 units and to create a new three level parking garage providing 235 parking spaces. Finally, the scope of Project includes: (i) expansion and renovation of the Patient Care Unit (PCU) to total 27 new patient rooms and the Intensive Care Unit (ICU) to total four beds; (ii) creation of new Cardiac Rehabilitation (Cardiac Rehab) and Physical Therapy (PT) departments, Medical Office Space and cafeteria and kitchen, as well as clinical spaces and gift shop and volunteer areas; and (iii) relocation and expansion of Cardiopulmonary and Same Day Surgery departments, chemo therapy, nuclear medicine and stress test areas, as well as Administration, Finance, Human Resources and mail room. Other
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enhancements include: improved storm drainage, multiple road and transportation improvements and the attainment of a LEED (green energy) rating.
THE BONDS
General
The Bonds will be dated as of their date of delivery and will mature on the dates and in the amounts as set forth on the inside cover page of this Official Statement. The Bonds will be issued as fully registered bonds in denominations of $5,000 or integral multiples thereof and will initially be registered in the name of “Cede & Co.,” as nominee for DTC. Purchases by beneficial owners of the Bonds (“Beneficial Owners”) are to be made in book-entry only form in the principal amount of $5,000 or any integral multiple thereof. Payments to Beneficial Owners are to be made as described below in “Book-Entry Only System.”
Designation of the 2010B Bonds as “Build America Bonds”
The District intends to designate the 2010B Bonds as Build America Bonds for purposes of the federal Recovery Act and to receive BAB Credit payments (defined in the Bond Resolution as the credit provided in Section 6431 of the Tax Code in lieu of any credit otherwise available to the owners of the 2010B Bonds under Section 54AA(a) of the Code) from the United States Treasury equal to 35% of the interest payable on the 2010B Bonds. See “TAX MATTERS--2010B Bonds.” Under current State law, BAB Credits may be used by the District for any lawful purpose for which the District may spend money. The BAB Credits are not pledged to pay debt service on the Bonds or any other District bonds. See “SECURITY FOR THE BONDS” for a description of the security and sources of payment of the Bonds.
Payment Provisions
Interest on the Bonds (calculated based on a 360-day year consisting of twelve 30-day months) is payable semiannually on June 1 and December 1, commencing June 1, 2011. The principal of and premium, if any, on any Bond shall be payable to the registered owner thereof as shown on the registration records kept by the Registrar, upon maturity or prior redemption of the Bonds and upon presentation and surrender at the principal office of the Paying Agent. If any Bond shall not be paid upon such presentation and surrender at maturity, it shall continue to draw interest at the same interest rate borne by said Bond until the principal thereof is paid in full. Payment of interest on any Bond shall be made to the registered owner thereof by the Paying Agent, on or before each interest payment date (or, if such interest payment date is not a Business Day, on or before the next succeeding Business Day), to the registered owner thereof at his or her address as it last appears on the registration books kept by the Registrar on the fifteenth day (whether or not a business day) of the calendar month immediately preceding such interest payment date (the “Record Date”); but any such interest not so timely paid or duly provided for shall cease to be payable to the person who is the registered owner thereof at the close of business on the Record Date and shall be payable to the person who is the registered owner thereof at the close of business on a Special Record Date for the payment of any such defaulted interest. The Special Record Date and the date for payment of defaulted interest shall be fixed by the Registrar whenever moneys become available for payment of the
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defaulted interest. Notice of the Special Record Date and the date for payment of defaulted interest shall be given to the registered owners of the Bonds not less than ten days prior thereto by first-class mail to each such registered owner as shown on the Registrar’s registration books on a date selected by the Registrar. The Paying Agent may make payments of interest on any Bond by such alternative means as may be mutually agreed to between the Owner of such Bond and the Paying Agent. All such payments shall be made in lawful money of the United States of America without deduction for the services of the Paying Agent or Registrar.
Notwithstanding the foregoing, payments of the principal of and interest on the Bonds will be made directly to DTC or its nominee, Cede & Co., by the Paying Agent, so long as DTC or Cede & Co. is the registered owner of the Bonds. Disbursement of such payments to DTC’s Participants is the responsibility of DTC, and disbursements of such payments to the Beneficial Owners is the responsibility of DTC’s Participants and the Indirect Participants, as more fully described herein. See “Book-Entry Only System” below.
Redemption Provisions
No Redemption of the 2010A Bonds. The 2010A Bonds are not subject to redemption prior to maturity.
Optional Redemption - 2010B Bonds. The 2010B Bonds maturing on or before December 1, 2020 are not subject to redemption prior to maturity at the option of the District. The 2010B Bonds maturing on and after December 1, 2021, shall be subject to redemption prior to their respective maturities at the option of the District, in whole or in part, in integral multiples of $5,000, from such maturities as are selected by the District and by lot within a maturity and interest rate (giving proportionate weight to Bonds in denominations larger than $5,000), in such a manner as the District may determine, on December 1, 2020, or on any date thereafter at a redemption price equal to the principal amount so redeemed plus accrued interest to the redemption date without a redemption premium.
Mandatory Sinking Fund Redemption. The 2010B Bonds maturing on December 1, 2025 and December 1, 2030 (the “Term Bonds”), are subject to mandatory sinking fund redemption at a price equal to the principal amount thereof plus accrued interest thereon to the redemption date. Term Bonds subject to mandatory sinking fund redemption shall be selected by lot in such manner as the Registrar shall determine (giving proportionate weight to 2010B Bonds in denominations larger than $5,000).
As and for a sinking fund for the redemption of the 2010B Bonds maturing December 1, 2025, the District will deposit into the Bond Fund (as defined in the Resolution) on or before December 1, 2022 and on or before each December 1 through and including December 1, 2024, a sum, which together with other moneys available in the Bond Fund is sufficient to redeem (after credit as provided in the Resolution) the following principal amounts of the Bonds maturing December 1, 2025:
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Sinking Fund Redemption(December 1)
Principal Amount
2022 $2,520,000 2023 2,610,000 2024 2,705,000
The remaining $2,805,000 of the 2010B Bonds maturing on December 1, 2025,
shall be paid upon presentation and surrender at maturity unless redeemed pursuant to optional redemption prior to maturity.
As and for a sinking fund for the redemption of the 2010B Bonds maturing
December 1, 2030, the District will deposit into the Bond Fund (as defined in the Resolution) on or before December 1, 2026 and on or before each December 1 through and including December 1, 2029, a sum, which together with other moneys available in the Bond Fund is sufficient to redeem (after credit as provided in the Resolution) the following principal amounts of the Bonds maturing December 1, 2030:
Sinking Fund Redemption(December 1)
Principal Amount
2026 $2,905,000 2027 3,020,000 2028 3,140,000 2029 3,260,000
The remaining $3,390,000 of the 2010B Bonds maturing on December 1, 2030,
shall be paid upon presentation and surrender at maturity unless redeemed pursuant to optional redemption prior to maturity.
At its option, to be exercised on or before the sixtieth day next preceding each
sinking fund redemption date, the District may (a) deliver to the Registrar for cancellation Term Bonds subject to mandatory sinking fund redemption on such date in an aggregate principal amount desired or (b) receive a credit in respect of its sinking fund redemption obligation for any Term Bonds subject to mandatory sinking fund redemption on such date, which prior to said date have been redeemed (otherwise than through the operation of the sinking fund) and canceled by the Registrar and not theretofore applied as a credit against any sinking fund redemption obligation. Each Term Bond so delivered or previously redeemed will be credited by the Registrar at the principal amount thereof on the obligation of the District on such sinking fund redemption date and the principal amount of Term Bonds to be redeemed by operation of such sinking fund on such date will be accordingly reduced.
Extraordinary Optional Redemption. The 2010B Bonds are subject to extraordinary redemption prior to their respective maturities, at the option of the District, upon the occurrence of an Extraordinary Event (defined below), as a whole or in part, on any date, at a redemption price equal to the greater of (a) the principal amount thereof plus accrued interest to
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the redemption date on the 2010B Bonds to be redeemed, or (b) the sum of the present value of the remaining scheduled payments of principal and interest to the maturity date of the 2010B Bonds to be redeemed, not including any portion of those payments of interest accrued and unpaid as of the date on which the 2010B Bonds are to be redeemed, discounted to the date on which the 2010B Bonds are to be redeemed on a semiannual basis, assuming a 360-day year consisting of twelve 30-day months, at the “Treasury Rate” plus 100 basis points provided that the redemption price shall not exceed 103%, plus, in each case, accrued and unpaid interest on the 2010B Bonds to be redeemed to the redemption date.
For purposes of the preceding paragraph, “Treasury Rate” means, with respect to any redemption date for a particular 2010B Bond, the yield to maturity as of such redemption date of United State Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) that has become publicly available at least two Business Days prior to the redemption date (excluding inflation-indexed securities) or, if such Statistical Release is no longer published, any publicly available source of similar market data) most nearly equal to the period from the redemption date to the maturity date of the 2010B Bonds to be redeemed; provided, however that if the period from the redemption date to the maturity date is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used.
The Paying Agent shall have the right to retain, at the expense of the District, an independent accounting firm, investment banking firm or financial advisor subject to the District’s approval to determine the redemption price and perform all actions and make all calculations required to determine the redemption price. The Paying Agent and the District may conclusively rely on such accounting firm’s, investment banking firm’s or financial advisor’s calculations in connection with, and determination of, the redemption price, and shall bear no liability for such reliance.
The Bond Resolution defines “Extraordinary Event” as: (i) a material adverse change has occurred to Section 54AA or 6431 of the Code, (ii) there is any guidance published by the Internal Revenue Service or the United States Treasury with respect to such Sections, or (iii) any other determination by the Internal Revenue Service or the United States Treasury, which determination is not the result of a failure of the District to satisfy the requirements of Section 830(B) of the Tax Code, and as a result thereof, the BAB Credit expected to be received with respect to the 2010B Bonds is eliminated or reduced, as reasonably determined by the President, Chief Executive Officer or the Chief Financial Officer, which determination shall be conclusive.
Notice of Redemption. Notice of any redemption shall be given by the Paying Agent in the name of the District by sending a copy of such notice by first-class, postage prepaid mail, not more than 60 days and not less than 30 days prior to the redemption date to the initial purchaser of the Bonds (the “Initial Purchaser” or the “Purchaser”) and to each Registered Owner of any Bond all or a portion of which is called for redemption at his or her address as it last appears on the registration books kept by the Registrar. Failure to give such notice by mailing to the Registered Owner of any Bond or to the Purchaser, or any defect therein, shall not affect the validity of the proceedings for the redemption of any other Bonds. Except as described below, prior to any redemption date, the District shall deposit with the Paying Agent an amount
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of money sufficient to pay the redemption price of all the Bonds or portions of Bonds which are to be redeemed on that date. In addition to the foregoing notice, further notice may be given by the Paying Agent in order to comply with the requirements of any depository holding the Bonds but no defect in said further notice nor any failure to give all or any portion of such further notice shall in any manner defeat the effectiveness of a call for redemption if notice thereof is given as above prescribed.
Official notice of redemption having been given as described above, the Bonds or portions of Bonds so to be redeemed shall, on the redemption date, become due and payable at the redemption price therein specified, and from and after such date (unless the District shall default in the payment of the redemption price) such Bonds or portions of Bonds shall cease to bear interest.
Notwithstanding the foregoing provisions, any notice of optional redemption may contain a statement that the redemption is conditioned upon the receipt by the Paying Agent of funds on or before the date fixed for redemption sufficient to pay the redemption price of the Bonds so called for redemption, and that if such funds are not available, such redemption shall be cancelled by written notice to the Owners of the Bonds called for redemption in the same manner as the original redemption notice was mailed.
Tax Covenants
In the Bond Resolution, the District covenants for the benefit of the registered owners of the 2010A Bonds (the “Owners” or “Registered Owners”) that it will not take any action or omit to take any action with respect to the 2010A Bonds, the proceeds thereof, any other funds of the District or any facilities financed or refinanced with the proceeds of the 2010A Bonds, if such action of omission (i) would cause the interest on the 2010A Bonds to lose its exclusion from gross income for federal income tax purposes under Section 103 of the Tax Code, (ii) would cause interest on the 2010A Bonds to lose its exclusion from alternative minimum taxable income as defined in Section 55(b)(2) of the Tax Code, or (iii) would cause interest on the 2010A Bonds to lose its exclusion from Colorado taxable income and Colorado alternative minimum taxable income under present State law. The foregoing covenant shall remain in full force and effect notwithstanding the payment in full or defeasance of the 2010A Bonds until the date on which all obligations of the District in fulfilling the covenant under the Tax Code have been met.
In the Bond Resolution, the District makes an irrevocable election that Section 54AA of the Tax Code shall apply to the 2010B Bonds and that subsection (g) of Section 54AA will also apply to the 2010B Bonds so that the District will receive the credit provided in Section 6431 of the Tax Code in lieu of any BAB Credit otherwise available to the bondholders of the 2010B Bonds under Section 54AA(a) of the Tax Code. None of the Owners of the 2010B Bonds shall be entitled to any credit under Section 54AA of the Tax Code. The District covenants that it will not take any action or omit to take any action with respect to the 2010B Bonds, the proceeds thereof, any other funds of the District or the Project if such action or omission would cause the District to not be entitled to the BAB Credit. In furtherance of this covenant, the District agrees to comply with the procedures set forth in the Tax Compliance Certificate to be executed with respect to the 2010B Bonds. The foregoing covenant shall remain in full force
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and effect notwithstanding the payment in full or defeasance of the 2010B Bonds until the date on which all obligations of the District in fulfilling the covenant have been met. The District also covenants that it will timely file any document required by the Internal Revenue Service to be filed in order to claim the BAB Credit.
Defeasance
When the Bonds shall be paid in accordance with their terms (or payment of the Bonds has been provided for in the manner described below), then the Bond Resolution and all rights granted thereunder shall thereupon cease, terminate and become void and be discharged and satisfied.
Payment of any Outstanding Bond shall, prior to the maturity or redemption date thereof, be deemed to have been provided for within the meaning and with the effect expressed described in this paragraph if: (a) in case the Bond is to be redeemed on any date prior to its maturity, the District shall have given to the Paying Agent irrevocable instructions to give notice of redemption of such Bond on said redemption date in accordance with the provisions described in “Redemption Provisions - Notice of Redemption” above, (b) there shall have been deposited with the Paying Agent or a commercial bank exercising trust powers either moneys in an amount which shall be sufficient, or Federal Securities (defined below) which shall not contain provisions permitting the redemption thereof at the option of the issuer, the principal of and the interest on which when due, and without any reinvestment thereof, will provide moneys which, together with the moneys, if any, deposited with or held by the Paying Agent or other commercial bank exercising trust powers at the same time, shall be sufficient to pay when due the principal of and interest due and to become due on the Bond on and prior to the redemption date or maturity date thereof, as the case may be, and (c) in the event the Bond is not by its terms subject to redemption within the next sixty days, the District shall have given the Paying Agent irrevocable instructions to give, as soon as practicable in the same manner as the notice of redemption is given pursuant to the Bond Resolution, a notice to the Owner of such Bond that the deposit required by (b) above has been made with the Paying Agent or other a commercial bank exercising trust powers and that payment of the Bond has been provided for as described in this paragraph and stating such maturity or redemption date upon which moneys are to be available for the payment of the principal of and interest of the Bond. Neither such securities nor moneys deposited with the Paying Agent or other commercial bank exercising trust powers as described above or principal or interest payments on any such Federal Securities shall be withdrawn or used for any purpose other than, and shall be held in trust for, the payment of the principal of and interest on the Bond; provided any cash received from such principal or interest payments on such Federal Securities deposited with the Paying Agent or other commercial bank exercising trust power, if not then needed for such purpose, shall, to the extent practicable, be reinvested in securities of the type described in (b) of this paragraph maturing at times and in amounts sufficient to pay when due the principal of and interest to become due on the Bond on or prior to such redemption date or maturity date thereof, as the case may be. At such time as payment of a Bond has been provided for as aforesaid, such Bond shall no longer be secured by or entitled to the benefits of the Bond Resolution, except for the purpose of any payment from such moneys or securities deposited with the Paying Agent or other commercial bank exercising trust powers.
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Upon compliance with the provisions described above with respect to all Bonds then Outstanding, the Bond Resolution may be discharged in accordance with the provisions described above, but the liability of the District in respect of the Bonds shall continue; provided that the Owners thereof shall thereafter be entitled to payment only out of the moneys or Federal Securities deposited with the Paying Agent or other commercial bank exercising trust powers as described above.
The Bond Resolution defines “Federal Securities” to mean only direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States (or ownership interests in any of the foregoing) and which are not callable prior to their scheduled maturities by the issuer thereof.
Bond Resolution Irrepealable
In accordance with Article XI, Section 6 of the Constitution of the State, the Bond Resolution provides that after any of the Bonds are issued, the Bond Resolution shall be and remain irrepealable until the Bonds and the interest accrued thereon shall have been fully paid, satisfied or discharged.
Amendment of Bond Resolution
The District may, without the consent of or notice to the Owners, adopt one or more resolutions supplemental to the Bond Resolution, which supplemental resolutions shall thereafter form a part of the Bond Resolution, for any one or more of the following purposes: (1) to cure any ambiguity, or to cure, correct or supplement any formal defect or omission or inconsistent provision contained in the Bond Resolution, to make any provision necessary or desirable due to a change in law, to make any provisions with respect to matters arising under the Bond Resolution, or to make any provisions for any other purpose if, in each case, such provisions are necessary or desirable and do not adversely affect the interests of the Registered Owners; (2) to pledge additional revenues, properties or collateral as security for the Bonds; (3) to grant or confer upon the Registrar for the benefit of the Registered Owners any additional rights, remedies, powers or authorities that may lawfully be granted to or conferred upon the Registered Owners; (4) to qualify the Bond Resolution under the Trust Indenture Act of 1939; (5) to preserve or protect the excludability from gross income for federal income tax purposes of the interest allocable to the 2010A Bonds; or (6) to maintain the status of the 2010B Bonds as qualified Build America Bonds under Section 54AA of the Tax Code.
Except for amendatory or supplemental resolutions adopted pursuant to the prior paragraph, the Owners of not less than two-thirds (2/3) in aggregate principal amount of the Bonds then Outstanding shall have the right, from time to time, to consent to and approve the adoption by the District of such resolutions amendatory or supplemental hereto as shall be deemed necessary or desirable by the District for the purpose of modifying, altering, amending, adding to, or rescinding, in any particular, any of the terms or provisions contained in the Bond Resolution; provided however, that without the consent of the Owners of all the Bonds affected thereby, nothing herein contained shall permit, or be construed as permitting: (1) a change in the terms of the maturity of any Bond, in the principal amount of any Bond or the rate of interest thereon, the dates of payment of principal and interest, or in the terms of prior redemption of any
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Bond; (2) an impairment of the right of the Owners to institute suit for the enforcement of any payment of the principal of or interest on the Bonds when due; (3) a privilege or priority of any Bond or any interest payment over any other Bond or interest payment; or (4) a reduction in the percentage in principal amount of the Bonds the consent of whose Owners is required for any such amendatory or supplemental resolution.
If, at any time, the District shall desire to adopt an amendatory or supplemental resolution for any of the purposes of the above paragraph, the District shall cause notice of the proposed adoption of such amendatory or supplemental resolution to be given by mailing such notice by certified or registered first-class mail to the Underwriter and to each Owner at the address shown on the registration books of the Registrar, at least thirty days prior to the proposed date of adoption of any such amendatory or supplemental resolution. Such notice shall briefly set forth the nature of the proposed amendatory or supplemental resolution and shall state that copies thereof are on file at the offices of the District or some other suitable location for inspection by all Owners. If, within sixty days or such longer period as shall be prescribed by the District following the giving of such notice, the Owners of not less than the required percentage in aggregate principal amount of the Bonds then outstanding at the time of the execution of any such amendatory or supplemental resolution shall have consented to and approved the execution thereof as herein provided, no Owner shall have any right to object to any of the terms and provisions contained therein, or the operation thereof, or in any manner to question the propriety of the adoption and effectiveness thereof, or to enjoin or restrain the District from adopting the same or from taking any action pursuant to the provisions thereof.
Book-Entry Only System
The Bonds will be available only in book-entry form in the principal amount of $5,000 or any integral multiple thereof. DTC will act as the initial securities depository for the Bonds. The ownership of one fully registered Bond for each maturity in each series, as set forth on the inside cover page of this Official Statement, in the aggregate principal amount of such maturity coming due thereon, will be registered in the name of Cede & Co., as nominee for DTC. See Appendix B - Book-Entry Only System.
SO LONG AS CEDE & CO, AS NOMINEE OF DTC, IS THE REGISTERED OWNER OF THE BONDS, REFERENCES IN THIS OFFICIAL STATEMENT TO THE OWNERS WILL MEAN CEDE & CO. AND WILL NOT MEAN THE BENEFICIAL OWNERS.
None of the District, the Registrar or the Paying Agent will have any responsibility or obligation to DTC’s Direct Participants or Indirect Participants (each as defined in Appendix B), or the persons for whom they act as nominees, with respect to the payments to or the providing of notice for the Direct Participants, the Indirect Participants or the beneficial owners of the Bonds as further described in Appendix B to this Official Statement.
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SECURITY FOR THE BONDS
General Ad Valorem Property Tax Pledge
The Bonds are general obligations of the District payable from ad valorem taxes which may be levied against all taxable property within the District without limitation of rate and in an amount sufficient to pay the Bonds when due. See “INTRODUCTION--Security,” “Limitations on Remedies Available to Owners of Bonds” below and “LEGAL MATTERS--Certain Constitutional Limitations.” The Bonds are not secured by property within the District, but rather by the District’s obligation to certify to the board of county commissioners of the County (the “Commissioners”) a rate of levy sufficient, together with other legally available revenues, to meet the debt service requirements on the Bonds. Such annual levy for debt service creates a statutory tax lien. Neither the State nor the County has any responsibility to pay the debt service on the Bonds.
The District anticipates that the major source of revenues for repayment of the Bonds will be the ad valorem taxes levied against property within the District and collected by the county treasurer (the “County Treasurer”). The District’s ability to retire the indebtedness created by the issuance of the Bonds is dependent, in part, upon the maintenance of an adequate tax base against which the District may levy and collect property tax revenues. The amount of ad valorem property taxes collected will be dependent upon the assessed valuation of property within the District and the rate of levy certified by the Board. See “LEGAL MATTERS--Certain Constitutional Limitations” and “PROPERTY TAXATION, ASSESSED VALUATION AND OVERLAPPING DEBT--Ad Valorem Property Taxes.”
The payment of property taxes does not constitute a personal obligation of the property owners within the District. Instead, these obligations are tied to the properties taxed, and if timely payment is not made, the obligations constitute a lien against the specific properties. The District will not have recourse to any assets of any property owners for the payment of property taxes. To enforce the liens, the County Treasurer has the power to cause the sale of the property that is subject to the delinquent taxes, as provided by law. However, selling property at a tax sale is a time-consuming remedy and proceeds realized from the sale, if any, may not be sufficient to cover the delinquent taxes. Because property taxes do not constitute personal obligations of the owners of taxable property in the District, in the event of a tax sale in which less than the amount of the delinquent taxes is realized, no deficiency judgment could be taken against the property owner who failed to pay taxes.
Foreclosure activity in the County has been increasing in recent years. See “ECONOMIC AND DEMOGRAPHIC INFORMATION--Foreclosure Activity.” It is not possible to predict whether foreclosure rates will continue to rise or whether any increase in foreclosures will cause significant delinquencies in property tax payments and the realization of property tax revenues by the District. Further, the country currently is in the midst of a recession; it is not possible to predict what effect the economic downturn will have on property values, foreclosures or delinquencies in property tax payments. See “PROPERTY TAXATION, ASSESSED VALUATION AND OVERLAPPING DEBT—Ad Valorem Property Tax Data.”
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The remedies available to the owners of the Bonds upon an event of default under the Bond Resolution are in many respects dependent upon judicial actions which are often subject to discretion and delay under existing constitutional and statutory law and judicial decisions, including specifically the United States Bankruptcy Code. The various legal opinions to be delivered concurrently with delivery of the Bonds will be qualified as to enforceability of the various legal instruments by limitations imposed by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting the rights of creditors generally and by equitable principles, whether considered at law or in equity. See “Limitations on Remedies Available to Owners of Bonds” below.
Various State laws and constitutional provisions apply to the assessment and collection of ad valorem property taxes. There is no assurance that there will not be any change in, interpretation of, or addition to the applicable laws, provisions, and regulations which would have a material effect, directly or indirectly, on the affairs of the District. See “PROPERTY TAXATION, ASSESSED VALUATION AND OVERLAPPING DEBT” and “LEGAL MATTERS--Certain Constitutional Limitations.”
Pledge of Revenues; Priority
The creation, perfection, enforcement, and priority of the pledge of revenues to secure or pay the Bonds as provided in the Bond Resolution shall be governed by the Supplemental Act and the Bond Resolution. The revenues pledged for the payment of the Bonds, as received by or otherwise credited to the District, shall immediately be subject to the lien of such pledge without any physical delivery, filing, or further act. The lien of such pledge on the revenues pledged for payment of the Bonds and the obligation to perform the contractual provisions made in the Bond Resolution shall have priority over any or all other obligations and liabilities of the District, except for any general obligation indebtedness of the District currently outstanding or any general obligation indebtedness issued on a parity with the Bonds. The lien of such pledge shall be valid, binding, and enforceable as against all persons having claims of any kind in tort, contract, or otherwise against the District irrespective of whether such persons have notice of such liens.
Limitations on Remedies Available to Owners of Bonds
No Acceleration. There is no provision for acceleration of maturity of the principal of the Bonds in the event of a default in the payment of principal of or interest on the Bonds. Consequently, remedies available to the Owners of the Bonds may have to be enforced from year to year.
Limitations Generally. The enforceability of the rights and remedies of the Owners of the Bonds and the obligations incurred by the District in issuing the Bonds are subject to the federal bankruptcy code and applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or affecting the enforcement of creditors’ rights generally, now or hereafter in effect; usual equity principles which may limit the specific enforcement under State law of certain remedies; the exercise by the United States of America of the powers delegated to it by the federal Constitution; and the reasonable and necessary exercise, in certain exceptional situations, of the police power inherent in the sovereignty of the State and
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its governmental bodies in the interest of serving a significant and legitimate public purpose. Bankruptcy proceedings or the exercise of powers by the federal or State government, if initiated, could subject the Owners of the Bonds to judicial discretion and interpretation of their rights in bankruptcy or otherwise, and consequently may entail risks of delay, limitation or modification of their rights.
Limitations on Debt Service. At the Election, District voters approved the issuance of bonds in an amount not to exceed $50,000,000 with a total repayment cost not to exceed $86,850,000 and a maximum annual repayment cost not to exceed $4,363,000. The voters also approved increased ad valorem property taxes to pay debt service on such bonds, provided that the annual amount of such taxes cannot exceed $4,363,000. The District may not exceed these limitations with respect to the payment of debt service for any reason. See “LEGAL MATTERS--Certain Constitutional Limitations.”
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DEBT SERVICE SCHEDULE
Set forth below are the estimated debt service requirements of the Bonds.
Debt Service Requirements
Calendar The 2010A Bonds The 2010B Bonds Total Year Principal(1) Interest Principal(1) Interest(2) 2010 Bonds
2011 $1,950,000 $302,510 $ -- $1,950,790 $4,203,300 2012 1,925,000 275,750 -- 2,029,724 4,230,474 2013 1,965,000 237,250 -- 2,029,724 4,231,974 2014 2,020,000 185,050 -- 2,029,723 4,234,773 2015 2,060,000 144,650 -- 2,029,723 4,234,373 2016 2,125,000 79,250 -- 2,029,723 4,233,973 2017 -- -- 2,205,000 2,029,723 4,234,723 2018 -- -- 2,255,000 1,948,998 4,203,998 2019 -- -- 2,315,000 1,857,152 4,172,152 2020 -- -- 2,380,000 1,758,232 4,138,232 2021 -- -- 2,445,000 1,654,155 4,099,155 2022 -- -- 2,520,000 1,543,568 4,063,568 2023 -- -- 2,610,000 1,403,128 4,013,128 2024 -- -- 2,705,000 1,257,673 3,962,673 2025 -- -- 2,805,000 1,106,923 3,911,923 2026 -- -- 2,905,000 950,600 3,855,600 2027 -- -- 3,020,000 774,877 3,794,877 2028 -- -- 3,140,000 592,197 3,732,197 2029 -- -- 3,260,000 402,259 3,662,259 2030 -- -- 3,390,000 205,061 3,595,061
TOTAL $12,045,000 $1,224,460 $37,955,000 $29,583,953 $80,808,413 (1) Assumes that no optional redemptions are made prior to maturity. See “THE BONDS--Redemption
Provisions.” (2) With respect to the 2010B Bonds, reflects total interest to be paid on the 2010B Bonds (i.e., the BAB Credit
has not been subtracted from the amounts shown). Source: The Underwriter.
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THE DISTRICT
General
Aspen Valley Hospital has been in existence under various governance since
1890. The Aspen Valley Hospital District was formed and approved by the Pitkin County Board of County Commissioners on August 5, 1974. On January 1, 1977, the District assumed the operations of Aspen Valley Hospital. The District is a quasi-municipal corporation and political subdivision of the State of Colorado organized pursuant to the laws of the State, particularly Article 1 of Title 32, Colorado Revised Statutes, as amended.
The District presently owns and operates an acute care hospital which is known as Aspen Valley Hospital (the “Hospital Facility”) located in Aspen, Colorado. The Hospital Facility was constructed in 1977 and was originally licensed to accommodate 49 beds. The Hospital Facility as presently configured has 25 licensed inpatient beds. Major capital improvements have been made to Hospital Facility since its original construction in 1977.
The District is the majority owner of Midvalley Ambulatory Surgery Center (the “Surgery Center”) and Midvalley Imaging Center (the “Imaging Center”) both located in Basalt, approximately 20 miles north of the Hospital. Both the Surgery Center and the Imaging Center operate in leased space and do not own any real property. The District was formerly the majority owner of Snowmass Clinic Associates (the “Snowmass Clinic”) until January 1, 2010, when the District became the sole owner of Snowmass Clinic. The Snowmass Clinic now operates as an integrated unit of the District.
The District also owns and operates a 15-bed assisted living facility known as Whitcomb Terrace (the “Assisted Living Facility”) and two employee housing projects: a 21-unit employee housing project known as Mountain Oaks and a 25-unit employee housing project known as the Beaumont (the “Employee Housing Facilities”). The Employee Housing Facilities are made available to qualifying employees within Pitkin County, Colorado (the “County”).
The geographic boundaries of the District include substantially all residential and commercial property in Pitkin County, including, the City of Aspen, the Town of Snowmass Village, Woody Creek, Old Snowmass and parts of the Town of Basalt. The geographic boundaries of the District define the real property in Pitkin County which is subject to ad valorem taxation by the District and which residents and property owners within Pitkin County are allowed to participate in District elections. The geographic boundaries of the District do not define its service area. See the following caption entitled “--Service Area and Competition.”
Inclusion, Exclusion, Consolidation and Dissolution
Inclusion of Property. The Special District Act, Title 32 Article 1, C.R.S., pursuant to which the District is organized, provides that the boundaries of a special district may be altered by the inclusion of additional real property under certain circumstances. After its inclusion, the included property is subject to all of the taxes and charges imposed by the special district and shall be liable for its proportionate share of existing bonded indebtedness of the
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special district. The District has never included property, and at the present time, no inclusions are pending or expected.
Exclusion of Property. The Special District Act provides that the boundaries of a special district also may be altered by the exclusion of real property from the District under certain circumstances. After its exclusion, the excluded property is no longer subject to the special district’s operating mill levy, and is not subject to any debt service mill levy for new debt issued by the special district. The excluded property, however, remains subject to the special district’s debt service mill levy for that proportion of the special district’s outstanding indebtedness and the interest thereon existing immediately prior to the effective date of the exclusion order. The District has never excluded any property, and at the present time, no exclusions are pending or expected.
Consolidation With Other Districts. Two or more special districts may consolidate into a single district upon the approval of the District Court and of the electors of each of the consolidating special districts. The District Court order approving the consolidation can provide that the consolidated district assumes the debt of the districts being consolidated. If so, separate voter authorization of the debt assumption is required. If such authorization is not obtained, then the territory of the prior district will continue to be solely obligated for the debt after the consolidation. At the present time, no consolidations with other districts are pending or expected.
Dissolution of the District. The Special District Act allows a special district board of directors to file a dissolution petition with the District Court. The District Court must approve the petition if the special district’s plan for dissolution meets certain requirements, generally regarding the continued provision of services to residents and the payment of outstanding debt. Dissolution must also be approved by the special district’s voters. If the special district has debt outstanding, the district may continue to exist for only the limited purpose of levying its debt service mill levy and discharging the indebtedness. At the present time, no dissolution is expected or planned.
District Powers
The rights, powers, privileges, authorities, functions and duties of the District are established by the laws of the State, particularly the Special District Act, which provides that the Board has certain powers including, but not limited to, the power: to have perpetual existence; to sue and be sued; to enter into contracts and agreements; to incur indebtedness and revenue obligations; to acquire, dispose of, and encumber real and personal property; to have the management, control, and supervision of all the business and affairs of the special district and all construction, installation, operation, and maintenance of special district improvements; to appoint, hire, and retain agents, employees, engineers, and attorneys; to fix and from time to time increase or decrease fees, rates, tolls, penalties or charges for services, programs or facilities furnished by or available from the District, and to pledge such revenue for the payment of any indebtedness of the District; to furnish services and facilities without the boundaries of the special district and to establish fees, rates, tolls, penalties, or charges for such services and facilities; and to have and exercise all rights and powers necessary or incidental to or implied from the specific powers granted to special districts by statute. In addition, the Board has the
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power to establish, maintain, or operate, directly or indirectly through lease to or from other parties or other arrangement, public hospitals, convalescent centers, nursing care facilities, intermediate care facilities, emergency facilities, community clinics, or other facilities providing health and personal care services; to organize, own, operate, control, direct, manage, contract for, or furnish ambulance service; and to contract with or work cooperatively and in conjunction with a health assurance district or other existing health care provider or service to provide health care services to the residents of the District. Upon the approval of the District’s electors, the District may also levy a sales tax within the District; however, the District has not received such approval and does not anticipate seeking such approval in the near future.
Governing Board
The District is governed by a board of directors that consists of five members. In order to be eligible for nomination to the Board, prospective Board members must be eligible electors of the District as defined by State law. Directors are elected to staggered four year terms of office at successive biennial elections. Vacancies on the Board are filled by appointment of the remaining directors, the appointee to serve until the next regular election, at which time the vacancy is filled by election for any remaining unexpired portion of the term. The directors hold regular meetings and, as needed, special meetings. Each director is entitled to one vote on all questions before the Board when a quorum is present. Directors may receive a maximum of $1,600 per year as compensation for service to the District, payable at a rate not in excess of $100 per meeting attended. Directors may not receive compensation from the District as employees of the District, except as provided above. Pursuant to the State constitution, directors are limited to two terms in office unless the District’s voters have approved a waiver or modification of this limit. The voters of the District approved the removal of this limitation at an election in May 2000.
The Board of Directors is empowered under Colorado law to manage, control and supervise the business and affairs of the District and the present members are:
Name Position Occupation Term Expiration John Sarpa President Real Estate May 2014 Chuck Frias Director Real Estate May 2014 Melinda Nagle, M.D. Director Physician May 2012 Barry Mink, M.D. Director Physician May 2012 Lee Schumacher Director Attorney May 2014
Conflicts of Interest
State law requires directors to disqualify themselves from voting on any issue in which they have a conflict of interest unless the applicable director has disclosed the conflict in a certificate filed with the Secretary of State and with the Board at least 72 hours in advance of any meeting of which the conflict may arise.
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Administration
The Board is responsible for the administration of the District. The day to day operations of the District are managed by the Chief Executive Officer and several directors managing different departments.
David Ressler, Chief Executive Officer. Mr. Ressler has been Chief Executive Officer of the Hospital since September, 2004. From 2000 through 2004, he was President and Chief Executive Officer of Sierra Vista Regional Health Center in Sierra Vista, Arizona. Prior to his service at Sierra Vista, he was the Vice President of Business Development for TMC Healthcare in Tucson, Arizona. From 1993 through 1999, Mr. Ressler was Chief Operating Officer at Sierra Vista Community Hospital in Arizona. From 1986 through 1993, he was employed in various executive capacities with health plans located in Utah and Arizona. Mr. Ressler holds a BS in Business Administration from the University of Arizona and an MBA in Healthcare Administration from the University of Phoenix.
Terry Collins, Chief Financial Officer. Mr. Collins has been Chief Financial Officer of the Hospital since December, 2004. From 2000 until 2004, he was Chief Financial Officer of Caregiver Services, Inc. (a venture-capital backed company involved in assisted living services in Tennessee and Florida) headquartered in Nashville, Tennessee. From 1996 until 2000, he served as Vice President of Finance at St. Thomas Health Services in Nashville. From 1992 through 1996, he was Chief Financial Officer at Baptist Memorial Hospital in Memphis, Tennessee. Prior to 1992, Mr. Collins served in executive financial positions with St. Luke’s Episcopal Hospital in Houston and with Intermountain Healthcare in Salt Lake City. He holds a BA in accounting and an MBA in finance from the University of Utah.
Employees and Benefits
The District currently employs 275 full-time personnel, including a complete staff of administrative, technical, nursing and support personnel. The Districtdoes not anticipate severe shortages in any areas in the near future.
Management deems its relationship with employees to be very good. The employees are not organized or covered by any collective bargaining agreements. Wages paid by the District are considered very competitive and management considers employee turnover to be low.
The District contributes to the cost of employee medical insurance. For full-time and half-time employees, the District contributes 80% of the employee’s health insurance benefit cost and 50% of the cost of dental benefits. The District also provides to qualifying employees life insurance coverage and short and long term disability insurance.
The District administers a Cash Balance Retirement Plan (the “Plan”) providing retirement, disability, and death benefits to full-time and half-time employees and their beneficiaries. The Plan is a single-employer defined benefit plan wherein a separate cash balance account is established for each employee upon becoming a member of the Plan. An employee’s benefit under the Plan, subject to certain limitations, is based on the amounts contributed to the employee’s separate account and an annual minimum guaranteed investment
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rate of return. The District makes annual contributions to the Plan equal to 7.5% of the employee’s salary earned during the year provided the employee’s earned hours were at least 1,000 hours during the year. Employees vest in the District’s contributions on a graded scale after the second year of service. The District’s contribution to the plan in 2009 was $1,675,000. For more information regarding the District’s pension benefit obligations see Note M to the District’s Financial Statements contained in Appendix A to this Official Statement and the Supplementary Information attached thereto.
As of January 1, 2010, the Plan had Actuarial Accrued Liabilities (“AAL”) of $12,612,523 and an Actuarial Value of Assets of $10,045,588, resulting in a total funding as of January 1, 2010 at 79.65%. The required annual contribution to the Plan for the period from January 1, 2009 through December 31, 2009, was $1,666,196. The District’s actual contribution for this period was $1,675,000, or 100.53% of the required amount. The District expects that the funding percentage has improved during the current year, but no actuarial assessment will be performed until the District’s audit for the year ended December 31, 2010 is prepared.
District Insurance Coverage
The District has obtained institutional professional liability insurance for hospital operations in the amount of $1 million per claim, with an aggregate annual limit of $3 million. The District maintains property insurance, general liability insurance, directors and officers liability insurance, and automobile liability insurance in amounts which, in the opinion of management, are customary for facilities and operations of like size and type and adequate to protect its property and operations.
Existing Facilities
The existing facilities of the District consist of the Hospital Facility, the Assisted Living Facility and the Employee Housing Facilities.
The Hospital Facility and adjacent structures are situated on a 19-acre parcel located along Castle Creek Road on the west side of Aspen, Colorado. The Hospital Facility was constructed in 1977 with the assistance of a $1,500,000 fund raising campaign undertaken by the then newly formed Aspen Valley Medical Foundation.
The Hospital Facility is a single story building and contains approximately 80,000 square feet. Since 1977 the Hospital has been remodeled and expanded several times. The Hospital Facility contains emergency room facilities which are staffed by physicians on a 24-hour basis, operating rooms and related recovery rooms, intensive care unit, diagnostic imaging areas which include a state-of-the-art CT scanner, MRI, dedicated mammography equipment, nuclear medicine and ultrasound, a newborn nursery, a laboratory and blood bank, a physical therapy and cardiac rehabilitation facility, several outpatient clinics, kitchen, cafeteria, laundry facility, conference center, gift shop and administrative space. The Hospital is a Level III trauma center and is equipped with a helipad for emergency transfers to other hospital facilities.
The Assisted Living Facility and one of the Employee Housing Facilities are located on the Hospital Facility’s campus. The second Employee Housing Facility is located in
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the City of Aspen, several miles from the Hospital. Aspen Ambulance District also maintains an ambulance garage and staff quarters on the Hospital Facility’s campus.
Future Capital Expenditures
In November 2007, the Board of Directors approved a Master Facilities Plan for the District, which included four phases. The Hospital Facilities, as improved and expanded pursuant to the Master Facilities Plan, are planned as state-of-the-art, environmentally conscious, and patient and family oriented. They are expected to allow for greater efficiencies and enhanced patient privacy and safety. The patient-centered plan calls for a doubling to tripling in size of all patient service areas, including Emergency, Diagnostic Imaging, Surgery, Patient Care Unit, Intensive Care Unit, Cardiology, Obstetrics, Orthopedics and Sports Medicine, Cardiopulmonary, Cardiac Rehabilitation; Nuclear Medicine, and Physical Therapy as well as the specialty clinics. Other enhancements include increased parking capacity, a new vehicular entrance access, a new cafeteria, a new public lobby area, the relocation of the helipad, and medical office space. The plan also provides for private rooms, which are now the industry standard in healthcare to enhance medical care and address privacy concerns.
The Master Facilities Plan reflects the ultimate build-out of the Aspen Valley Hospital campus. Based on projections, construction of the entire project will take approximately seven years. By sequencing the construction in logical phases, disruption to patients and surrounding neighbors is expected to be minimized. New functions are to be built outside of the existing walls. Once those new areas are operational, the existing space is to be remodeled. A major priority of the plan is to minimize the hospital’s visual impact on the neighborhood.
As required by the City, the long-term Master Facilities Plan was presented to the City for review. Phase I of the Master Facilities Plan as approved by the City consisted of an expansion and renovation of the obstetrical department, which was completed in September 2008 with proceeds of revenue bonds. It features new private patient rooms and the latest in contemporary design. Phases II, III, and IV received conceptual approval in May 2009. On July 12, 2010, the City of Aspen approved the District’s Master Facility Plan Phase II Expansion and Renovation Project. A majority of these Phase II improvements will be financed with the proceeds of the Bonds. The District also expects to contribute approximately $15,000,000 to $20,000,000 of its own funds or funds from private donations to complete the Phase II project. See “SOURCES AND USES OF FUNDS--The Project.” Phases III and IV of the Master Facility Plan are expected to commence within the next several years after City approval is obtained. The District expects that Phases III and IV will cost approximately $47,000,000, to be funded with District funds, private donations, and, if necessary, the issuance of revenue obligations of the District.
Presentation and review of the plan is pursuant to the City’s Planned Unit Development process, which entails review by the Planning and Zoning Commission as well as the City Council. In addition to the City’s land use review process, through a series of meetings, neighbors and other interested community groups and residents had the opportunity to review the plan and ask questions. From the outset of the planning process, cost containment has been a
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priority. An initial budget of $100 million was established for planning purposes. Escalating building costs and inflationary factors have and will impact the final, overall budget.
Additionally, the Hospital routinely funds capital expenditures of about $4.0 million per year. This includes minor renovations of the existing Hospital space, as well as the purchase of equipment throughout the Hospital (such as medical equipment, diagnostic equipment, information services devices, furniture, office equipment, etc.). These routine expenditures are funded each year from the Hospital’s operating cashflows.
Services Provided
The District is a Medicare designated sole community provider. Additionally, in September, 2004, the District was designated a Medicare Critical Access Hospital. Services offered include the following:
24 Hour (Level III Trauma) Emergency Care Obstetrics and Gynecology Adult and Pediatric Medicine & General Surgery Occupational – Therapy Ambulatory Surgery (Mid-Valley) Oncology Anesthesia Ophthalmology Bone Densitometry Oral Surgery Cardiac Rehabilitation Orthopedic Surgery Cardiology Otolaryngology Computer Assisted Tomography (CT) Pain Management Diabetes Education Pathology Family Medicine Pediatrics Gastroenterology Physical Therapy and Rehabilitation Indigent Care Plastic Surgery Internal Medicine Radiology Laboratory Speech Therapy Magnetic Resonance Imaging (MRI) Sports Medicine Mammography Ultrasound Newborn Nursery Urology Nuclear Medicine
Medical Staff
The District’s medical staff and its privileges are governed by Medical Staff Bylaws. The medical staff is organized to include active, consulting, provisional and emeritus members. The medical staff bylaws, rules and regulations provide the rules for participation on the medical staff and establish a governance committee designated as the medical executive committee.
As of June 30, 2010, the medical staff included 38 active members, no active provisional members, 4 consulting provisional members, 20 consulting members, 2 affiliate members, no emeritus members and 4 honorary members. The following chart provides additional information concerning the medical staff:
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Active, Provisional, Consulting, Affiliate and Honorary Medical Staff Profile June 30, 2010
Specialty Staff
Number Board
Certified Average Age Anesthesiology 4 4 43 Emergency Medicine 7 7 46 Family Medicine 8 8 47 Medicine:
Cardiology 2 2 58 Gastroenterology 1 1 59 Internal Medicine 5 5 56 Oncology 2 2 62
Neurology 5 5 43 OB/GYN 3 3 45 Ophthalmology 1 1 54 Orthopedics 8 8 49 Otolaryngology 1 1 49 Pathology 3 3 49 Pediatrics 4 4 54 Plastic/Reconstructive 3 3 49 Radiology 1 1 48 Surgery 2 2 50 Urology 3 3 46 Other 5 5 60
Totals: 68 68
________________ Source: The District.
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Active, Provisional, Consulting and Emeritus Medical Staff Profile June 30, 2010
Specialty
Year 2009 Percent of
Admissions
Year 2009 Percent of Outpatient Registrations
Year 2009 Percent of Same
Day Surgery Anesthesiology 1.8% 1.9% 0.2% Dermatology 0 0 0 Emergency Medicine 25.6 26.8 0 Family Medicine 9.6 10.0 0 Medicine:
Cardiology 11.7 12.3 1.1 Endocrinology 0 0 0 Gastroenterology 0.1 0.1 0 Internal Medicine 21.2 20.8 5.5 Oncology 1.6 1.7 0
Neurology 0.9 0.9 0 OB/GYN 9.1 8.2 9.2 Ophthalmology 0 0 0 Orthopedics 4.2 3.9 38.6 Otolaryngology 0.3 0.3 2.8 Pathology 0 0 0 Pediatrics 2.6 1.8 0 Plastic/Reconstructive 0.2 0.2 6.1 Podiatry 0.1 0.1 1.0 Radiology 0 0 0 Surgery 2.5 2.1 35.0 Urology 1.1 1.2 0.5 Other 7.4 7.7 0
Totals 100% 100% 100%
________________ Source: The District.
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Top 20 Physicians Rated by Discharge Volume (Year Ended December 31, 2009)
Specialty
Percentage of Total
Discharges Pediatrics 18.5% Obstetrical/Gynecology 26.3 General Surgery 11.7 Internal Medicine 28.6 Orthopedics 10.9 Family Medicine 2.6 Plastics 1.1 Other 0.3
Total: 100% ________________ Source: The District.
Service Area and Competition
The District’s primary service area encompasses Pitkin County, and includes Aspen, the Town of Snowmass Village, Woody Creek, Old Snowmass and portions of the Town of Basalt, Colorado. The District’s secondary service area for hospital and outpatient services includes portions of Eagle and Garfield Counties along the Highway 82 corridor.
The following table sets forth population levels for the years 1980, 1990, 1995, 2000 and 2005 for Pitkin County, as well as the city of Aspen.
1980 1990 1995 2000 2005 Pitkin County 10,338 12,661 14,372 14,872 16,420 Aspen 3,678 5,049 5,665 5,914 6,399
The District’s primary competition comes from the Valley View Hospital located in Glenwood Springs, Colorado (approximately 40 miles from the Hospital Facility). All of the specialties available at the Hospital Facility are also available at Valley View Hospital.
Licenses and Accreditation. The Hospital Facility is surveyed and licensed by the Colorado Department of Public Health and Environment. The District was subject to its regularly scheduled Joint Commission on Accreditation of Healthcare Organizations (“JCAHO”) in 2008. The District passed its review and its next accreditation review will occur in 2011. The Authority is a member of the Colorado Health and Hospital Association and VHA (formerly known as Voluntary Hospitals of America).
Aspen Valley Medical Foundation
The District receives support from the Aspen Valley Medical Foundation (the “Foundation”), which is governed by an independent board of directors. The Foundation was formed in 1973. The Foundation solicits community funds for District projects and other
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community health programs. Grants are funded by the Foundation several times annually pursuant to an application process. Historically, the Foundation has granted funds to various areas and functions within the Hospital including equipment purchases, continuing education expenses, physician recruitment expenses, special community health initiatives and certain loss-leader services. Most recently the Foundation has approved funding for approximately $182,900 of projects in 2009, and approximately $26,200 in 2010. In addition, the Foundation contributed in excess of $837,500 toward District operating costs in the year 2009. The Foundation has not pledged any of its assets, including its endowment account, to payment of the Bonds or any other of the District’s obligations, or to any other organization’s debts or obligations.
Approximately 85% of all of the Foundation’s grants or fund raising efforts are for the District. The Foundation also devotes its efforts to other community health issues, including grants to the Aspen Counseling Center, Aspen High School Community Service Club, Aspen/Pitkin County Airport, Columbine Home Health, Community Health Services, Roaring Fork Hospice, Snowmass-Wildcat Firefighters Association and Valley Partnership for Drug Prevention.
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DISTRICT FINANCIAL INFORMATION
Sources of District Revenues
Revenues received from patient services constitute the largest source of District revenue. Ad valorem property taxes, described below and in “PROPERTY TAXATION, ASSESSED VALUATION AND OVERLAPPING DEBT” are levied to pay for the principal and interest payments on the District’s outstanding obligations as well as to fund a portion of the District’s operations expenses. Additional sources of revenue include investment income and specific ownership taxes (a State tax on motor vehicle registrations which is shared with local governments, including the District), and grants and donations. Budget Process
The District is required by law to adopt an annual budget setting forth all proposed expenditures for the administration, operation, and maintenance of all offices, departments, boards, commissions, and institutions of the District. The budget must show the actual or estimated deficits from prior years, all debt redemptions and interest charges during the budget year, and all expenditures for capital projects to be undertaken or executed during the budget year. It must also set forth the anticipated income and other means of financing the proposed expenditures for the ensuing fiscal year, which coincides with the calendar year.
No later than October 15 of each year, the person appointed to prepare the budget must submit a proposed budget to the Board for the ensuing year. The Board must cause to be published a notice that such proposed budget is open for inspection by the public. Prior to adoption, any elector of the District may register his or her objections to the proposed budget. The District must adopt its budget and certify its mill levy by December 15. After adoption of the budget, the Board must enact a corresponding appropriation resolution before the beginning of the fiscal year. If the District fails to file a certified copy of its budget by the following January 31 with the Colorado Division of Local Government in the Department of Local Affairs, the division may authorize the County Treasurer to prohibit release of the District’s tax revenues and other moneys held by the County Treasurer until the District files its budget.
In general, the District cannot expend money for any of the purposes set out in the appropriation resolution in excess of the amount appropriated. However, in the case of an emergency or some contingency which was not reasonably foreseeable, the Board may authorize the expenditure of funds in excess of the budget by adopting a resolution. If the District receives revenues which were unanticipated at the time of adoption of the budget, the Board may authorize the expenditure of such revenues by adopting a supplemental budget after notice and hearing.
Financial Statements
Under State law, the Board is required to have the financial statements of the District audited annually. The audited financial statements must be filed with the Board by July 1 of each year and with the State Auditor 30 days later. If the District fails to file its audit report with the State Auditor, the State Auditor may, after notice to the District, authorize the
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County Treasurer to prohibit release of the District’s tax revenues and other moneys held by the County Treasurer until the District files the audit report.
The District’s financial statements for the years ended December 31, 2009 and December 31, 2008, have been audited by Grant Thornton LLP, certified public accountants, Wichita, Kansas. The audited financial statements of the District and the report of the certified public accountants are included in this Official Statement in Appendix A. The audited financial statements included in Appendix A represent the most recent audited financial statements of the District.
History of District Revenues and Expenses
The table below presents a summary of revenue and expenses for the District for the five years ended December 31, 2005 through December 31, 2009. The Financial Statements of the District were audited by Grant Thornton LLP, independent certified public accountants, Wichita, Kansas. The following summaries should be read in conjunction with the audited financial statements presented in Appendix A hereto.
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Statement of Revenues, Expenses and Changes in Net Assets for 2005-2009 2005 2006 2007 2008 2009 Operating revenue:
Net patient service revenue $42,835,082 $47,920,007 $52,386,773 $53,479,943 $55,843,357 Other operating revenue 1,655,065 1,795,691 1,662,043 1,963,549 2,220,991
Total operating revenue 44,490,147 49,715,698 54,048,816 55,443,492 58,064,348 Operating expenses:
Salaries and wages 16,247,685 17,116,379 19,048,116 20,686,854 21,496,620 Contract labor 1,386,146 1,429,632 2,001,865 2,638,312 1,418,682 Supplies and other 22,279,398 23,161,872 23,752,704 25,457,291 26,743,835 Depreciation and amortization 3,453,803 3,505,057 3,220,608 4,110,049 4,481,049
Total operating expenses 43,367,032 45,212,940 48,023,293 52,892,506 54,140,186 Operating income 1,123,115 4,502,758 6,025,523 2,550,986 3,924,162 Nonoperating revenue (expenses):
Property taxes(1) 2,692,744 2,849,265 3,036,555 3,423,809 3,517,092 Investment income 472,124 1,130,856 1,604,227 738,041 869,059 Interest expense (1,166,672) (1,371,929) (1,269,259) (1,178,300) (992,601) Noncapital contributions 178,917 146,718 117,512 101,890 893,879 Gain on investment in joint venture 525,130 908,901 144,326 66,256 43,009 Gain (loss) on disposal of capital assets (135,106) (193,562) (155,319) (264,984) 12,944
Total nonoperating revenue (expenses) 2,567,137 3,470,249 3,478,042 2,886,712 4,343,382
Income before capital contributions, member distributions, net and equity contributions
3,690,252
7,973,007 9,503,565 5,437,698 8,267,544
Capital contributions 539,457 1,320,107 884,298 70,996 182,910 Member distributions -- -- 561,812 636,582 895,050 Equity contributions -- -- (400,000) (642,747) -- Change in reporting presentation -- -- (550,633) -- -- Change in net assets 4,229,709 9,293,114 9,999,042 5,502,529 9,345,504 Net assets beginning of year 23,779,445 28,009,154 37,302,268 47,301,310 52,803,839 Net assets end of year $28,009,154 $37,302,268 $47,301,310 $52,803,839 $62,149,343 _________________ (1) The District imposes a levy of 1.5 mills for operating and capital expenditure purposes which shall expire on December
31, 2015 unless an extension of such levy is approved by the voters of the District. Source: District’s audited financial statements for the years ended December 31, 2005-2009.
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Budget Summary and Comparison
The table below contains statements of the District’s 2009 budget compared to 2009 actual results (January 1 through August 31) and 2010 budget compared to unaudited 2010 actual results (January 1 through August 31).
General Fund Budget Summary and Comparison (1)(2)
2009 Budget
2009Actual 1/1/09 through
8/31/09 2010 Budget
2010Actual 1/1/10 through
8/31/10 Operating revenue:
Net patient service revenue $55,867,588 $39,680,649 $56,706,708 $41,228,755 Other operating revenue 2,085,112 1,268,240 2,257,916 1,585,706
Total operating revenue 57,952,700 40,948,889 58,964,624 42,814,461 Operating expenses:
Salaries and wages 22,728,222 15,344,377 23,210,773 15,090,566 Contract labor 953,318 1,259,925 959,831 1,163,604 Supplies and other 30,424,370 18,244,187 30,134,951 20,205,485 Depreciation and amortization 4,429,446 2,911,557 4,525,550 2,874,291
Total operating expenses 58,535,356 37,760,046 58,831,105 39,333,946 Operating income (loss) (582,656) 3,188,843 133,519 3,480,515 Nonoperating revenue (expenses):
Property taxes 3,517,093 2,658,802 3,517,111 2,344,744 Investment income 750,000 541,794 900,000 538,523 Interest expense (1,350,445) (630,588) (1,000,000) (604,427) Noncapital contributions and payments(5) (46,302) 239,588 (90,000) 65,736 Gain on investment in joint venture (3) 450,008 336,235 -- -- Loss on disposal of capital assets -- 4,099 -- (8,179)
Total nonoperating revenue (expenses) 3,320,354 3,149,930 3,327,111 2,336,397 Income before capital contributions, member distributions, net and equity contributions
2,737,698 6,338,773 3,460,630 5,816,912
Capital contributions(5) 662,302 274,808 543,045 26,630 Member distributions(4) -- -- 650,000 369,750 Change in net assets 3,400,000 6,613,581 4,653,675 6,213,292 Net assets beginning of year 52,803,839 52,803,839 62,149,343 62,149,343 Net assets end of year $56,203,839 $59,417,420 $66,803,018 $68,362,635 _______________________ (1) Unaudited. (2) 2009 budgeted numbers come from the records of the District. The budget information for the year ended December 31, 2009 as
presented in the supplementary information attached hereto in Appendix A shows slightly different numbers due to classification differences primarily related to bad debt expense.
(3) The actual amounts in this schedule include the gain on investment in joint venture of discretely presented component units which is eliminated in the District’s 2009 audited financial statements presented in Appendix A.
(4) The District did not budget for member distributions received from component units for the year ended December 31, 2009. As such, the District has decided to exclude actual member distributions occurring January 1, 2009 through August 31, 2009 from this schedule.
(5) Classifications of certain noncapital and capital contributions between the schedule above for the 2009 actual and the District’s audited financial statements as of and for the years ended December 31, 2009 and 2008 differ due to reclassification adjustments recorded in the last four months of year ended December 31, 2009.
Source: The District’s 2009 and 2010 Budgets, and the District for unaudited interim financial information for January 1, 2009 through August 31, 2009 and January 1, 2010 through August 31, 2010.
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Management’s Discussion and Analysis of Recent Financial and Operational Per formance
The following information has been prepared by District management. The following discussion is intended to give readers an understanding of how the District is performing in 2010 when compared to 2009, through the first half of the year. The following discussion and analysis should be read in conjunction with the audited financial statement for the years ended December 31, 2009 and 2008 included in Appendix A.
Gross revenues through June 30, 2010 were 5.7% higher than the comparable period in 2009 ($41,097,686 versus $38,867,043, respectively). Since the District implemented a 5% rate increase on January 1, 2010, this would indicate that either patient volumes or acuity are slightly higher in 2010 than in 2009. Since inpatient volumes are lower in 2010 than in 2009, and since outpatient volumes are relatively flat, patient acuity is rising. This is borne out by a comparison of case mix indexes between 2009 and 2010, which shows a rising acuity from 2009 to 2010. In addition, surgeries at the Hospital Facility are flat, again pointing to rising acuity as the driver of the slightly higher revenue in 2010. The District, which is highly dependent on the ski business in Aspen, expects both inpatient and outpatient volumes to pick up slowly at the end of 2010, and to accelerate in 2011 as the U. S. economy improves, and the town of Aspen begins to see more tourists.
Payer mix for 2010 is essentially the same as for 2009, thus net patient service revenue is 5.6% higher in 2010 than it was in 2009 ($31,979,927 vs. $30,280,180, respectively), due primarily to the aforementioned rate increase, and the increase in patient acuity. Total operating revenue, therefore, is 6.2% higher in 2010 than it was in 2009 ($33,194,763 vs. $31,251,774).
Operating expenses for 2010 rose at a rate of 4.5% over the expenses in 2009 ($29,597,158 vs. $28,329,447, respectively), due primarily to inflation in salaries, physician compensation, additional maintenance contracts on equipment, and employee benefits. However, since total operating revenue rose at a slightly faster rate than expenses, the District’s operating margin rose 23% from 2009 to 2010 ($2,922,327 vs. $3,597,605, respectively).
Non-operating revenue dropped about 20% from 2009 to 2010 ($2,660,729 vs. $2,119,640, respectively). This was due primarily to a large drop in contributions to the District during 2010. It is expected that these contributions will pick up considerably in the years ahead as the District campaigns for its Master Facilities Plan.
The District’s change in net assets for 2010 is 2.4% greater than what it was in 2009 for this same period ($5,717,245 vs. $5,583,056), for the reasons outlined above.
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PROPERTY TAXATION, ASSESSED VALUATION AND OVERLAPPING DEBT
Ad Valorem Property Taxes
Property Subject to Taxation. Subject to the limitations imposed by Article X, Section 20 of the State constitution (the Taxpayers Bill of Rights or “TABOR,” described in “LEGAL MATTERS – Certain Constitutional Limitations”), the Board has the power to certify to the Board of County Commissioners for the County (the “Commissioners”) a levy for collection of ad valorem taxes against all taxable property within the District.
Property taxes are uniformly levied against the assessed valuation of all property subject to taxation by the District. Both real and personal property are subject to taxation, but there are certain classes of property which are exempt. Exempt property includes, but is not limited to: property of the United States of America; property of the State and its political subdivisions; public libraries; public school property; property used for charitable or religious purposes; nonprofit cemeteries; irrigation ditches, canals, and flumes used exclusively to irrigate the owner’s land; household furnishings and personal effects not used to produce income; intangible personal property; inventories of merchandise and materials and supplies which are held for consumption by a business or are held primarily for sale; livestock; agricultural and livestock products; and works of art, literary materials and artifacts on loan to a political subdivision, gallery or museum operated by a charitable organization. The State Board of Equalization supervises the administration of all laws concerning the valuation and assessment of taxable property and the levying of property taxes.
Assessment of Property. Taxable property is first appraised by the county assessor of the County (the “County Assessor”) to determine its statutory “actual” value. This amount is then multiplied by the appropriate assessment percentage to determine each property’s assessed value. The mill levy of each taxing entity is then multiplied by this assessed value to determine the amount of property tax levied upon such property by such taxing entity. Each of these steps in the taxation process is explained in more detail below.
Determination of Statutory Actual Value. The County Assessor annually conducts appraisals in order to determine, on the basis of statutorily specified approaches, the statutory “actual” value of all taxable property within the County based upon its condition on January 1. Most property is valued using a market approach, a cost approach or an income approach. Residential property is valued using the market approach, and agricultural property, exclusive of building improvements thereon, is valued by considering the earning or productive capacity of such lands during a reasonable period of time, capitalized at a statutory rate.
The statutory actual value of a property is not intended to represent its current market value, but, with certain exceptions, is determined by the County Assessors utilizing a “level of value” ascertained for each two-year reassessment cycle from manuals and associated data published by the State Property Tax Administrator for the statutorily-defined period preceding the assessment date. Real property is reappraised by the County Assessor’s office every odd numbered year. The statutory actual value is based on the “level of value” for the period one and one-half years immediately prior to the July 1 preceding the beginning of the two-year reassessment cycle (adjusted to the final day of the data-gathering period). For
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example, values for levy year 2009 (collection year 2010) were based on an analysis of sales and other information for the period January 1, 2007 to June 30, 2008. The following table sets forth the State Property Appraisal System for property tax levy years 2006 through 2011:
Collection Year
Levy Year
Value Calculated As Of
Based on the Market Period
2007 2006 July 1, 2004 Jan. 1, 2003 to June 30, 2004 2008 2007 July 1, 2006 Jan. 1, 2005 to June 30, 2006 2009 2008 July 1, 2006 Jan. 1, 2005 to June 30, 2006 2010 2009 July 1, 2008 Jan. 1, 2007 to June 30, 2008 2011 2010 July 1, 2008 Jan. 1, 2007 to June 30, 2008 2012 2011 July 1, 2010 Jan. 1, 2009 to June 30, 2010
The County Assessor may consider market sales from more than one and one-half
years immediately prior to July 1 if there were insufficient sales during the stated market period to accurately determine the level of value.
Oil and gas leaseholds and lands, producing mines and other lands producing nonmetallic minerals are valued based on production levels rather than by the base year method. Public utilities are valued by the State Property Tax Administrator based upon the value of the utility’s tangible property and intangibles (subject to certain statutory adjustments), gross and net operating revenues and the average market value of its outstanding securities during the prior calendar year.
Determination of Assessed Value. Assessed valuation, which represents the value upon which ad valorem property taxes are levied, is calculated by the County Assessor as a percentage of statutory actual value. The percentage used to calculate assessed valuation differs depending upon the classification of each property.
Residential Property. To avoid extraordinary increases in residential real property taxes when the base year level of value is changed, the State constitution requires the Colorado General Assembly to adjust the assessment rate of residential property for each year in which a change in the base year level of value occurs. This adjustment is constitutionally mandated to maintain the same percentage of the aggregate statewide valuation for assessment attributable to residential property which existed in the previous year (although, notwithstanding the foregoing, TABOR prohibits any valuation for assessment ratio increase for a property class without prior voter approval).
Pursuant to the adjustment process described above, the residential assessment rate is subject to adjustment every two years, resulting in the following history of residential assessment rates since levy year 1989: 15.00% of statutory actual value (levy years 1989-90); 14.34% of statutory actual value (levy years 1991-92); 12.86% of statutory actual value (levy years 1993-94); 10.36% of statutory actual value (levy years 1995-96); 9.74% of statutory actual value (levy years 1997-98 and 1999-2000); 9.15% of statutory actual value (levy years 2001-02); and 7.96% of statutory actual value (levy years 2003-10).
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In December 2009, the Colorado Legislative Council (the research division of the Colorado General Assembly) projected that the residential assessment rate will remain at 7.96% through levy year 2012. This projection is only an estimate, however, and is subject to change.
Non-residential property. All non-residential taxable property (including the commercial property in the District), with certain specified exceptions, is assessed at 29% of its statutory actual value. Producing oil and gas property is generally assessed at 87.5% of the selling price of the oil and gas.
Protests, Appeals, Abatements and Refunds. Property owners are notified of the valuation of their land or improvements, or taxable personal property and certain other information related to the amount of property taxes levied, in accordance with statutory deadlines. Property owners are given the opportunity to object to increases in the statutory actual value of such property, and may petition for a hearing thereon before the County Board of Equalization. Upon the conclusion of such hearings, the County Assessor is required to complete the assessment roll of all taxable property and, no later than August 25th each year, prepare an abstract of assessment therefrom. The abstract of assessment and certain other required information is reviewed by the State Property Tax Administrator prior to October 15 of each year and, if necessary, the State Board of Equalization orders the County Assessor to correct assessments. The valuation of property is subject to further review during various stages of the assessment process at the request of the property owner, by the State Board of Assessment Appeals, the State courts or by arbitrators appointed by the Commissioners. On the report of an erroneous assessment, an abatement or refund must be authorized by the Commissioners; however, in no case will an abatement or refund of taxes be made unless a petition for abatement or refund is filed within two years after January 1 of the year in which the taxes were levied. Refunds or abatements of taxes are prorated among all taxing entities which levied a tax against the property.
Statewide Review. The Colorado General Assembly is required to cause a valuation for assessment study to be conducted each year in order to ascertain whether or not county assessors statewide have complied with constitutional and statutory provisions in determining statutory actual values and assessed valuations for that year. The final study, including findings and conclusions, must be submitted to the Colorado General Assembly and the State Board of Equalization by September 15 of the year in which the study is conducted. Subsequently, the Board of Equalization may order a county to conduct reappraisals and revaluations during the following property tax levy year. Accordingly, the District’s assessed valuation may be subject to modification following any such annual assessment study.
Homestead Property Tax Exemption. The Colorado Constitution provides property tax exemptions for qualifying senior citizens (adopted in 2000) and for disabled veterans (adopted in 2006). The senior citizen provision provides that for property tax collection years 2007 and later (except that the exemption was suspended for collection years 2009, 2010 and 2011), the exemption is equal to 50% of the first $200,000 of actual value of residential real property that is owner-occupied if the owner or his or her spouse is 65 years of age or older and has occupied such residence for at least 10 years. The disabled veterans provision provides that for property tax collection years 2008 and later, the same exemption is available to homeowners who have served on active duty in the U.S. Armed Forces and who are rated 100% permanently
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disabled by the federal government due to a service-connected disability. The State is required to reimburse all local governments for the reduction in property tax revenue resulting from these exemptions; therefore, it is not expected that this exemption will result in the loss of any property tax revenue to the District. There is no assurance, however, that the State reimbursement will be received in a time period which is sufficient to replace the reduced property tax revenue.
Taxation Procedure. The County Assessor is required to certify to the District the assessed valuation of property subject to the District’s mill levy no later than August 25th of each year. Subject to the limitations of TABOR, based upon the valuation certified by the County Assessor, the Board computes a rate of levy which, when levied upon every dollar of the valuation for assessment of property subject to the District’s property tax, and together with other legally available District revenues, will raise the amount required by the District in its upcoming fiscal year. The District subsequently certifies to the Commissioners the rate of levy sufficient to produce the needed funds. Such certification must be made no later than December 15 of the property tax levy year for collection of taxes in the ensuing year. The property tax rate is expressed as a mill levy, which is the rate equivalent to the amount of tax per one thousand dollars of assessed valuation. For example, a mill levy of 25 mills would impose a $250 tax on a parcel of property with an assessed valuation of $10,000.
The Commissioners levy the tax on all property subject to taxation by the District. By December 22nd of each year, the Commissioners must certify to the County Assessor the levy for all taxing entities within the County. If the Commissioners fail to so certify, it is the duty of the County Assessor to extend the levies of the previous year. Further revisions to the assessed valuation of property may occur prior to the final step in the taxing procedure, which is the delivery by the County Assessor of the tax list and warrant to the treasurer of the County (the “County Treasurer”).
Adjustment of Taxes to Comply with Certain Limitations. Section 29-1-301, C.R.S., contains a statutory restriction limiting the property tax revenues which may be levied for operational purposes to an amount not to exceed the amount of such revenue levied in the prior year plus 5.5% (subject to certain statutorily authorized adjustments). However, the District’s electors have approved an election question that exempts the District from this restriction.
Property Tax Collections. Taxes levied in one year are collected in the succeeding year. Thus, taxes certified in December 2010 will be collected in 2011. Taxes are due on January 1 in the year of collection; however, they may be paid in either one installment (not later than the last day of April) or in two equal installments (not later than the last day of February and June 15) without interest or penalty. Interest accrues on unpaid first installments at the rate of 1% per month from March 1 until the date of payment unless the whole amount is paid by April 30. If the second installment is not paid by June 15, the unpaid installment will bear interest at the rate of 1% per month from June 16 until the date of payment. Notwithstanding the foregoing, if the full amount of taxes is to be paid in a single payment after the last day of April and is not so paid, the unpaid taxes will bear penalty interest at the rate of 1% per month accruing from the first day of May until the date of payment. The County Treasurer collects current and delinquent property taxes, as well as any interest or penalty, and after deducting a statutory fee for such collection, remits the balance to the District on a monthly
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basis. The payments to the District must be made by the tenth of each month, and shall include all taxes collected through the end of the preceding month.
All taxes levied on property, together with interest thereon and penalties for default, as well as all other costs of collection, constitute a perpetual lien on and against the property taxed from January 1 of the property tax levy year until paid. Such lien is on a parity with the tax liens of other general taxes. It is the County Treasurer’s duty to enforce the collection of delinquent real property taxes by tax sale of the tax lien on such realty. Delinquent personal property taxes are enforceable by distraint, seizure, and sale of the taxpayer’s personal property. Tax sales of tax liens on realty are held on or before the second Monday in December of the collection year, preceded by a notice of delinquency to the taxpayer and a minimum of four weeks of public notice of the impending public sale. Sales of personal property may be held at any time after October 1 of the collection year following notice of delinquency and public notice of sale. There can be no assurance that the proceeds of tax liens sold, in the event of foreclosure and sale by the County Treasurer, would be sufficient to produce the amount required with respect to property taxes levied by the District and property taxes levied by overlapping taxing entities, as well as any interest or costs due thereon. Further, there can be no assurance that the tax liens will be bid on and sold. If the tax liens are not sold, the County Treasurer removes the property from the tax rolls and delinquent taxes are payable when the property is sold or redeemed. When any real property has been stricken off to the County and there has been no subsequent purchase, the taxes on such property may be determined to be uncollectible after a period of six years from the date of becoming delinquent and they may be canceled by the Commissioners after that time.
Potential for Creation of Tax Increment Entity. Various Colorado statutes allow the formation of tax increment entities, such as urban renewal authorities, downtown development authorities and transportation authorities. In particular, the Colorado Urban Renewal Law (the “URA Law”) allows the formation of urban renewal authorities in certain areas which have been designated by the governing bodies of municipalities as blighted areas. The District is located within the City, which has not created any urban renewal areas (“URAs”). Although it is possible that the property in the District could be included in such an area in the future, the District believes that such inclusion is unlikely. If the property in the District ever becomes located within an urban renewal area, however, the provisions of the URA Law will become applicable to such property. Upon the approval of an urban renewal plan which includes the property in the District, the assessed valuation of the property in the District would not increase beyond the amount existing in the year prior to the adoption of the plan (other than by means of the general reassessment). Taxes levied on any increase above this amount would be paid to the URA or other tax increment entity.
Similarly, Colorado law allows the formation of public highway authorities. Pursuant to statute, the board of directors of a public highway authority is entitled to designate areas within the authority’s boundaries as “value capture areas” to facilitate the financing, construction, operation or maintenance of highways constructed by the authority; an authority is entitled to capture a portion of the property taxes in such an area to support these purposes. No public highway authority currently exists within the County. If an authority were to be formed and a value capture area implemented in the future, it is impossible to predict the terms of the plan, including whether it would negatively impact the District’s property tax revenues.
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Ad Valorem Property Tax Data
A five year history of the District’s certified assessed valuations and mill levies is set forth in the following table.
History of Assessed Valuations and Mill Levies for the District
Levy/ Collection
Year Assessed Valuation
Percent Change
Mill Levy
2005/2006 $1,858,836,890 -- 1.500 2006/2007 1,905,600,475 2.5% 1.500 2007/2008 2,696,637,030 41.5 1.280 2008/2009 2,747,742,620 1.9 1.280 2009/2010 3,630,488,412 32.1 0.969 2010/2011 3,646,593,910 0.4 n/a(1)
(1) The 2010 mill levy (for collection of taxes in 2011) will not be certified until December 2010. Sources: State of Colorado, Department of Local Affairs, Division of Property Taxation, Annual Reports,
2005-2009; and Pitkin County Assessor’s Office. The following table sets forth the history of the District’s ad valorem property tax
collections for the time period indicated.
Property Tax Collections in the District
Levy/Collection Year
Taxes Levied(1)
Current Tax Collection(2)
Collection Rate
2004/2005 $2,634,723 $2,632,809 99.93% 2005/2006 2,788,255 2,783,814 99.84 2006/2007 2,858,401 2,853,527 99.83 2007/2008 3,451,695 3,440,386 99.67 2008/2009 3,517,111 3,497,729 99.45 2009/2010(3) 3,517,943 3,489,909 99.20
(1) Levied amounts do not reflect abatements or other adjustments. (2) The County Treasurer’s collection fee has not been deducted from these amounts. Figures do not include
interest, fees and penalties. (3) Collections through October 31, 2010. Sources: State of Colorado, Department of Local Affairs, Division of Property Taxation, Annual Reports, 2004-
2009; and Pitkin County Treasurer’s Office.
The following table sets forth the assessed valuation of specific classes of real and personal property within the District based upon the District’s 2010 certified assessed valuation. As shown below, residential property accounts for the largest percentage of the District’s assessed valuation, and therefore it is anticipated that owners of residential property will pay the largest percentage of ad valorem property taxes levied by the District.
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2010 Assessed Valuation of Classes of Property in the District Property Class
Total Assessed Valuation
Percentage of Total Assessed Valuation
Residential $2,551,106,870 69.96% Commercial 664,202,110 18.21 Vacant 393,515,090 10.79 State Assessed 25,535,530 0.70 Agricultural 5,962,830 0.16 Natural Resources 5,377,780 0.15 Industrial 893,700 0.03 TOTAL $3,646,593,910 100.00%
Source: Pitkin County Assessor’s Office.
Based upon the most recent information available from the County, the following table represents the ten largest taxpayers within the District. No independent investigation has been made of and consequently there can be no representation as to the financial conditions of the taxpayers listed below or that such taxpayers will continue to maintain their status as major taxpayers in the District.
Ten Largest Taxpayers in the District for 2010
Taxpayer Name
2010 Assessed Valuation
Percentage of Total Assessed
Valuation(1) Aspen Skiing Company LLC $70,058,180 1.92% Base Village Owner LLC (2) 33,174,140 0.91 315 East Dean Assoc. Inc. 23,635,000 0.65 Hyatt Grand Aspen 15,980,030 0.44 Aspen Highlands Condo Assoc. Inc. 15,851,550 0.43 Silvertree Hotel of Snowmass 15,064,460 0.41 Residences at the Little Nell Condo Assoc. Inc. 14,842,770 0.41 Jerome Property LLC 13,793,930 0.38 Carroll Drive Properties LLC 9,735,590 0.27 Ajax Mountain Associates LLC 9,236,240 0.25 TOTAL $221,371,890 6.07%
(1) Based on a 2010 certified assessed valuation of $3,646,593,910. (2) According to the County Treasurer’s Office, this property is scheduled for a foreclosure sale on December 15,
2010; however, the owners are not delinquent in their tax payments. Source: Pitkin County Treasurer’s Office. Mill Levies Affecting Property Owners Within the District
In addition to the District’s ad valorem property tax levy, owners of property within the District are obligated to pay taxes to other taxing entities in which their property is located. As a result, property owners within the District’s boundaries may be subject to different
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mill levies depending upon the location of their property. The following table sets forth sample mill levies that may be imposed on certain properties within the District and is not intended to portray the mills levied against all properties within the District.
Sample Mill Levies Affecting Property Owners Within the District - 2009
Taxing Entity Mill Levy(1) Aspen School District RE-1 7.846 Pitkin County 5.677 City of Aspen 4.042 Colorado Mountain College 3.997 Aspen Fire Protection District 1.146 Pitkin County Library District 0.906 Aspen Historic Park & Rec District 0.236 Colorado River Conservancy District 0.166 Aspen Ambulance District 0.138 Aspen Consolidated Sanitation District 0.130
Total Overlapping Sample Mill Levy 24.284 The District 0.969
Total Sample Mill Levy 25.253 __________________
(1) One mill equals 1/10 of one percent. Mill levies certified in 2009 result in the collection of property taxes in 2010.
Source: Pitkin County Assessor’s Office. Estimated Overlapping General Obligation Debt
In addition to the general obligation indebtedness of the District, other taxing entities overlap or partially overlap the boundaries of the District. The following table sets forth those taxing entities which currently pay their general obligation debt directly from a mill levy assessed against property within the District boundaries. The table reflects the outstanding general obligation debt of the other taxing entities as of the date of this Official Statement.
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Estimated Overlapping General Obligation Indebtedness
2010
Preliminary Assessed
Outstanding General
Outstanding General Obligation Debt Attributable to
the District Entity(1) Valuation(2) Obligation Debt Percent(3) Amount City of Aspen $1,687,839,340 $ 14,375,000 100.00% $ 14,375,000 Aspen Fire Protection District 2,688,351,410 12,275,000 100.00 12,275,000 Aspen Highlands Residential Metro Dist 59,964,320 6,995,000 100.00 6,995,000 Aspen School District No. 1 3,377,742,300 67,035,000 100.00 67,035,000 Town of Basalt 226,763,620 2,440,000 31.87 777,628 Basalt and Rural Fire Protection District 506,876,260 1,465,000 42.25 618,963 Basalt Regional Library District 562,836,310 10,220,000 47.99 4,904,578 Basalt Sanitation District 145,703,520 2,410,000 50.09 1,207,169 Base Village Metropolitan Dist. No. 2 39,329,940 47,750,000 100.00 47,750,000 Brush Creek Metropolitan District 28,292,690 1,295,000 100.00 1,295,000 Buttermilk Metropolitan District 46,129,390 3,105,000 100.00 3,105,000 Crown Mountain Park & Rec District 502,616,520 4,315,000 42.27 1,823,951 Holland Hills Metropolitan District 4,986,470 1,000,000 100.00 1,000,000 Meadowood Metropolitan District 24,735,530 3,135,511 100.00 3,135,511 Pitkin County 3,686,822,500 18,175,000 98.99 17,991,433 Roaring Fork School District Re-1 1,414,096,920 104,904,984 19.22 20,162,738 Town of Snowmass Village 700,421,450 10,035,000 100.00 10,035,000 Snowmass Water and Sanitation District 663,035,320 1,635,000 100.00 1,635,000 Starwood Metropolitan District 82,226,960 3,085,000 100.00 3,085,000 Twining Flats Road Improvement Dist. 4,196,570 44,600 100.00 44,600 Total $219,251,571 (1) The following entities also overlap with the District but they have no reported general obligation debt
outstanding: Aspen Ambulance District; Aspen Consolidated Sanitation District; Aspen Highlands Commercial Metropolitan District; Aspen Historic Park and Recreation District; Aspen Village Metropolitan District; Base Village Metropolitan District No. 1; Colorado Mountain College; Colorado River Water Conservation District; East Aspen Metropolitan District; Five Trees Metropolitan District; Gateway Metropolitan District, Pitkin County Library District; Town of Snowmass Village General Improvement District; Snowmass-Wildcat Fire Protection District; White Horse Springs Water and Sanitation District; and W/J Ranch Metropolitan District.
(2) These values are preliminary and are subject to change on or prior to December 10, 2010. The final 2010 assessed valuation figures will be certified by the County Assessor for collection of ad valorem property taxes in 2011.
(3) The percentage of each entity’s outstanding debt chargeable to District property owners is calculated by comparing the assessed valuation of the portion overlapping the District to the total assessed valuation of the overlapping entity. To the extent the District’s assessed valuation changes disproportionately with the assessed valuation of the overlapping entities, the percentage of debt for which District property owners are responsible will also change.
Sources: Counties of Eagle and Pitkin Assessor’s Offices; and individual taxing entities.
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DISTRICT DEBT STRUCTURE
Required Elections
Various State constitutional and statutory provisions require voter approval prior to the incurrence of general obligation indebtedness by the District. Among such provisions, Article X, Section 20 of the Colorado Constitution (the Taxpayers Bill of Rights, or “TABOR”) requires that, except for refinancing bonded debt at a lower interest rate, the District must have voter approval in advance for the creation of any multiple-fiscal year direct or indirect district debt or other financial obligation whatsoever without adequate present cash reserves pledged irrevocably and held for payments in all future fiscal years. For a discussion of TABOR, see “LEGAL MATTERS – Certain Constitutional Limitations.” For a discussion of District debt elections, see “INTRODUCTION--Security--Additional Bonds” above. The Bonds are issued by the District as a result of the Election.
General Obligation Debt
Statutory Debt Limit. The District is subject to a statutory debt limitation established pursuant to Section 32-1-1101(6), C.R.S. This limitation provides that, with certain exceptions listed below, the total principal amount of general obligation debt issued by a special district after 1991 shall not at the time of issuance exceed the greater of $2 million or 50% of the special district’s assessed valuation. Based upon the District’s 2010 certified assessed valuation of $3,646,593,910, the District’s debt limitation is $1,823,296,955. The Bonds will not exceed this amount.
Outstanding General Obligation Debt. Upon issuance of the Bonds, the Bonds will be the only outstanding general obligation indebtedness of the District. The debt service schedule for the Bonds is set forth in “DEBT SERVICE REQUIREMENTS.”
Authorized but Unissued Debt. The Bond Resolution does not prohibit the District from issuing additional general obligation indebtedness. If it does issue any additional general obligation indebtedness while the Bonds are outstanding, such additional debt would have a parity claim to the ad valorem tax revenue from which the Bonds will be payable.
Revenue and Other Financial Obligations
Revenue Bonds. The District also has the authority to issue revenue obligations payable from the net revenue of District facilities, to enter into obligations which do not extend beyond the current fiscal year, and to incur certain other obligations. Currently, the District has two outstanding obligations payable from revenues of the District.
The District has previously issued its Aspen Valley Hospital District Variable Rate Demand Revenue Bonds Series 2003 (the “Series 2003 Bonds”) which are currently outstanding in the aggregate principal amount of $10,840,000, which bear interest at weekly interest rates determined by Wells Fargo Securities as remarketing agent. The Series 2003 Bonds are secured by a pledge of the District’s Hospital Revenues and by a letter or credit (the “Letter of Credit”) issued by Vectra Bank. The District’s obligation to reimburse draws upon the Letter of Credit are governed pursuant to the terms of a Reimbursement Agreement dated as of
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October 1, 2003 (the “Reimbursement Agreement”) between the District and Zions First National Bank. (the “Reimbursement Bank”).
In 2007, the District issued its Aspen Valley Hospital District Refunding Revenue Bonds, Series 2007 (the “Series 2007 Bonds”), which were issued on a parity with the Series 2003 Bonds. The Series 2007 Bonds are currently outstanding in the aggregate principal amount of $11,595,000.
The District’s revenue bonds are payable solely from the net revenues of the District and are not payable from general ad valorem property taxes.
Physician Guarantee Contracts. The District has entered into income guarantee contracts for several physicians. The District has agreed to make various payments to the “guaranteed party” each month if the gross cash collections generated by the physician’s practice does not equal or exceed an amount specified by contract. The majority of the contracts have a guarantee period of 12 months and a forgiveness period of 24 months. The District has executed promissory notes with each covered physician. The maximum potential amount of future undiscounted payments the District could be required to make under these contracts totaled $57,122 as of December 31, 2009. See Note E to the audited financial statements attached hereto as Appendix A.
Operating Leases and Other Obligations. During 2008, the District entered into a note with the Alpine Bank for the acquisition of a property located at 331 Holland Hills Road in Basalt. The note specifies payment of principal and interest of $2,492 payable monthly with a final balloon payment of $539,930 due in 2013. The note is collateralized by the Holland Hills Road property and has a variable interest of prime plus 2%. As of December 31, 2009, the note had an outstanding principal balance of $593,328. Further, the District has capitalized lease obligations at varying rates of imputed interest maturing between 2010 and 2014 that are collateralized by leased equipment. As of December 31, 2009, the lease obligations were outstanding in the aggregate principal amount of $1,635,960. See Note I to the District’s audited financial statements attached hereto as Appendix A.
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Selected Debt Ratios
The following table sets forth ratios of direct debt of the District (after giving effect to the issuance of the Bonds) and overlapping debt within the District (only for those entities which currently pay their general obligation debt through a mill levy assessed against property within the District) to assessed valuation and statutory actual value of the District:
Selected Debt Ratios of the District as of the Date of the Issuance of the Bonds (Unaudited)
Estimated Population of District (1) ...................................................... 14,384 Direct Debt (Consisting of the Bonds)................................................... $ 50,000,000 Overlapping Debt (2) ............................................................................. 219,251,571 Total Direct Debt and Overlapping Debt............................................... $269,251,571 Per Capita Direct Debt ........................................................................... $3,476.08 Per Capita Direct and Overlapping Debt ............................................... $18,718.82 2010 District Assessed Valuation .......................................................... $3,646,593,910 Direct Debt to 2010 Assessed Valuation ............................................... 1.37% Direct Debt Plus Overlapping Debt to 2010 Assessed Valuation.......... 7.38% 2010 District Estimated Statutory “Actual” Value (3) .......................... $35,826,608,780 Direct Debt to 2010 Estimated Statutory “Actual” Value ..................... 0.14% Direct Debt Plus Overlapping Debt to 2010 Estimated
Statutory “Actual” Value................................................................... 0.75% ____________________
(1) Population estimate provided by the Underwriter. (2) Figure is estimated based on information supplied by other taxing authorities and does not include self-
supporting general obligation debt. See “PROPERTY TAXATION, ASSESSED VALUATION AND OVERLAPPING DEBT – Estimated Overlapping General Obligation Debt” and the footnote regarding the type of overlapping debt which is included.
(3) This figure has been calculated using a statutory formula under which assessed valuation is calculated at 7.96% of the statutory “actual” value of residential property in the District, 29% of the statutory “actual” value of most of the other property within the District (with certain specified exceptions). Statutory “actual” value is not intended to represent market value. See “PROPERTY TAXATION, ASSESSED VALUATION AND OVERLAPPING DEBT – Ad Valorem Property Taxes.”
Sources: County Assessor’s Office, the District, the Underwriter, and information obtained from individual
overlapping entities.
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ECONOMIC AND DEMOGRAPHIC INFORMATION
This portion of the Official Statement contains general information concerning the economic and demographic conditions in and surrounding the County. It is intended only to provide prospective investors with general information regarding the District’s community. The information was obtained from the sources indicated and is limited to the time periods indicated. The information is historic in nature; it is not possible to predict whether the trends shown will continue in the future. The District makes no representation as to the accuracy or completeness of data obtained from parties other than the District.
Population and Age Distribution
The following table sets forth population statistics for the City of Aspen, Pitkin County and the State for the periods listed. Between 2000 and 2009, the population of the City increased approximately 15.8%, the County increased 17.6% and the State increased 18.0%.
Population
Year
City of Aspen
Percent Change
Pitkin County
Percent Change
Colorado
Percent Change
1960 1,101 -- 2,381 -- 1,753,947 -- 1970 2,437 121.3% 6,185 159.8% 2,209,596 26.0% 1980 3,678 50.9 10,338 67.1 2,889,735 30.8 1990 5,049 37.3 12,661 22.5 3,294,394 14.0 2000 5,914 17.1 14,872 17.5 4,301,261 30.6 2009 6,846 15.8 17,489 17.6 5,074,528 18.0
Sources: Figures for 1960 through 2000 were obtained from the United States Department of Commerce, Bureau
of Census; figures for 2009 are estimates provided by the Colorado Department of Local Affairs, Division of the Local Government, and are subject to periodic revision.
The following table provides an age profile for the populations of the City of
Aspen, Pitkin County, the State, and the nation as of January 1, 2010.
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Age Distribution
Age City of Aspen Pitkin County Colorado United States 0-17 13.7% 16.1% 24.2% 24.3% 18-24 6.0 6.4 9.2 9.7 25-34 16.0 13.3 14.9 13.3 35-44 19.3 18.4 14.3 13.6 45-54 16.8 17.8 14.9 14.4 55-64 17.6 17.8 11.6 11.5 65-74 6.9 7.0 6.1 7.0 75 and Older 3.7 3.2 4.8 6.2
Source: © 2010 The Nielsen Company, SiteReports. Income
The following table sets forth the annual per capita personal income levels for the residents of Pitkin County, the State and the nation. Per capita personal income levels in the County have consistently exceeded State and national levels during the period shown.
Annual Per Capita Personal Income
Year Pitkin County Colorado United States 2004 $75,528 $36,652 $33,881 2005 82,140 38,555 35,424 2006 90,500 40,898 37,698 2007 95,687 42,367 39,458 2008 92,680 43,509 40,673 2009(1) n/a 41,839 39,626
(1) State and national data posted September 2010. County 2009 will be posted in April 2011. Source: United States Department of Commerce, Bureau of Economic Analysis.
The following two tables reflect the Median Household Effective Buying Income (“EBI”), and also the percentage of households by EBI groups. EBI is defined as “money income” (defined below) less personal tax and nontax payments. “Money income” is defined as the aggregate of wages and salaries, net farm and nonfarm self-employment income, interest, dividends, net rental and royalty income, Social Security and railroad retirement income, other retirement and disability income, public assistance income, unemployment compensation, Veterans Administration payments, alimony and child support, military family allotments, net winnings from gambling, and other periodic income. Deductions are made for personal federal, state and local income taxes, personal contributions to social insurance (Social Security and federal retirement payroll deductions), and taxes on owner-occupied nonbusiness real estate. The resulting figure is known as “disposable” or “after-tax” income.
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Median Household Effective Buying Income
Year City of Aspen Pitkin County Colorado United States 2006 -- $55,347 $45,594 $40,529 2007 -- 56,252 45,477 41,255 2008 -- 56,888 44,711 41,792 2009 $53,111 58,449 45,490 42,513 2010 55,257 59,622 45,543 43,252
Source: © The Nielsen Company, SiteReports, 2009-2010. (Prior years provided by Nielsen Claritas-informed
publication: Trade Dimensions International Inc. – Demographics USA – County Edition, 2006-2008.)
Percent of Households by Effective Buying Income Group - 2010
Effective Buying Income Group
City of Aspen
Pitkin County
Colorado
United States
Under $24,999 15.9% 12.8% 21.1% 26.2% $25,000 - 49,999 29.7 28.6 34.4 32.1 $50,000 - 74,999 21.1 22.3 20.8 20.1 $75,000 - 99,999 13.3 13.7 12.0 11.1 $100,000 - 149,999 9.5 10.5 7.5 6.5 $150,000 - More 10.5 12.1 4.2 4.0
Source: © 2010 The Nielsen Company, SiteReports. Employment
The following table presents information on employment within Pitkin County, the State and the nation for the period indicated. The annual unemployment figures indicate average rates for the entire year and do not reflect monthly or seasonal trends.
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Labor Force and Employment
Pitkin County(1) Colorado(1) United States Year
Labor Force
Percent Unemployed
Labor Force
Percent Unemployed
Percent Unemployed
2005 11,186 4.1% 2,588,382 5.1% 5.1% 2006 11,393 3.2 2,653,333 4.4 4.6 2007 11,399 2.8 2,695,834 3.9 4.6 2008 11,616 3.3 2,727,616 4.9 5.8 2009 11,036 6.3 2,701,026 7.7 9.3
Month of August(2)
2009 11,016 5.4% 2,709,855 7.7% 9.7% 2010 10,816 6.2 2,686,473 8.0 9.6
(1) Figures for the County and the State are not seasonally adjusted. (2) Most current revised data available. Due to the seasonal nature of much of the employment in the County, the
monthly estimates are not necessarily representative of overall employment in the County. Source: State of Colorado, Department of Labor and Employment, Labor Market Information, Colorado Areas
Labor Force Data and U.S. Bureau of Labor, Bureau of Labor Statistics.
The following table sets forth the number of individuals employed within selected Pitkin County industries which are covered by unemployment insurance. In 2009, the largest employment sector in the County was accommodation and food services (comprising approximately 23.4% of the County’s work force), followed, in order, by government; arts, entertainment, and recreation; administrative and waste services; and retail trade. For the twelve-month period ended December 31, 2009, total average employment in the County decreased (10.0)% as compared to the same period ending December 31, 2008, while average weekly wages decreased (4.8)% during the same time period.
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Average Number of Employees Within Selected Industries – Pitkin County
Industry Title 2005 2006 2007 2008 2009 2010(1)
Agriculture, Forestry, Fishing, Hunting 49 50 49 55 56 46 Mining n/a(2) n/a(2) n/a(2) n/a(2) n/a(2) n/a(2) Utilities 14 11 n/a(2) n/a(2) n/a(2) n/a(2) Construction 1,124 1,152 1,218 1,292 1,039 824 Manufacturing 140 155 161 155 128 102 Wholesale Trade 131 116 110 109 90 84 Retail Trade 1,638 1,642 1,633 1,592 1,339 1,459 Transportation and Warehousing 272 240 262 235 184 187 Information 229 224 230 242 215 199 Finance and Insurance 319 320 325 319 298 292 Real Estate, Rental and Leasing 1,243 1,363 1,306 1,373 1,205 1,325 Professional and Technical Services 843 932 979 977 816 718 Management of Companies/Enterprises 80 90 45 41 30 31 Administrative and Waste Services 1,584 1,711 1,645 1,926 1,384 1,157 Educational Services 258 267 284 249 239 191 Health Care and Social Assistance 363 363 383 385 383 357 Arts, Entertainment and Recreation 1,710 1,788 1,869 1,929 1,824 n/a(2) Accommodation and Food Services 3,879 3,868 3,831 3,793 3,636 4,468 Other Services 784 821 709 723 703 714 Non-classifiable n/a(2) n/a(2) n/a(2) n/a(2) n/a(2) n/a(2) Government 1,717 1,754 1,800 1,866 1,957 1,967 Total(3) 16,382 16,873 16,858 17,283 15,548 17,040 (1) Averaged figures for 1st quarter 2010. (2) Due to confidentiality, figures were not released. (3) Figures may not equal totals when added, due to the rounding of averages or the inclusion in the total of
employees that were not disclosed in individual classifications. Source: State of Colorado, Department of Labor and Employment, Labor Market Information, Quarterly Census of
Employment and Wages (QCEW). Major Employers
A brief description of selected major employers located within the City and their approximate number of employees is listed below. No independent investigation of the stability or financial condition of the employers listed hereafter has been conducted, therefore no representation can be made that such employers will continue to maintain their status as major employers in the City.
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Selected Major Employers in the City of Aspen
Name of Employer
Product or Service
Estimated Number of
Employees(1) Aspen Valley Hospital Hospital 250 - 499 City of Aspen Local government 250 - 499 St. Regis Aspen Resort Hotel 250 - 499 Roaring Fork Transit Authority Bus lines 250 - 499 Pitkin County Local government 250 - 499 Aspen School District No. 1 Public education 100 - 249 Ritz Carlton Club Residence club 100 - 249 Hotel Jerome Hotel 100 - 249 Aspen Club & Spa Health club 100 - 249
(1) Due to the seasonal nature of the majority of the businesses in the City, winter estimates reflect employee
numbers from mid-November through mid-April. Figures include full-time, part-time and seasonal employees. Source: State of Colorado Department of Labor and Employment, Labor Market Facts; Aspen School District No.
1; and Pitkin County. Retail Sales
The table set forth below provides information on retail sales within the City, the County and the State for the years indicated.
Retail Sales (in thousands)
Year City of Aspen
Percent Change
Pitkin County
Percent Change Colorado
Percent Change
2005 $625,241 -- $ 979,221 -- $122,907,090 -- 2006 713,502 14.1% 1,088,156 11.1% 133,531,307 8.6% 2007 740,256 3.7 1,285,247 18.1 148,673,216 11.3 2008 728,053 (1.6) 1,316,335 2.4 152,747,684 2.7 2009 606,543 (16.7) 1,170,986 (11.0) 134,058,593 (12.2) 2010(1) 211,803 -- 332,593 -- 31,717,505 --
(1) Figures for 1st quarter 2010. Source: State of Colorado, Department of Revenue, “Sales Tax Statistics,” 2005-2010. Building Permit Activity
The following two tables set forth the number of building permits issued in the City of Aspen and in Pitkin County for the time period indicated.
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Building Permit Issuances in the City of Aspen
Residential(1) Commercial(1)
Year Permits Value Permits Value 2005 538 $208,837,668 202 $ 35,583,318 2006 616 182,820,303 244 117,437,727 2007 597 187,754,848 266 67,515,865 2008 420 87,814,004 211 82,927,044 2009 329 37,808,105 242 28,110,833 2010(2) 288 45,258,110 265 10,401,965
(1) Includes permits issued for new construction, additions, and remodels. (2) Permits issued through October 2010. Source: City of Aspen Building Department.
Building Permits Issued in Pitkin County
Residential(1) Non-Residential Construction(1) Year Units Value Permits Value 2005 207 $126,365,666 13 $ 6,208,750 2006 181 115,438,374 33 5,777,650 2007 187 120,985,744 44 7,133,000 2008 137 130,387,911 32 11,989,400 2009 93 71,949,751 36 4,453,700 2010(2) 88 68,081,494 19 3,201,000
(1) Includes permits issued for new construction, additions, and remodels. (2) Permits issued through September 2010. Source: Pitkin County Building Division. Foreclosure Activity
The following table sets forth, the number of foreclosures filed in the County during the time period indicated. Such information represents the number of foreclosures filed, and does not take into account the number of foreclosures which were subsequently redeemed or withdrawn.
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History of Foreclosures - Pitkin County
Year
Number of Foreclosures Filed
Percent Change
2005 15 -- 2006 24 60.0% 2007 15 (37.5) 2008 35 133.3 2009 103 194.3 2010(1) 122 --
(1) As of November 8, 2010. Source: Pitkin County Public Trustee’s Office. Recreation and Tourism
Year-round tourism and skiing-related businesses account for a significant portion of the employment and earned income of area residents.
The Ski Industry in the State. After three consecutive years of gain, the Colorado ski industry dropped approximately 6.1 percent in skier visits during the 2008-09 season at the state’s 26 ski areas and held steady for the 2009-10 season. According to Colorado Ski Country USA (“CSCUSA”), a ski industry group, Colorado hosted 11.86 million skier visits during the 2009-10 season, a slight increase over the 11.77 million visits hosted in the 2008-09 season. Skier visits represent one person visiting a ski area for all or any part of a day or night for the purpose of skiing or snowboarding. Overall snow totals across the State were a contributing factor to the 2009-10 season’s visitation patterns. Snowfall amounts were down substantially, a 26 percent decrease compared to the 2008-09 season. However, heavy spring snows rallied visits to a solid finish for the season.
An indicator of a significant ski industry is the economic impact. Research commissioned by Colorado Ski Country USA in 2004, stated that skiers spend $2.0 to $2.5 billion annually in Colorado, with up to an estimated two-thirds of those expenditures being captured by local business within the resort communities. In addition, the strong number of skier visits supported Denver International Airport’s 2008 first time posting of 50 million plus passengers in a year. The 2009 passenger total reflected a -2.1% decrease from the previous year.
The Ski Industry in the Aspen Area. Aspen/Snowmass is comprised of four mountains: Snowmass, Aspen Mountain, Aspen Highlands, and Buttermilk and is owned by Aspen Skiing Company. Aspen Skiing Company has invested more than $130 million over the past seven years in on-mountain improvements that include 11 new lifts with two new gondolas, three new restaurants, a $17 million children’s center, a second 22-foot Olympic-size halfpipe, additional terrain, plus the new Snowmass base village. The Treehouse Kids’ Adventure Center features a family-friendly alpine climber, teen activities, children’s retail and themed rooms for children ages eight-weeks and up. It stands as the first of its kind in the snowsports industry. In its second season (winter 2008-2009), the new Snowmass base village opened new ski-in/ski-out
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condos and a new 8,000 square foot conference space. Buttermilk is the home of the ESPN Winter X Games through 2012 and was voted #1 by Transworld Snowboarding Magazine Reader’s Poll for best pipe.
Skier visits at the two busiest ski areas in the vicinity, Snowmass and Aspen Mountain, accounted for 8.6% of the total skier visits for the State during the 2009/10 ski season. Set forth in the following table are the skier visits for the Aspen area ski resorts from the 2005/06 ski season through the 2009/10 ski season, as well as skier visit data for the State.
Historical Skier Visits(1)
(in thousands)
2005/06 2006/07 2007/08 2008/09 2009/10 Aspen Area Ski Resorts(2) 1,445 1,446 1,476 1,283 1,338 Percent Change -- 0.1% 2.1% (13.1)% 4.3% Colorado 12,533 12,566 12,541 11,775 11,862 Percent Change -- 0.3% (0.2)% (6.1)% 0.8% Aspen Area as % of State 11.5% 11.5% 11.8% 10.9% 11.3%
___________________ (1) Skier visits include all lift tickets issued by the ski area for discount, fully paid or complimentary lift tickets on
a daily basis for each ski season. (2) Snowmass, Aspen Mountain, Aspen Highlands, and Buttermilk. Source: Colorado Ski Country USA and Aspen Skiing Company.
The following table sets forth the respective mountain statistics for each of the resort mountains associated with the Aspen/Snowmass Ski Resort area. All of the resort mountains are considered Destination Resorts, meaning they have a resort bed base and are more than a two-hour drive from the City of Denver.
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Mountain Statistics – Aspen/Snowmass
Resort(1)
Snowmass
Aspen Highlands
Aspen Mountain
Buttermilk Mountain
Scheduled Opening Date
November 26 December 12 November 26 December 12
Base Elevation 8,104 ft. 8,040 ft. 7,945 ft. 7,870 ft. Summit Elevation 12,510 ft. 11,675 ft. 11,212 ft. 9,900 ft. Vertical Rise 4,406 ft. 3,635 ft. 3,267 ft. 2,030 ft. Skiable Acres 3,132 1,028 673 470 Number of Trails 91 118 76 44 Longest Run 5.3 miles 3.5 miles 3 miles 5 miles % of Trails Beg/Int/Exp
6/50/44
18/30/52
0/48/52
35/39/26
Annual Snowfall 300 inches 300 inches 300 inches 200 inches Snowmaking 230 acres 110 acres 210 acres 108 acres Number of Lifts 21 5 8 9 Lift Capacity 33,058 riders/hour 6,500 riders/hour 10,755 riders/hour 7,500 riders/hour Parks and Pipes 3 terrain parks
1 superpipe 1 beginner pipe
-- -- 2 terrain parks, includes superpipe and X Games slopestyle course
Restaurants 9 2 4 2 (1) All resorts are considered Destination Resorts–have a resort bed base and are more than a two-hour drive from
Denver. Source: Colorado Ski Country USA.
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TAX MATTERS
2010A Bonds
In the opinion of Bond Counsel, assuming continuous compliance with certain covenants described below, interest on the 2010A Bonds is excluded from gross income under federal income tax laws pursuant to Section 103 of the Tax Code, interest on the 2010A Bonds is excluded from alternative minimum taxable income as defined in Section 55(b)(2) of the Tax Code, and interest on the 2010A Bonds is excluded from Colorado taxable income and Colorado alternative minimum taxable income under Colorado income tax laws in effect on the date of delivery of the 2010A Bond. For purposes of this paragraph and the succeeding discussion, “interest” includes the original issue discount on certain of the 2010A Bonds only to the extent such original issue discount is accrued as described herein.
The Tax Code and Colorado law impose several requirements which must be met with respect to the 2010A Bonds in order for the interest thereon to be excluded from gross income and alternative minimum taxable income. Certain of these requirements must be met on a continuous basis throughout the term of the 2010A Bonds. These requirements include: (a) limitations as to the use of proceeds of the 2010A Bonds; (b) limitations on the extent to which proceeds of the 2010A Bonds may be invested in higher yielding investments; and (c) a provision, subject to certain limited exceptions, that requires all investment earnings on the proceeds of the 2010A Bonds above the yield on the 2010A Bonds to be paid to the United States Treasury. The District will covenant and represent in the Bond Resolution that it will take all steps to comply with the requirements of the Tax Code and Colorado law (in effect on the date of delivery of the 2010A Bonds) to the extent necessary to maintain the exclusion of interest on the 2010A Bonds from gross income and alternative minimum taxable income under such federal income tax laws and Colorado taxable income and Colorado alternative minimum taxable income under such Colorado income tax laws. Bond Counsel’s opinion as to the exclusion of interest on the 2010A Bonds from gross income, alternative minimum taxable income, and Colorado income tax is rendered in reliance on these covenants, and assumes continuous compliance therewith. The failure or inability of the District to comply with these requirements could cause the interest on the 2010A Bonds to be included in gross income or alternative minimum taxable income, or both, from the date of issuance. Bond Counsel’s opinion also is rendered in reliance upon certifications of the District and other certifications furnished to Bond Counsel. Bond Counsel has not undertaken to verify such certifications by independent investigation.
The Tax Code contains numerous provisions which may affect an investor’s decision to purchase the 2010A Bonds. Owners of the 2010A Bonds should be aware that the ownership of tax-exempt obligations by particular persons and entities, including, without limitation, financial institutions, insurance companies, recipients of Social Security or Railroad Retirement benefits, taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry tax-exempt obligations, foreign corporations doing business in the United States and certain “subchapter S” corporations may result in adverse federal and Colorado tax consequences. Under Section 3406 of the Tax Code, backup withholding may be imposed on payments on the 2010A Bonds made to any owner who fails to provide certain required information, including an accurate taxpayer identification number, to certain persons required to
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collect such information pursuant to the Tax Code. Backup withholding may also be applied if the owner underreports “reportable payments” (including interest and dividends) as defined in Section 3406, or fails to provide a certificate that the owner is not subject to backup withholding in circumstances where such a certificate is required by the Tax Code. Certain of the 2010A Bonds were sold at a premium, representing a difference between the original offering price of those 2010A Bonds and the principal amount thereof payable at maturity. Under certain circumstances, an initial owner of such bonds (if any) may realize a taxable gain upon their disposition, even though such bonds are sold or redeemed for an amount equal to the owner’s acquisition cost. Bond Counsel’s opinion relates only to the exclusion of interest on the 2010A Bonds from gross income, alternative minimum taxable income, Colorado taxable income and Colorado alternative minimum taxable income as described above and will state that no opinion is expressed regarding other federal or Colorado tax consequences arising from the receipt or accrual of interest on or ownership of the 2010A Bonds. Owners of the 2010A Bonds should consult their own tax advisors as to the applicability of these consequences.
The opinions expressed by Bond Counsel are based on existing law as of the delivery date of the 2010A Bonds. No opinion is expressed as of any subsequent date nor is any opinion expressed with respect to pending or proposed legislation. Amendments to the federal or state tax laws may be pending now or could be proposed in the future that, if enacted into law, could adversely affect the value of the 2010A Bonds, the exclusion of interest on the 2010A Bonds from gross income or alternative minimum taxable income or both from the date of issuance of the 2010A Bonds or any other date, or that could result in other adverse tax consequences. In addition, future court actions or regulatory decisions could affect the tax treatment or market value of the 2010A Bonds. Owners of the 2010A Bonds are advised to consult with their own tax advisors with respect to such matters.
The Internal Revenue Service (the “Service”) has an ongoing program of auditing tax-exempt obligations to determine whether, in the view of the Service, interest on such tax-exempt obligations is includable in the gross income of the owners thereof for federal income tax purposes. No assurances can be given as to whether or not the Service will commence an audit of the 2010A Bonds. If an audit is commenced, the market value of the 2010A Bonds may be adversely affected. Under current audit procedures, the Service will treat the District as the taxpayer and the Owners may have no right to participate in such procedures. The District has covenanted in the Bond Resolution not to take any action that would cause the interest on the 2010A Bonds to lose its exclusion from gross income for federal income tax purposes or lose its exclusion from alternative minimum taxable income for the owners thereof for federal income tax purposes. None of the District, the Financial Advisors, the initial purchaser of the 2010A Bonds or Bond Counsel or Special Counsel is responsible for paying or reimbursing any Registered Owner or Beneficial Owner for any audit or litigation costs relating to the 2010A Bonds.
2010B Bonds
In the opinion of Bond Counsel, interest on the 2010B Bonds is included in gross income pursuant to the Tax Code. The District has designated the 2010B Bonds as “Build America Bonds” pursuant to Section 54AA(d)(1) of the Tax Code. Pursuant to Section 54AA(g)(2) of the Tax Code, the District has elected to receive a credit under Section 6431 of
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the Tax Code in connection with the 2010B Bonds, in lieu of any credit otherwise available to the Owners under Section 54AA(a) of the Code. The owners of the 2010B Bonds will not receive a tax credit as a result of holding the 2010B Bonds. In the opinion of 2010B Bond Counsel, assuming continuous compliance with certain covenants described herein, the interest on and income from the 2010B Bonds is exempt from all taxation and assessments in the State of Colorado.
The Tax Code imposes several requirements which must be met with respect to the 2010B Bonds in order for such bonds to continue to qualify as “Build America Bonds.” Certain of these requirements must be met on a continuous basis throughout the term of the 2010B Bonds. These requirements include: (a) limitations as to the use of proceeds of the 2010B Bonds; (b) limitations on the extent to which proceeds of the 2010B Bonds may be invested in higher yielding investments; and (c) a provision, subject to certain limited exceptions, that requires all investment earnings on the proceeds of the 2010B Bonds above the yield on the 2010B Bonds to be paid to the United States Treasury. Under Colorado law in effect as of the date of issuance of the 2010B Bonds, if the 2010B Bonds cease to qualify as “Build America Bonds,” the interest on and income from the 2010B Bonds may become subject to taxation and assessments in the State of Colorado. The District will covenant and represent that it will take all steps to maintain the status of the 2010B Bonds as “Build America Bonds” under the Tax Code to the extent necessary to maintain exemption of the interest on and income from 2010B Bonds from all taxation and assessments in the State of Colorado. Bond Counsel’s opinion as to the exemption of the interest on and income from 2010B Bonds from all taxation and assessments in the State of Colorado is rendered in reliance on these covenants, and assumes continuous compliance therewith. Bond Counsel’s opinion also is rendered in reliance upon certifications of the District and other certifications furnished to Bond Counsel. Bond Counsel has not undertaken to verify such certifications by independent investigation.
The Tax Code contains numerous provisions which may affect an investor’s decision to purchase the 2010B Bonds. Under Section 3406 of the Tax Code, backup withholding may be imposed on payments on the 2010B Bonds made to any owner who fails to provide certain required information, including an accurate taxpayer identification number, to certain persons required to collect such information pursuant to the Tax Code. Backup withholding may also be applied if the owner underreports “reportable payments” (including interest and dividends) as defined in Section 3406, or fails to provide a certificate that the owner is not subject to backup withholding in circumstances where such a certificate is required by the Tax Code.
The opinions expressed by Bond Counsel are based on existing law as of the delivery date of the 2010B Bonds. No opinion is expressed as of any subsequent date nor is any opinion expressed with respect to pending or proposed legislation. Amendments to the federal or state tax laws may be pending now or could be proposed in the future that, if enacted into law, could adversely affect the value of the 2010B Bonds. In addition, future court actions or regulatory decisions could affect the market value of the 2010B Bonds. Owners of the 2010B Bonds are advised to consult with their own tax advisors with respect to such matters.
The Service routinely examines municipal bond issues for compliance with the applicable tax laws and regulations. Like other municipal bonds, Build America Bonds, such as
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the 2010B Bonds, and the application of the proceeds thereof to expenditures, are subject to numerous requirements set forth in the Tax Code and regulations promulgated thereunder, and are subject to scrutiny by the Service. The Service’s scrutiny of Build America Bonds is likely to include an inquiry into the requirement that proceeds of Build America Bonds, net of any proceeds used for issuance costs and funding of a reserve fund, must be used for “capital expenditures”, as that term is used in Section 54AA of the Tax Code. Further, the Service may determine to examine a greater percentage of Build America Bonds than the percentage of other municipal bonds it examines under its current practices. If, as a result of such an examination of the Bonds, the Service makes an initial determination that the District did not comply with the applicable rules, the Service could suspend paying BAB Credits to the District even before it makes a final determination that the applicable tax rules were violated. In addition, the Service could seek to recover BAB Credits previously paid to the District.
Any tax advice concerning the 2010B Bonds, interest on the 2010B Bonds or any other federal income tax issues associated with the 2010B Bonds, express or implicit in the provisions of this Official Statement, is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding penalties that may be imposed on any taxpayer by the Internal Revenue Service. This document supports the promotion or marketing of the transactions or matters addressed herein. Each taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor.
FINANCIAL INSTITUTION INTEREST DEDUCTION
The Tax Code generally provides that a financial institution may not deduct that portion of its interest expense which is allocable to tax-exempt interest. The interest expense which is allocable to tax-exempt interest is an amount which bears the same ratio to the institution’s interest expense as the institution’s average adjusted basis of tax-exempt obligations acquired after August 7, 1986 bears to the average adjusted basis of all assets of the institution. Tax-exempt obligations may be treated as if issued prior to August 7, 1986 (and therefore are not subject to this rule), if they are “qualified tax-exempt obligations” as defined in the Tax Code and are designated for this purpose by the District.
The District has designated the 2010A Bonds for this purpose; however, under provisions of the Tax Code dealing with financial institution preference items, certain financial institutions, including banks, are denied 20% of their otherwise allowable deduction for interest expense with respect to obligations incurred or continued to purchase or carry the 2010A Bonds. In general, interest expense with respect to obligations incurred or continued to purchase or carry the 2010A Bonds will be in an amount which bears the same ratio as the institution’s average adjusted basis in the 2010A Bonds bears to the average adjusted basis of all assets of the institution.
Amendments to the Tax Code could be enacted in the future and there is no assurance that any such future amendments which may be made to the Tax Code will not adversely affect the ability of banks or other financial institutions to deduct any portion of its interest expense allocable to tax-exempt interest.
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LEGAL MATTERS
No Litigation
According to the District and its General Counsel, no litigation challenging the validity or the issuance of the Bonds is pending or threatened. The District’s attorney states that as of the date hereof, to the best of her knowledge, although the District is subject to certain pending or threatened litigation or administrative proceedings, these matters either are adequately covered by insurance or, to the extent not insured, the final settlement thereof is not expected to materially, adversely affect the financial position of the District.
Sovereign Immunity
The Colorado Governmental Immunity Act, Title 24, Article 10, C.R.S. (the “Immunity Act”), provides that, with certain specified exceptions, sovereign immunity acts as a bar to any action against a public entity, such as the District, for injuries which lie in tort or could lie in tort.
The Immunity Act provides that sovereign immunity is waived by a public entity for injuries occurring as a result of certain specified actions or conditions, including: the operation of a non-emergency motor vehicle (including a light rail car), owned or leased by the public entity; the operation of any public hospital, correctional facility or jail; a dangerous condition of any public building; certain dangerous conditions of a public highway, road or street; and the operation and maintenance of any public water facility, gas facility, sanitation facility, electrical facility, power facility or swimming facility by such public entity. In such instances, the public entity may be liable for injuries arising from an act or omission of the public entity, or an act or omission of its public employees, which are not willful and wanton, and which occur during the performance of their duties and within the scope of their employment. The maximum amounts that may be recovered under the Immunity Act, whether from one or more public entities and public employees, are as follows: (a) for any injury to one person in any single occurrence, the sum of $150,000; (b) for an injury to two or more persons in any single occurrence, the sum of $600,000; except in such instance, no person may recover in excess of $150,000. The District may increase any maximum amount that may be recovered from the District for certain types of injuries. However, the District may not be held liable either directly or by indemnification for punitive or exemplary damages unless the District voluntarily pays such damages in accordance with State law. The District has not acted to increase the damage limitations under the Immunity Act.
The District may be subject to civil liability and damages including punitive or exemplary damages under federal laws, and it may not be able to claim sovereign immunity for actions founded upon federal laws. Examples of such civil liability include suits filed pursuant to Section 1983 of Title 42 of the United States Code, alleging the deprivation of federal constitutional or statutory rights of an individual. In addition, the District may be enjoined from engaging in anti-competitive practices which violate federal and State antitrust laws. However, the Immunity Act provides that it applies to any State court having jurisdiction over any claim brought pursuant to any federal law, if such action lies in tort or could lie in tort.
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Approval of Certain Legal Proceedings
The approving opinion of Sherman & Howard L.L.C., as Bond Counsel, will be delivered with each series of the Bonds. A form of each Bond Counsel opinion is attached to this Official Statement as Appendix D. Sherman & Howard L.L.C., Denver, Colorado, has also acted as Special Counsel to the District in connection with this Official Statement. Certain matters will be passed upon for the District by its General Counsel.
Certain Constitutional Limitations
TABOR (Article X, Section 20 of the Colorado Constitution). At the general election on November 3, 1992, Colorado voters approved TABOR (Article X, Section 20 of the Colorado Constitution). In general, TABOR restricts the ability of the State and local governments to increase revenues and spending, to impose taxes and to issue debt and certain other types of obligations without voter approval. TABOR generally applies to the State and all local governments, including school districts (“local governments”). TABOR does not apply to “enterprises,” defined as government-owned businesses authorized to issue revenue bonds and receiving under 10% of annual revenue in grants from all State and local governments combined. See “Proposed Fiscal Initiatives” below for a discussion of proposed amendments to TABOR.
Because some provisions of TABOR are unclear, litigation seeking judicial interpretation of its provisions has been commenced on numerous occasions since its adoption. Additional litigation may be commenced in the future seeking further interpretation of TABOR. No representation can be made as to the overall impact of TABOR on the future activities of the District, including its ability to generate sufficient revenues for its general operations, to undertake additional programs or to engage in any subsequent financing activities.
Voter Approval Requirements and Limitations on Taxes, Spending, Revenues and Borrowing. TABOR requires voter approval in advance for: (a) any new tax, tax rate increase, mill levy above that imposed in the prior year, valuation for assessment ratio increase, extension of an expiring tax, or tax policy change causing a net tax gain, (b) any increase in a local government’s spending from one year to the next in excess of the limitations described below; (c) any increase in the real property tax revenues of a local government from one year to the next in excess of the limitations described below; or (d) creation of any multiple-fiscal year direct or indirect debt or other financial obligation whatsoever (subject to certain exceptions such as the refinancing of obligations at a lower interest rate). Issuance of the Bonds was approved by the District’s voters at the Election.
TABOR limits increases in government spending and property tax revenues to, generally, the rate of inflation and a local growth factor which is based upon, for school districts, the percentage change in enrollment from year to year, and for non-school districts, the actual value of new construction in the local government. Unless voter approval is received as described above, revenues collected in excess of these permitted spending limitations must be rebated. Debt service, however, including the debt service on the Bonds, can be paid without regard to any spending limits, assuming revenues are available to do so.
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In November 2010, the District’s voters approved an election question which authorizes the District to retain excess revenues which may otherwise be required by TABOR to be refunded to taxpayers.
Emergency Reserve Funds. TABOR also requires local governments to establish emergency reserve funds. The reserve fund must consist of at least 3% of fiscal year spending, excluding bonded debt service. TABOR allows local governments to impose emergency taxes (other than property taxes) if certain conditions are met. Local governments are not allowed to use emergency reserves or taxes to compensate for economic conditions, revenue shortfalls, or local government salary or benefit increases. The District has budgeted emergency reserves as required by TABOR.
Other Limitations. TABOR also prohibits new or increased real property transfer tax rates and local government income taxes. TABOR allows local governments to enact exemptions and credits to reduce or end business personal property taxes; provided, however, the local governments’ spending is reduced by the amount saved by such action. With the exception of K-12 public education and federal programs, TABOR also allows local governments (subject to certain notice and phase out requirements) to reduce or end subsidies to any program delegated for administration by the general assembly; provided, however, the local governments’ spending is reduced by the amount saved by such action.
Police Power
The obligations of the District are subject to the reasonable exercise in the future by the State and its governmental bodies of the police power inherent in the sovereignty of the State and to the exercise by the United States of America of the powers delegated to it by the Federal Constitution, including bankruptcy.
RATING
Moody’s Investors Service (“Moody’s”) has assigned the Bonds the Rating shown on the cover page of this Official Statement. An explanation of the significance of the rating given by Moody’s may be obtained from Moody’s at 7 World Trade Center at 250 Greenwich Street, New York, New York 10007.
Such rating reflects only the view of the rating agency, and there is no assurance that the rating will be obtained or will continue for any given period of time after obtained or that the rating will not be revised downward or withdrawn entirely by the rating agency if, in its judgment, circumstances so warrant. Any such downward revision or withdrawal of such rating may have an adverse effect on the market price of the Bonds. Other than its responsibilities under the Disclosure Certificate, the District has not undertaken any responsibility to bring to the attention of the owners of the Bonds any proposed change in or withdrawal of such rating once received or to oppose any such proposed revision.
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INDEPENDENT AUDITORS
The basic financial statements of the District for the year ended December 31, 2009 and 2008, included in this Official Statement as Appendix A, have been audited by Grant Thornton LLP, independent certified public accountants, Wichita, Kansas, to the extent and for the period indicated in their report thereon.
UNDERWRITING
RBC Capital Markets, LLC, Denver, Colorado (the “Underwriter”) has agreed to purchase the Bonds from the District at a price equal to $50,174,826.55, which is equal to (i) with respect to the 2010A Bonds, the par amount of the 2010A Bonds of $12,045,000, less Underwriter’s compensation of $78,292.50, plus original issue premium of $499,826.55, and (ii) with respect to the 2010B Bonds, the par amount of the 2010B Bonds of $37,955,000, less Underwriter’s compensation of $246,707.50. The Underwriter is committed to take and pay for all of the Bonds if any are taken. The Underwriter intends to offer the Bonds to the public at the offering prices appearing on the cover page of this Official Statement. After the initial public offering, the public offering price may be varied from time to time by the Underwriter.
No assurance can be given concerning the future existence of a secondary market for the Bonds or, if one exists, its maintenance by the Underwriter or others, and prospective purchasers of the Bonds should therefore be prepared, if necessary, to hold their Bonds to maturity or prior redemption, if any.
OFFICIAL STATEMENT CERTIFICATION
The preparation of this Official Statement and its distribution have been authorized by the Board. This Official Statement is hereby duly approved by the Board as of the date on the cover page hereof.
ASPEN VALLEY HOSPITAL DISTRICT
By /s/John Sarpa President, Board of Directors
(THIS PAGE INTENTIONALLY LEFT BLANK)
A-1
APPENDIX A
Audited Financial Statements for the years ended December 31, 2009 and 2008
(THIS PAGE INTENTIONALLY LEFT BLANK)
FINANCIAL STATEMENTS AND REPORT OF
INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS
ASPEN VALLEY HOSPITAL DISTRICT
December 31, 2009 and 2008
Contents
Page
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 1
MANAGEMENT’S DISCUSSION AND ANALYSIS 3
FINANCIAL STATEMENTS
BALANCE SHEETS 14
STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS 15
STATEMENTS OF CASH FLOWS 16
STATEMENTS OF FIDUCIARY NET ASSETS 18
STATEMENTS OF CHANGES IN FIDUCIARY NET ASSETS 19
NOTES TO FINANCIAL STATEMENTS 20
SUPPLEMENTARY INFORMATION
SCHEDULE OF FUNDING PROGRESS - CASH BALANCE RETIREMENT PLAN 36
SCHEDULE OF EMPLOYER CONTRIBUTIONS - CASH BALANCE RETIREMENT PLAN 37
STATEMENT OF BUDGETED AND ACTUAL REVENUES AND EXPENSES 38
COMBINING BALANCE SHEET - COMPONENT UNITS 39
COMBINING STATEMENT OF REVENUES, EXPENSES AND
CHANGES IN NET ASSETS - COMPONENT UNITS 40
COMBINING STATEMENT OF CASH FLOWS - COMPONENT UNITS 41
Audit ���� Tax ���� Advisory
Grant Thornton LLP 8300 Thorn Drive, Suite 300
Wichita, KS 67226-2708
T 316.265.3231
F 316.383.3274
www.GrantThornton.com
Grant Thornton LLP
U.S. member firm of Grant Thornton International Ltd
Report of Independent Certified Public Accountants
Board of Directors Aspen Valley Hospital District We have audited the accompanying financial statements of the business-type activities, the aggregate discretely presented component units and the aggregate remaining fund information of the Aspen Valley Hospital District (District) as of and for the years ended December 31, 2009 and 2008, which collectively comprise the District’s basic financial statements, as listed in the table of contents. These financial statements are the responsibility of the District’s management. Our responsibility is to express opinions on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America as established by the American Institute of Certified Public Accountants. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis of designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the District’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the business-type activities, the aggregate discretely presented component units and the aggregate remaining fund information of the Aspen Valley Hospital District as of December 31, 2009 and December 31, 2008 and, where applicable, the respective results of operations, changes in financial position and cash flows thereof for the years then ended, in conformity with accounting principles generally accepted in the United States of America. The management’s discussion and analysis on pages 3 through 13 and the schedule of funding progress - cash balance retirement plan and schedule of employer contributions - cash balance retirement plan on pages 36 and 37 are not a required part of the basic financial statements but are supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it.
2 Grant Thornton LLP U.S. member firm of Grant Thornton International Ltd
Our audits were conducted for the purpose of forming opinions on the financial statements that collectively comprise the Aspen Valley Hospital District’s basic financial statements. The statement of budgeted and actual revenues and expenses, and combining financial statements for aggregate discretely presented component units supplementary information is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. Wichita, Kansas May 4, 2010
Aspen Valley Hospital District
MANAGEMENT’S DISCUSSION & ANALYSIS
December 31, 2009 and 2008
3
As management of Aspen Valley Hospital District, we offer readers of the financial statements thisdiscussion and analysis of the financial activities of Aspen Valley Hospital (the Hospital) for the calendar years ended on December 31, 2009 and 2008.
The financial statements are broken into two columns – one for the Hospital and one for Component Units. The Component Units column represents the financial statements for joint ventures that are owned in part by the Hospital. Please see Footnote A1 in the Notes to the Financial Statements for a complete explanation of these arrangements. For purposes of thisdiscussion and analysis, the financial results of the joint ventures are considered immaterial to the total Hospital’s finances, and therefore are not specifically discussed herein.
We encourage readers to consider this discussion and analysis in conjunction with the accompanying financial statements.
FINANCIAL OVERVIEW
This discussion and analysis is intended to serve as an introduction to Aspen Valley Hospital District’s basic financial statements, which are comprised of four components:
1. Balance Sheets: provides information about the Hospital’s assets and liabilities and reflect the Hospital’s financial position as of December 31, 2009 and 2008.
2. Statements of Revenues, Expenses, and Changes in Net Assets: reports the cumulative activity of providing healthcare services and the expenses related to such activity for the years ended December 31, 2009 and 2008.
3. Statements of Cash Flows: outlines the cash inflows and outflows related to the activity of providing healthcare services for the year ended December 31, 2009 and 2008.
4. Notes to the Financial Statements: provide explanation and clarification on specific items within the previously mentioned financial statements.
This report also contains other supplementary information in addition to the basic financial statements themselves.
1. BALANCE SHEETS
Financial AnalysisThe Hospital’s Total Assets at the end of 2009 were $91,964,540 compared to $84,462,148 for 2008 and $81,618,470 at the end of 2007. The $7,502,392 increase from 2008 Total Assets is attributable to increase in Patients Accounts Receivable, Prepaid Expenses; and decreases in Capital Assets and Other Assets. The increase of $2,843,678 from 2007 is attributable to increases in Cash, Patient Accounts Receivable and Prepaid Expenses; and decreases in Capital Assets and Other Assets.
At December 31, 2009, Assets consisted primarily of Cash and Cash Equivalents of $8,186,384, Net Patient Accounts Receivable of $6,763,442, Investments of $17,415,969, Assets Whose Use is Limited - Internally Designated for Capital Acquisitions of $18,123,689, Assets Whose Use is Limited– Held by Trustee Under Bond Agreement of $2,464,103 and Net Capital Assets of $32,412,333.
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MANAGEMENT’S DISCUSSION & ANALYSIS - CONTINUED
December 31, 2009 and 2008
4
At December 31, 2008, Assets consisted primarily of Cash and Cash Equivalents of $34,381,759, Net Patient Accounts Receivable of $6,058,285, Investments of $1,419,420, Assets Whose Use is Limited- Held by Trustee Under Bond Agreement of $2,382,932 and Net Capital Assets of $34,008,046. The$2,225,422 decrease in Assets Whose Use is Limited - Held by Trustee Under Bond Agreement from 2007 is due to the completion of Phase I of Aspen Valley Hospital’s Master Facilities Plan; The Aspen Birthing Center. The Aspen Birthing Center opened to the public in early November 2008, highlighting state of the art labor and delivery suites with an equally advanced nursery.
Comparable Asset balances at December 31, 2007, consisted primarily of Cash and Cash Equivalents of $31,397,091, Net Patient Accounts Receivable of $7,002,567, Investments of $1,393,010, AssetsWhose Use is Limited - Held by Trustee Under Bond Agreement of $4,608,354, and Net Capital Assets of $31,241,535.
In 2009, the Hospital restructured Assets of $36,255,218 to reduce the risk of investment losses to Hospital Assets. $1,419,420 of 2008 Investments, as well as $34,512,109 of accumulated Cash and Cash Equivalents from prior years operational efficiencies, were converted into less risky investment instruments. The restructuring efforts noted an increase in Investments of $15,996,549 and the establishment of Assets Whose Use is Limited - Internally Designated for Capital Acquisitions,designated by the Board of Directors, of $18,123,689, ($152,365 of which reflects accrued interest, and $171,324 of realized interest.)
The continued stabilization in Net Patient Accounts Receivable and the increase in Cash and Cash Equivalents during 2009 and 2008 resulted from the reliable revenue cycle management of Computer Sciences Corporation (formerly First Consulting Group) and MedAssist, two outside billing specialists. An emphasis on timely communication with third-party payors and effective claim management were instrumental for growth in Cash and Cash Equivalents, Investments, and Assets Whose Use are Limited Internally Designated for Capital Acquisitions for 2009 and 2008.
The Hospital’s Total Liabilities at December 31, 2009 were $29,815,197; noting Accounts Payable of $2,338,034, Accrued Liabilities of $2,368,092, Patient and Insurance Refunds Payable of $58,768, Unclaimed Refunds Payable of $416,106, Long-Term Revenue Bonds Payable of $21,835,085, Long-Term Capital Lease Obligations of $1,009,743 and Long-Term Notes Payable of $579,091.
The Hospital’s Total Liabilities at December 31, 2008 were $31,658,309; noting Accounts Payable of $1,908,941, Accrued Liabilities of $2,335,217, Patient and Insurance Refunds Payable of $249,712, Unclaimed Refunds Payable of $1,024,130, Due to Medicare of $352,069, Long-Term Revenue Bonds Payable of $22,403,621, Long-Term Capital Lease Obligations of $1,580,508 and Long-Term Notes Payable of $592,045.
At December 31, 2007, Total Liabilities were $34,317,160 consisting primarily of Accounts Payable of $5,151,850, Accrued Liabilities of $2,705,991, Patient and Insurance Refunds Payable of $340,021,Unclaimed Refunds Payable of $972,470, Due to Medicare of $190,709, Long-Term Revenue Bonds Payable of $22,947,998, and Long-Term Capital Lease Obligations of $923,884.
Aspen Valley Hospital District
MANAGEMENT’S DISCUSSION & ANALYSIS - CONTINUED
December 31, 2009 and 2008
5
In 2009, Total Liabilities decreased $1,843,112 with a marked decrease in Unclaimed Refunds Payable. The reduction in this area was attributable to the re-evaluation of the recorded refunds to ensure proper classification and insurance adjudication of patient accounts. The evaluation showed$664,458 of recorded refunds were adjudicated properly and thus not payable. The $664,458 was recognized as income in 2009. Decreases were also noted in Long-Term Debt, Accrued Liabilities, Due to Medicare and Patient and Insurance Refunds Payable. There was an increase in Accounts Payable contributable to a single invoice received after the year-end Accounts Payable process.
The $2,658,851 decrease in Total Liabilities for 2008 was attributable to the reduction of Accounts Payable, with payments of capital expenditures for the Aspen Birthing Center outstanding at the end of 2007, Long-Term Debt disbursements, the addition of Capital Lease Obligations, and the addition of a Note Payable. The Notes Payable line item came about with the purchase of an employee-housing unit in Basalt, Colorado’s Holland Hills Subdivision, in October 2008. The purchase of the employee-housing unit emphasized the Hospital’s Board of Director’s, and the Hospital’sAdministration’s commitment to implementing strategic tactics relating to employee recruitment and retention.
The Hospital reported Unrestricted Net Assets of $50,784,050 in 2009, $40,919,514 in 2008, and $34,710,517 in 2007. The increase in Total Net Assets of $9,345,504 from 2008 and $5,502,529 from 2007 represent net income reported by the Hospital for each year. Net Assets represent the cumulative changes in gains and losses since the inception of the entity.
2. STATEMENTS OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS
Patient Service Revenues The Hospital classifies revenues as Operating and Nonoperating Revenues. Operating Revenues consist of Net Patient Service Revenues and Other Revenues. Net Patient Service Revenues result from direct patient care.
Net Patient Service Revenues increased $2,363,414 or 4.4% in 2009 compared to $1,093,170 or 2.1% in 2008. Net Patient Service Revenue for 2009 in total was $55,843,357 compared to $53,479,943 in 2008 and $52,386,773 in 2007. The slow rate of growth in Net Patient Service Revenue for both 2009 and 2008 is directly attributable to the downturn in economic conditions experienced around the country.
The Hospital’s Outpatient Service Revenues continue to exceed the Inpatient Service Revenues, with 70% of the Hospital’s 2009 Patient Service Revenue generated by Outpatient Services compared to 67% for 2008, and 65% in 2007. The departments contributing most to Outpatient Revenues during these years were Outpatient Surgeries, Emergency Room, Laboratory, and Diagnostic Imaging.
The payor mix for the Hospital has remained consistent with prior year’s experience. The largest portion of the Hospital’s Patient Service Revenues were derived from Commercial health plans, 67% during 2009 and 2008, and 65% during 2007. In addition, the Hospital derived approximately 22.5% of Gross Revenues from Medicare in 2009 up .50% from 2008 and 2007. Payments for services rendered to patients under these programs are less than billed charges; therefore, the Hospital estimates a provision for contractual adjustments to reduce the total charges to estimated receipts,
Aspen Valley Hospital District
MANAGEMENT’S DISCUSSION & ANALYSIS - CONTINUED
December 31, 2009 and 2008
6
based upon contractual arrangements. Due to the complicated nature of the contracts and the governmental programs, the actual payments received could differ from the estimates.
Other Operating Revenues consist of services provided by the Hospital not directly related to patient care. In 2009, the Hospital reclassified $377,434 of fees received from the Aspen Ambulance District for management of their operations to Other Operating Revenues from Nonoperating Revenues. Comparably, fees received by the Hospital from the Aspen Ambulance District in 2008 were $301,506. The $257,442 increase in Other Operating Revenues from 2008 is attributable to increases in Cafeteria sales and Rental income from employee housing. In 2008, Other Operating Revenues had an increase of $108,759. The increase for 2008 was attributable to increased Cafeteria sales and a modest rent increase at Whitcomb Terrace, the assisted living facility operated by the Hospital.
Nonoperating Revenues and Expenses are comprised of Ad Valorem Taxes, Investment Income, Interest Expense, Noncapital Contributions for Operations, Gain or Loss on Investment in Joint Venture and Gain or Loss on Disposal of Equipment. Nonoperating Revenues and Expenses for 2009 were $4,343,382 compared to $2,886,712 in 2008 (adjusted per above notes) and $3,285,295 for 2007. The $1,456,670 increase from 2008 in Nonoperating Revenues and Expenses were attributable to increased Noncapital Contributions of $791,989, increases of $131,018 in Investment Income, an increase of $93,283 in Ad Valorem Taxes and decreased Interest Expense of $185,699. Gains (Loss) on Disposal of Capital Assets increased $277,928 over 2008 data. The $398,583 decrease in 2008 is primarily due to $580,001 of additional Ad Valorem Taxes received for rebased property values in Pitkin County and a reduction in Investment Income of $866,186 due to reduced rates of interest.
ExpensesIn 2009, Operating Expenses increased $1,247,680 from 2008 reported data. Increases of $809,766 were attributable to Salaries and Wages, $1,286,544 from Supplies and Other and $371,000 from Depreciation and Amortization. However, decreases in Contract Labor of $1,219,630 were also noted. In 2009, a contingency plan of operations was instituted to hold Full-Time Equivalent and Operational Expense growth to lower than budgeted numbers. Operating Expenses increased $4,869,213 in 2008. Instrumental to this increase was Salaries and Wages contributing a $1,638,738 increase over 2007. In 2008, the Hospital experienced growth in Full-Time Equivalents needed to maintain current service line demands. With this growth, key executive and managerial positions were in a state of transition. This caused $636,447 of additional expense in the Contract Labor line to cover unexpected usage of agency personnel in clinical departments as well as in key administrative positions. The Supplies and Other section of Operating Expenses contributed $1,704,587 towards the increase as well. Within this line item, Patient Care Supplies used in the direct care of patients had a modest increase of $195,792; Maintenance & Utilities had a $443,641 contribution to the 2008 increase, as well as Employee Benefits with $137,030 and Miscellaneous Expense with $507,956. Within the Miscellaneous Expense change, the Hospital entered into an operating lease to finance state of the art equipment and engaged the services of off-site storage facilities to store digital radiological images.
Aspen Valley Hospital District
MANAGEMENT’S DISCUSSION & ANALYSIS - CONTINUED
December 31, 2009 and 2008
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Bad Debt ExpenseThe collection of receivables from third-party payors and patients is the Hospital’s primary source of cash and is, therefore, critical to the Hospital’s operating performance.
The primary collection risks are related to patients’ payment portions not covered by their primary insurance (deductibles and co-payments). The Hospital estimated the Bad Debt Expense based primarily upon the age of Accounts Receivable and the effectiveness of the Hospital’s third-party payor collection efforts.
Significant changes in payor mix, Hospital operations, economic conditions, and trends in Federal and State governmental health care coverage affect the Hospital’s collection of Accounts Receivable, Cash Flows, and Results of Operations.
In 2009, the Hospital reported Bad Debt Expense of $2,046,383, compared to $2,938,033 for 2008 and $283,794 for 2007. The marked fluctuations in the Bad Debt Expense for 2009 and 2008 are directly related to Computer Sciences Corporation (formerly First Consulting Group) and MedAssist’s analysis, recommendations for modification, and implementation of improved billing and collection processes. The favorable Bad Debt Expense in 2007 is attributable to a decrease in the write-off of aged Patient Accounts Receivables due to higher collections than expected. Bad Debt Expense is included in Net Patient Service Revenue.
Accounts written-off as Charity and Indigent Care and are included in Net Patient Service Revenue. Charity and Indigent Care write-offs were $2,199,117 or 3.0% of Gross Patient Service Revenue,compared to $2,624,014 or 3.7% of Gross Patient Service Revenue for 2008, and $2,160,243 or 3.1% of Gross Patient Service Revenue for 2007.
3. STATEMENTS OF CASH FLOWS
Liquidity and Capital Resources Aspen Valley Hospital’s cash flows from operations and Ad Valorem Taxes provide the primary sources of funding for the Hospital’s ongoing cash needs.
The following is a summary of cash flows for the calendar years ended on December 31, 2009, 2008,and 2007:
Cash flows 2009 2008 2007
Operating Activities 6,880,841$ 6,230,051$ 9,004,371$ Noncapital Financing Activities 4,410,971 3,525,699 2,961,320 Capital & Related Financing Activities (4,864,013) (9,786,832) (8,055,399) Investing Activities (32,542,003) 790,328 373,029
Net Increase/(Decrease) in Cash (26,114,204)$ 759,246$ 4,283,321$
Aspen Valley Hospital District
MANAGEMENT’S DISCUSSION & ANALYSIS - CONTINUED
December 31, 2009 and 2008
8
In 2009, the Hospital’s Cash Flow from Operations increased $650,790 over 2008 from decreased payments from patients and third-party payors of $847,441, an increase of cash received from others of $760,631, a decrease in cash paid to suppliers of $1,205,455 and an increase of cash paid to employees of $467,855 (a reduction in cash.) The Hospital’s Cash Flow from Operations decreased $2,774,320 in 2008 from a mixture of increased payments from patients and third-party payors of $1,010,175, an increase in cash received from others of $1,937,663 increased payments to suppliers of $4,073,626 (a reduction in cash), and an increase in payments to employees of $1,648,532 (also a reduction in cash).
Noncapital Financing provided $93,283 positive cash flow from additional Ad Valorem taxes and $791,989 from Noncapital Contributions. The Noncapital Contributions were granted to the Hospital by the Aspen Valley Medical Foundation for the start-up operational costs related to Quality Health Network’s (QHN) medical health record product. The $564,379 increase of Noncapital Financing for 2008 was attributable to the increase in assessed property values in Pitkin County, which resulted in an increase of Ad Valorem Taxes of $580,001 from 2007 to 2008 and a $15,622 reduction in Noncapital Contributions made to the Hospital.
In 2009, Cash Flow activities used in Capital & Related Financing decreased by $4,922,819. The main diver in this area was the decreased purchases of capital assets. Along with the contingency operational policies put in place early in 2009, Capital Asset purchases were also monitored. Capital & Related Financing decreased $1,731,433 from 2007, primarily due to the decrease in sale of assets and capital contributions.
Investing Activities were the Hospital’s biggest outflow of cash in 2009. The Hospital purchased $34,087,873 of Investments; $17,971,324 of which was internally designated by the Board of Directors for the purchase of capital assets. Investing Activities posted a $417,299 increase over 2007 due to less Investment Income of $866,186 received from interest bearing accounts, increased Member Distributions from Component Units of $159,632 and the influx of $642,747 of Equity into a new Component Unit for 2008; Midvalley Imaging Center, LLC.
Outstanding Debt SecuritiesThe Hospital did not issue additional debt in 2009 or 2008. On February 12, 2007, the outstanding Series 2000 and 2001 bonds were defeased with the issuance of Hospital Refunding Bonds – Series 2007. Proceeds from the bonds were used to purchase securities that were deposited in trust under an escrow agreement sufficient to pay future principal and interest and redemption premiums on the defeased bonds. Additionally, a loss on refunding of $991,240 was recorded by the Hospital. These refunding activities resulted in the reduction of expenses relating to Long-Term Debt.
On October 15, 2003, Aspen Valley Hospital issued Revenue Bonds in the amount of $11,715,000, with an irrevocable letter of credit. Pursuant to the issuance of the Revenue Bonds, the Hospital signed a Reimbursement Agreement, which contained covenants that were met by the Hospital during the calendar years 2009 and 2008.
Aspen Valley Hospital District
MANAGEMENT’S DISCUSSION & ANALYSIS - CONTINUED
December 31, 2009 and 2008
9
BUDGETARY HIGHLIGHTS
Aspen Valley Hospital is responsible for funding expenses from Cash generated through its Operations and from the Ad Valorem Taxes received during the calendar year. The Hospital prepares a budget to reflect the expected revenues and expenses generated through its operations. Annual Budgets are adopted as required by Colorado Statutes. Formal budgetary integration is employed as a management control device during the year. Budgets are adopted on a basis that is consistent with generally accepted accounting principles.
The Hospital’s Board of Directors approved the 2009 and 2008 budgets during the last quarter of the 2008 and 2007 calendar years, respectively. There were no amendments made to the original budgets presented to the State of Colorado for the calendar years 2009 and 2008.
During 2009, Net Patient Service Revenue was $3,227,437 (6.1%) higher than budget, while Operating Expense was $1,227,502 (2.0%) lower than budget. In 2008, Net Patient Service Revenue was $452,704 (0.8%) lower than budget, while Operating Expenses were $1,018,515 (1.9%) lower than budget due to extensive hospital-wide cost reductions.
Please see Attachment A for the Statement of Budget and Actual Revenues and Expenses for the year ended December 31, 2009.
ECONOMIC FACTORS AND NEXT YEAR’S BUDGET
During 2009, the hospital experienced declines in its patient volumes due to the difficult economic conditions plaguing the country. As a result, Gross Revenues for 2009 were essentially flat compared to 2008 (2.1% increase). Because of cost containment efforts at the hospital in 2009, Expenses forthe year increased only 2.36% compared to 2008. Those efforts, coupled with an increase in Net Patient Service Revenues ($2,363,414), an increase in total Contributions ($903,903) and a reduction in Interest Expense ($185,699), combined to produce a gain in 2009 that was almost $4 million higher than 2008.
The Hospital continues to outsource its billing office to Computer Sciences Corporation (formerly First Consulting Group) and MedAssist located in St. Louis, Missouri. This arrangement, which has been in place since 2005, continues to result in the extraordinary management of Accounts Receivable. Evidence of this is in the fact that net days in accounts receivable for both 2008 and 2009 were below 40 days. In addition, unrestricted cash balances in 2009 grew at a brisk pace of 21.7% ($7.8 million) from the 2008 levels.
In constructing the Hospital’s 2010 budget, management took into account the effects of the local and national economy, and anticipated volume declines of approximately 3.6%. Therefore, Gross Revenues for 2010 will be essentially flat (0.4% increase) when compared to 2009. Expenses for 2010 are expected to rise 4.9% over 2009, so the anticipated gain for 2010 will be $4.7 million, a reduction of $3.6 million from 2009.
Aspen Valley Hospital District
MANAGEMENT’S DISCUSSION & ANALYSIS - CONTINUED
December 31, 2009 and 2008
10
Beginning in the fall of 2010, the Hospital anticipates beginning construction on a major renovation and expansion project. This phase of the project will cost approximately $35-40 million, and will require 12 to 14 months to complete. Funding for the project will come from a new issue of Revenue Bonds in the summer of 2010, and from internal cash reserves. Further phases of the project will be considered in future years, depending on the availability of funding.
CONTACTING THE HOSPITAL’S FINANCIAL MANAGEMENT
This management discussion and analysis report is designed to provide interested parties with a general overview of Aspen Valley Hospital District’s financial activity for the 2009 and 2008 calendar years and to demonstrate the Hospital’s accountability for the money it received for providing healthcare services to members of this community and others. If you have questions about this report or need additional information, please contact Terry Collins, Aspen Valley Hospital District’s Chief Financial Officer, at 0401 Castle Creek Road, Aspen, Colorado 81611.
Attachment A
Favorable Budgeted (Unfavorable)Amount Actual Variance
Patient Service RevenuesAmbulance 1,203,029$ 1,041,622$ (161,407)$ After Hours Care Clinic 527,378 172,194 (355,184) Cardiac Rehabilitation 171,914 213,139 41,225 Cardiology Clinic 2,101,256 2,057,303 (43,953) Cardiopulmonary 2,109,947 2,057,997 (51,950) Diabetes Education 26,991 43,236 16,245 Diagnostic Imaging 11,799,828 11,427,276 (372,552) Emergency Room 9,345,338 9,861,582 516,244 Endoscopy 629,716 770,869 141,153 Intensive Care Unit 1,006,656 961,055 (45,601) Laboratory 7,751,444 7,710,002 (41,442) Mental Health 15,483 - (15,483) Nutritional Services 6,338 7,804 1,466 Obstetrics 2,135,702 2,416,451 280,749 Oncology 428,029 377,465 (50,564) Pain Management Clinic 463,338 492,728 29,390 Patient Care Unit 4,734,763 4,026,049 (708,714) Pharmacy 5,374,310 4,402,872 (971,438) Physical Therapy 3,173,911 2,825,332 (348,579) Recovery 993,942 1,174,846 180,904 Same Day Surgery 457,680 553,998 96,318 Surgery 17,802,254 20,212,875 2,410,621
Total Patient Service Revenues 72,259,247 72,806,695 547,448 Revenue Deductions (19,643,327) (16,963,338) 2,679,989
Net Patient Service Revenues 52,615,920 55,843,357 3,227,437 Other Revenues 2,085,112 2,220,991 135,879
Total Operating Revenues 54,701,032 58,064,348 3,363,316
Operating ExpensesAdmissions 708,331 660,142 48,189 After Hours Care Clinic 823,243 791,324 31,919 Ambulance 1,302,833 1,403,828 (100,995) Cardiac Rehabilitation 220,619 217,994 2,625 Cardiology Clinic 683,683 689,114 (5,431)
Aspen Valley Hospital District
STATEMENT OF BUDGET AND ACTUAL REVENUES AND EXPENSES
Year ended December 31, 2009
11
Attachment A
Favorable Budgeted (Unfavorable)Amount Actual Variance
Cardiopulmonary 1,176,479$ 1,043,128$ 133,351$ Community Relations 772,530 587,028 185,502 Diabetes Education 103,790 98,275 5,515 Diagnostic Imaging 4,070,593 4,250,126 (179,533) Emergency Room 4,880,189 4,665,684 214,505 Employee Health 173,470 162,015 11,455 Employee Housing 809,831 639,006 170,825 Endoscopy 221,909 167,070 54,839 Engineering 2,397,236 2,219,109 178,127 Finance 205,018 842,651 (637,633) General & Administrative 3,167,032 3,869,461 (702,429) Health Information Systems 885,139 788,317 96,822 Housekeeping & Laundry 731,354 686,748 44,606 Human Resources 6,610,861 6,014,649 596,212 Information Technology 3,325,699 3,304,550 21,149 Intensive Care Unit 741,739 601,889 139,850 Laboratory 2,852,995 2,883,311 (30,316) Language Resources 74,459 77,135 (2,676) Legal & Compliance 425,287 381,431 43,856 Materials Management 459,680 570,113 (110,433) Medical Staff 70,782 51,527 19,255 Nursing Education 76,829 103,372 (26,543) Nutritional Services 1,021,614 939,383 82,231 Obstetrics 1,764,096 1,379,683 384,413 Oncology 503,749 358,007 145,742 Pain Management Clinic 151,762 177,488 (25,726) Patient Care Unit 2,178,171 1,972,129 206,042 Patient Financial Services 2,145,970 2,271,849 (125,879) Pharmacy 2,534,824 2,014,949 519,875 Physical Therapy 1,298,171 980,139 318,032 QA/Risk Management 374,463 321,804 52,659 Recovery 336,557 328,793 7,764 Same Day Surgery 341,363 379,147 (37,784)
STATEMENT OF BUDGET AND ACTUAL REVENUES AND EXPENSES - continued
Year ended December 31, 2009
Aspen Valley Hospital District
12
Attachment A
Favorable Budgeted (Unfavorable)Amount Actual Variance
Surgery 3,685,553$ 4,317,217$ (631,664)$ Trauma Services 127,046 103,639 23,407 Utilization Review & Discharge 170,050 135,013 35,037 Whitcomb Terrace 762,689 691,949 70,740
Total Operating Expenses 55,367,688 54,140,186 1,227,502
Operating Income (666,656) 3,924,162 4,590,818
Nonoperating Revenues (Expenses)Ad Valorem Taxes 3,517,093 3,517,092 (1) Investment Income 750,000 869,059 119,059 Interest Expense (1,350,445) (992,601) 357,844 Contributions for Operations 37,698 893,879 856,181 Gain on Investment in Equity Investee 450,008 43,009 (406,999) Other - 12,944 12,944
Total Nonoperating Revenues (Expenses) 3,404,354 4,343,382 939,028
Income Before Capital Contributions, Member Distributions and EquityContribution 2,737,698 8,267,544 5,529,846
Capital Contributions 662,302 182,910 (479,392) Member Distributions - 895,050 895,050 Equity Contribution - - -
Change in Net Assets 3,400,000$ 9,345,504$ 5,945,504$
Year ended December 31, 2009
Aspen Valley Hospital District
STATEMENT OF BUDGET AND ACTUAL REVENUES AND EXPENSES - continued
13
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FINANCIAL STATEMENTS
Aspen Valley Component Aspen Valley Component
Hospital units Hospital units
CURRENT ASSETS
Cash and cash equivalents 8,186,384$ 702,776$ 34,381,759$ 423,825$
Patient accounts receivable, net 6,763,442 618,700 6,058,285 711,126
Due from Medicare 287,668 - - -
Contributions receivable 504,401 - 523,274 -
Other receivables 1,423,532 64,963 1,396,013 17,458
Inventories 1,626,037 121,444 1,609,476 142,024
Investments 17,415,969 - 1,419,420 -
Prepaid expenses 1,062,163 78,866 581,366 170,473
Total current assets 37,269,596 1,586,749 45,969,593 1,464,906
ASSETS WHOSE USE IS LIMITED
INTERNALLY DESIGNATED FOR
CAPITAL ACQUISITIONS 18,123,689 - - -
ASSETS WHOSE USE IS LIMITED
HELD BY TRUSTEE UNDER
BOND AGREEMENT 2,464,103 - 2,382,932 -
CAPITAL ASSETS
Land 267,057 - 267,057 -
Depreciable capital assets, net of accumulated
depreciation 32,145,276 1,234,362 33,740,989 1,466,549
Total capital assets, net of accumulated
depreciation 32,412,333 1,234,362 34,008,046 1,466,549
OTHER ASSETS
Contributions receivable 618,654 - 749,280 -
Physician guarantees receivable 363,563 - 694,681 -
Investment in joint venture 213,092 - 125,720 -
Other (net) 499,510 127,395 531,896 152,067
Total other assets 1,694,819 127,395 2,101,577 152,067
Total assets 91,964,540$ 2,948,506$ 84,462,148$ 3,083,522$
The accompanying notes are an integral part of these statements.
2009 2008
Aspen Valley Hospital District
BALANCE SHEETS
December 31,
ASSETS
Aspen Valley Component Aspen Valley Component
Hospital units Hospital units
CURRENT LIABILITIES
Current maturities of long-term debt 1,210,278$ -$ 1,212,066$ -$
Accounts payable 2,338,034 56,586 1,908,941 81,922
Accrued salaries, benefits and payroll taxes 1,400,658 22,375 1,202,485 -
Other accrued liabilities 967,434 576,603 1,132,732 145,680
Refunds payable 58,768 - 249,712 -
Unclaimed refunds payable 416,106 - 1,024,130 -
Due to Medicare - - 352,069 -
Total current liabilities 6,391,278 655,564 7,082,135 227,602
LONG-TERM DEBT
Revenue bonds payable 21,835,085 - 22,403,621 -
Capital lease obligations 1,009,743 - 1,580,508 -
Note payable 579,091 - 592,045 -
Total long-term debt 23,423,919 - 24,576,174 -
Total liabilities 29,815,197 655,564 31,658,309 227,602
CONTINGENCIES AND COMMITMENTS
NET ASSETS
Invested in capital assets, net of related debt 7,778,136 - 8,219,806 -
Restricted
For debt service 2,464,103 - 2,391,965 -
Expendable for capital acquisitions 506,030 - 1,226,054 -
Expendable for specific operating activities 617,024 - 46,500 -
Reserved for minority interests - 1,019,264 - 1,231,391
Unrestricted 50,784,050 1,273,678 40,919,514 1,624,529
Total net assets 62,149,343 2,292,942 52,803,839 2,855,920
Total liabilities and net assets 91,964,540$ 2,948,506$ 84,462,148$ 3,083,522$
2009 2008
LIABILITIES AND NET ASSETS
14
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Aspen Valley Component Aspen Valley Component
Hospital units Hospital units
Operating revenues
Net patient service revenue 55,843,357$ 4,450,116$ 53,479,943$ 3,714,715$
Other revenues 2,220,991 13,060 1,963,549 -
Total operating revenues 58,064,348 4,463,176 55,443,492 3,714,715
Operating expenses
Salaries and wages 21,496,620 935,318 20,686,854 904,696
Contract labor 1,418,682 - 2,638,312 -
Supplies and other 26,743,835 2,018,654 25,457,291 1,639,410
Depreciation and amortization 4,481,049 339,482 4,110,049 220,966
Total operating expenses 54,140,186 3,293,454 52,892,506 2,765,072
Operating income 3,924,162 1,169,722 2,550,986 949,643
Nonoperating revenues (expenses)
2009 2008
Aspen Valley Hospital District
STATEMENTS OF REVENUES, EXPENSES
AND CHANGES IN NET ASSETS
Year ended December 31,
15
Nonoperating revenues (expenses)
Ad valorem taxes 3,517,092 - 3,423,809 -
Investment income 869,059 14,538 738,041 18,557
Interest expense (992,601) - (1,178,300) -
Noncapital contributions 893,879 - 101,890 -
Gain on investment in joint venture 43,009 - 66,256 -
Gain (loss) on disposal of capital assets 12,944 - (264,984) -
Total nonoperating revenues (expenses) 4,343,382 14,538 2,886,712 18,557
Income before capital contributions, member
distributions, net and equity contributions 8,267,544 1,184,260 5,437,698 968,200
Capital contributions 182,910 - 70,996 -
Member distributions 895,050 (1,755,000) 636,582 (950,000)
Equity contributions - 7,762 (642,747) 1,227,488
Change in net assets 9,345,504 (562,978) 5,502,529 1,245,688
Net assets at beginning of year 52,803,839 2,855,920 47,301,310 1,610,232
Net assets at end of year 62,149,343$ 2,292,942$ 52,803,839$ 2,855,920$
The accompanying notes are an integral part of these statements.
15
Aspen Valley Component Aspen Valley Component
Hospital units Hospital units
Cash flows from operating activities
Cash received from patients and third-party
payors 53,699,495$ 4,542,542$ 54,546,936$ 3,821,599$
Cash received from (paid to) others 2,770,398 (49,445) 2,009,767 (7,198)
Cash paid to suppliers (28,290,605) (1,493,118) (29,496,060) (1,533,207)
Cash paid to employees (21,298,447) (912,943) (20,830,592) (904,696)
Net cash provided by operating activities 6,880,841 2,087,036 6,230,051 1,376,498
Cash flows from noncapital financing activities
Ad valorem taxes 3,517,092 - 3,423,809 -
Noncapital contributions 893,879 - 101,890 -
Net cash provided by noncapital financing
activities 4,410,971 - 3,525,699 -
Cash flows from capital and related
financing activities
Purchases of capital assets (2,830,286) (67,623) (7,343,408) (1,356,042)
Proceeds from the sale of capital assets 19,284 - - -
Principal payments on debt (1,243,320) - (1,336,120) -
Interest payments on debt (992,601) - (1,178,300) -
Capital contributions 182,910 - 70,996 -
Net cash used in capital and related financing
activities (4,864,013) (67,623) (9,786,832) (1,356,042)
Cash flows from investing activities
Purchases of investments, net (16,116,549) - (26,410) -
Investment income 575,183 14,538 738,041 18,557
Change in assets whose use is limited (17,971,324) - - -
Member distributions 970,687 (1,755,000) 721,444 (950,000)
Equity contributions - - (642,747) 1,227,488
Net cash provided by (used in) investing
activities (32,542,003) (1,740,462) 790,328 296,045
Net increase (decrease) in cash and cash equivalents (26,114,204) 278,951 759,246 316,501
Cash and cash equivalents at beginning of year 36,764,691 423,825 36,005,445 107,324
Cash and cash equivalents at end of year 10,650,487$ 702,776$ 36,764,691$ 423,825$
2009 2008
Aspen Valley Hospital District
STATEMENTS OF CASH FLOWS
Year ended December 31,
16
Aspen Valley Component Aspen Valley Component
Hospital units Hospital units
Reconciliation of cash and cash equivalents to the
balance sheets
Cash and cash equivalents 8,186,384$ 702,776$ 34,381,759$ 423,825$
Assets whose use is limited 2,464,103 - 2,382,932 -
Total cash and cash equivalents 10,650,487$ 702,776$ 36,764,691$ 423,825$
Reconciliation of operating income to net cash
provided by operating activities
Operating income 3,924,162$ 1,169,722$ 2,550,986$ 949,643$
Adjustments to reconcile operating income to
net cash provided by operating activities
Depreciation and amortization 4,481,049 339,482 4,110,049 220,966
Bad debt expense 2,046,383 - 2,938,033 -
Gain on reversal of unclaimed refunds payable (664,458) - - -
Change in assets and liabilities
Patient accounts receivable (2,751,540) 92,426 (1,993,751) 106,884
Contributions receivable 149,499 - 413,632 -
Other receivables 445,110 (47,505) (316,193) (9,259)
Inventories (16,561) 20,580 (150,051) 25,528
Prepaid expenses (480,797) 91,607 (218,542) 88,084
Other assets (45,202) (15,000) (51,221) 2,061
Accounts payable 534,568 (25,336) (804,828) 39,306
Accrued salaries, benefits and payroll taxes 198,173 22,375 (143,738) -
Other accrued liabilities (165,298) 438,685 (227,036) (46,715)
Refunds payable (190,944) - (90,309) -
Unclaimed refunds payable 56,434 - 51,660 -
Due to/from Medicare (639,737) - 161,360 -
Net cash provided by operatingactivities 6,880,841$ 2,087,036$ 6,230,051$ 1,376,498$
Supplemental schedule of noncash capital and financing activities
The District entered into capital lease obligations for equipment of $89,277 and $1,562,641 in
2009 and 2008, respectively.
Capital asset additions in accounts payable and other accrued liabilities were $63,152 and $188,127
in 2009 and 2008, respectively.
The District entered into a note payable for employee housing of $605,600 in 2008.
The accompanying notes are an integral part of these statements.
2009 2008
Aspen Valley Hospital District
STATEMENTS OF CASH FLOWS - CONTINUED
Year ended December 31,
17
2009 2008
ASSETS
Investments 10,045,588$ 7,418,510$
NET ASSETS - held for pension benefits 10,045,588$ 7,418,510$
The accompanying notes are an integral part of these statements.
Year ended December 31,
Aspen Valley Hospital District
STATEMENTS OF FIDUCIARY NET ASSETS
FIDUCIARY FUNDS
18
2009 2008
Additions
Contributions for employee benefits 1,675,000$ 1,148,242$
Investment earnings (losses) 1,793,661 (3,315,211)
Net change 3,468,661 (2,166,969)
Deductions
Benefits 833,257 387,728
Administrative expenses 8,326 -
Total deductions 841,583 387,728
Change in net assets 2,627,078 (2,554,697)
Net assets at beginning of the year 7,418,510 9,973,207
Net assets at end of the year 10,045,588$ 7,418,510$
The accompanying notes are an integral part of these statements.
Aspen Valley Hospital District
STATEMENTS OF CHANGES IN FIDUCIARY NET ASSETS
Year ended December 31,
FIDUCIARY FUNDS
19
Aspen Valley Hospital District
NOTES TO FINANCIAL STATEMENTS
December 31, 2009 and 2008
20
NOTE A - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Reporting entity
Aspen Valley Hospital District (the District), a political subdivision of the State of Colorado, operates the Aspen Valley Hospital (the Hospital), a 25-bed acute care facility that is designated by Medicare as a Critical Access Hospital located in Aspen, Colorado; Whitcomb Terrace, an assisted living facility; Mountain Oaks and the Beaumont Lodge, both employee housing complexes; and has an 8% interest in Healthcare Management, LLC. The District is governed by a Board of Directors consisting of five members elected by the residents of the District. The District is not a component unit of another governmental entity.
Midvalley Ambulatory Surgery Center, LLC (ASC) has been organized as a Colorado limited liability company to acquire, own and operate an ambulatory surgery center located in Basalt, Colorado. The members of ASC include the District and Surgical Management, LLC (SM), a Colorado corporation. The equity interests are 51% and 49%, respectively. The operating agreement between the District and SM states that the District shall elect three persons as board members and SM shall elect two persons as board members. As the District has a 51% ownership interest in ASC and appoints a voting majority of ASC’s board members, the District can impose its will on ASC. However, ASC does not provide services to the District. As a result, ASC is considered a component unit of the District and included in the financial statements of the District using discrete presentation.
Snowmass Clinic Associates, LLP (SMC) has been organized as a Colorado limited liability partnership to operate a medical clinic and triage facility located in Snowmass, Colorado. The partners of SMC include the District and Orthopaedic Associates, PC (OA), a Colorado professional corporation. The partnership interests are 80% and 20%, respectively. As the District has an 80% partnership interest in SMC, the District can impose its will on SMC. However, SMC does not provide services to the District. As a result, SMC is considered a component unit of the District and included in the financial statements of the District using discrete presentation.
Midvalley Imaging Center, LLC (MIC) has been organized as a Colorado limited liability company to operate one or more imaging centers in Basalt, Colorado, and the surrounding area. The members of MIC include the District and Midvalley Imaging Investors, LLC. The equity interests are 51% and 49%, respectively. As the District has a 51% ownership interest in MIC, the District can impose its will on MIC. However, MIC does not provide services to the District. As a result, MIC is considered a component unit of the District and included in the financial statements of the District using discrete presentation.
2. Use of estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Aspen Valley Hospital District
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 2009 and 2008
21
NOTE A - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
3. Proprietary fund accounting
The District’s government-wide financial statements (balance sheets and statements of revenues, expenses and changes in net assets and statements of cash flows) are comprised of an enterprise fund and discretely presented component units that use proprietary fund reporting. The only other fund of the District is a fiduciary fund (employee retirement fund) that is excluded from the government-wide financial statements and is presented separately as fund financial statements. The District utilizes the proprietary fund method of accounting whereby revenue and expenses are recognized on the accrual basis using the economic resources measurement focus. Based on Governmental Accounting Standards for Proprietary Funds and Other Governmental Entities That Use Proprietary Fund Accounting, the District has elected to apply the provisions of all relevant pronouncements of the Financial Accounting Standards Board (FASB), including those issued after November 30, 1989, that do not conflict with or contradict GASB pronouncements.
4. Cash equivalents
The District considers all liquid investments with original maturities of three months or less to be cash equivalents. At December 31, 2009 and 2008, cash equivalents consisted primarily of money market accounts with banks.
5. Patient accounts receivable, net/net patient service revenue
Patient accounts receivable, net is recorded at list price with an allowance for contractual adjustments (which represent the difference between charges and the amount received or receivable from third-party payors) and the allowance for doubtful accounts deducted to arrive at net receivables. The allowance for doubtful accounts is provided for at various percentages of accounts receivable, with a corresponding entry to bad debt expense. Contractual adjustments have been estimated by using historical payment percentages as well as payor specific contractual agreements. When individual accounts are determined to be uncollectible, the accounts are written off. Net patient service revenue is recorded at list price with contractual adjustments, charity care and bad debt expense deducted to arrive at net patient service revenue.
6. Physician guarantee contracts
Physician guarantees receivable represents the estimated future benefit to be received over the contractual life of physician guarantee contracts. The current portion of this receivable is included in other receivables in the balance sheets. Physician guarantees payable represents the estimated remaining liability of the District over the contractual life of physician guarantee contracts. This payable is included in other accrued liabilities in the balance sheets. See Note E for additional information on physician guarantee contracts.
7. Inventories
Inventories are stated at the lower of cost, determined using the first-in, first-out method, or market.
Aspen Valley Hospital District
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 2009 and 2008
22
NOTE A - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
8. Investments and investment income
Investments in U.S. Treasury and agency obligations with a remaining maturity of one year or less at the time of acquisition and in nonnegotiable certificates of deposit are carried at amortized cost, which approximates fair value. All other investments are carried at fair value. Fair value is determined using quoted market prices. Investment income includes dividend and interest income, realized gains and losses on investments and the net change for the year in the fair value of investments carried at fair value.
9. Assets whose use is limited
Assets whose use is limited are assets held by trustees under the Bond Indenture Agreements and internally designated by the District’s Board of Directors for capital acquisitions. The internally designated funds remain under the control of the District’s Board of Directors, which may at its discretion later use the funds for other purposes.
10. Capital assets
The District’s capital assets are reported at historical cost. Contributed capital assets are reported at their estimated fair value at the time of their donation. All capital assets other than land are depreciated or amortized (in the case of capital leases) using the straight-line method of depreciation using the following asset lives:
Land improvements 7-25 yearsBuilding 5-40 yearsFixed equipment 5-20 yearsMovable equipment 3-20 yearsEmployee housing 5-25 years
The District capitalizes interest costs as a component of construction in progress funded by borrowings based on interest costs of borrowing specifically for the project, net of interest earned on investments acquired with the proceeds of the borrowing. There was no net interest costs capitalized in 2009 and 2008.
The District has not acquired any general infrastructure assets.
11. Debt issuance costs
Debt issuance costs consist of costs incurred in connection with the issuance of debt obligations and are included in other assets in the balance sheets. These costs have been deferred and are being amortized over the life of the related debt using the effective interest method.
Aspen Valley Hospital District
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 2009 and 2008
23
NOTE A - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
12. Bond premium and loss on refunding
The bond premium is being amortized over the life of the related debt using the effective interest method. The unamortized bond premium is included as an addition to revenue bonds payable and is reflected as both current and long-term in the balance sheets. The loss on refunding is being amortized over the term of the related bonds using the straight-line method, which approximates the interest method. The unamortized loss on refunding is included as a reduction to revenue bonds payable and is reflected as both current and long-term in the balance sheets. The amortization of both the bond premium and the loss on refunding is recorded as a reduction and an addition to interest expense, respectively.
13. Net assets
Net assets of the District are classified in three components. Net assets invested in capital assets, net of related debt, consist of capital assets net of accumulated depreciation and reduced by any outstanding borrowings and related accounts used to finance the purchase or construction of those assets. Restricted net assets are net assets that must be used for a particular purpose, as specified by creditors, grantors, or contributors external to the District, including amounts deposited with trustees as required by revenue bond indentures and reserved for minority interests. Unrestricted net assets are remaining net assets that do not meet the definition of invested in capital assets, net of related debt or restricted.
14. Operating revenues and expenses
The District’s statement of revenues, expenses and changes in net assets distinguishes between operating and nonoperating revenues and expenses. Operating revenues result from exchange transactions associated with providing health care services (net patient service revenue) and other revenues which include income from employee housing, cafeteria revenue and other miscellaneous revenue. Nonexchange revenues, including ad valorem taxes, grants, and contributions received for purposes other than capital asset acquisition, investment income, gain on investment in joint venture and gain (loss) on disposal of capital assets are reported as nonoperating revenues. Operating expenses are all expenses incurred to provide health care services, other than financing costs.
15. Charity care
The District provides care without charge or at amounts less than its established rates to patients meeting certain criteria under its charity care policy. Net patient service revenue is reported net of charity care. Charges excluded from revenue under the District’s charity care policy were $2,199,117 and $2,624,014 for 2009 and 2008, respectively.
16. Ad valorem taxes
The District received approximately 5.7% of its sources of funds from ad valorem taxes in 2009 and 2008. These funds were used to support the operating and capital needs of the Hospital District. In November 2005, the voters in the District approved the Hospital District’s mill levy for a five-year period through 2010.
Ad valorem taxes are assessed on January 1 of each year. The Hospital District recognizes the tax revenue in the period it is assessed.
Aspen Valley Hospital District
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 2009 and 2008
24
NOTE A - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
17. Grants and contributions
From time to time, the District receives grants and contributions from individuals and private organizations. Revenues from grants and contributions (including contributions of capital assets) are recognized when all eligibility requirements, including time requirements are met. Grants and contributions may be restricted for either specific operating purposes or for capital purposes. Amounts unrestricted or that are restricted to a specific operating purpose are reported as nonoperating revenues. Amounts restricted to capital acquisitions are reported after nonoperating revenues and expenses.
18. Income taxes
As a political subdivision of the State of Colorado, the District is exempt from income taxes under Section 115 of the Internal Revenue Code and a similar provision of state law.
19. Reclassifications
Certain reclassifications have been made to the 2008 financial statements to conform to the 2009presentation.
NOTE B - DEPOSITS AND INVESTMENTS
Deposits
The Colorado Public Deposit Protection Act requires financial institutions to collateralize any uninsured public deposits. Any excess of deposits over the FDIC limit that are not insured are covered by collateral pledged by the financial institution in accordance with the Colorado Public Deposit Protection Act.
At December 31, the District had bank balances as follows:
2009 2008
FDIC insured $ 35,887,293 $ 1,000,000Collateralized by securities held by the pledging
financial institution’s trust department or agentin other than the District’s name 9,441,442 36,211,855
Total $ 45,328,735 $ 37,211,855
Carrying value on the balance sheets at December 31 $ 44,641,027 $ 36,868,779
The carrying value on the balance sheets at December 31, 2009 and 2008 includes assets whose use is limited of $19,041,574 and $1,070,250, respectively.
Aspen Valley Hospital District
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 2009 and 2008
25
NOTE B - DEPOSITS AND INVESTMENTS - Continued
Investments
The District may legally invest in direct obligations guaranteed as to principal by the U.S. Treasury and U.S. agencies. It may also invest fiduciary funds in other investments. At December 31, 2009 and 2008, investments amounted to $11,439,441 and $11,220,862, respectively. All investments under bond agreements, with the exception of those included in deposits, were invested in direct obligations of the U.S. Government through pooled investments.
Due to the nature of the fiduciary assets, ratings are not available. All investments are reported at fair value and have maturities of less than one year.
Summary of Carrying Values
The carrying values of deposits and investments shown above are included in the balance sheets as follows:
2009 2008
Carrying valueDeposits $ 44,641,027 $ 36,868,779Investments 11,439,441 8,731,192Cash on hand and change funds 2,900 2,650
$ 56,083,368 $ 45,602,621
Included in the following balance sheet captionsCash and cash equivalents $ 8,186,384 $ 34,381,759Investments 17,415,969 1,419,420
Assets whose use is limitedInternally designated for capital acquisitions 17,971,324 - Held by trustee under bond agreement 2,464,103 2,382,932Held by trustee under pension plan agreement (fiduciary assets) 10,045,588 7,418,510
$ 56,083,368 $ 45,602,621
NOTE C - PATIENT ACCOUNTS RECEIVABLE, NET/NET PATIENTSERVICE REVENUE
The District has agreements with third-party payors that provide for payments to the District at amounts different from its established rates. These payment arrangements include:
Medicare – The District is licensed as a Critical Access Hospital. Under this reimbursement system, inpatient acute care and swing-bed services rendered to Medicare program beneficiaries are paid under cost reimbursement methodologies. Outpatient services related to Medicare beneficiaries are paid based on a combination of fee schedules and cost reimbursement methodologies. The District is reimbursed for certain services at tentative rates with final settlement determined after submission of an annual cost report by the District and audit thereof by the Medicare fiscal intermediary.
Aspen Valley Hospital District
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 2009 and 2008
26
NOTE C - PATIENT ACCOUNTS RECEIVABLE, NET/NET PATIENTSERVICE REVENUE - Continued
Medicaid – Inpatient acute care services rendered to Medicaid program beneficiaries are paid at prospectively determined rates per discharge. These rates vary according to a patient classification system that is based on clinical, diagnostic and other factors. Inpatient nonacute services, certain outpatient services and defined capital costs related to Medicaid beneficiaries are paid based on a cost-reimbursement methodology. The District is reimbursed for cost-reimbursable items at a tentative rate with final settlement determined after submission of annual cost reports by the District and audits thereof by the Medicaid fiscal intermediary.
Other – The District has also entered into payment agreements with certain commercial insurance carriers, health maintenance organizations and preferred provider organizations. The basis for payment to the District under these agreements is primarily discounts from established charges.
Net accounts receivable and net patient service revenue is computed as follows for the years ended December 31:
2009 2008
Patient accounts receivable, gross $ 8,448,599 $ 8,413,180Allowance for doubtful accounts (675,259) (1,082,974)Allowance for contractual adjustments (1,009,898) (1,271,921)
Patient accounts receivable, net $ 6,763,442 $ 6,058,285
Gross patient service revenue $ 72,806,695 $ 71,327,726Less
Medicare contractuals 4,918,293 4,647,072Medicaid contractuals 1,346,080 1,078,981Other contractuals and adjustments 6,453,465 6,559,683Charity care 2,199,117 2,624,014Bad debt expense 2,046,383 2,938,033
Net patient service revenue $ 55,843,357 $ 53,479,943
Aspen Valley Hospital District
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 2009 and 2008
27
NOTE D - CONCENTRATION OF CREDIT RISK
The District grants credit without collateral to its patients, most of which are insured under third-party payor agreements. The mix of receivables from patients and third-party payors at December 31 are as follows:
2009 2008
Medicare 14% 17%Medicaid 2 2Blue Cross 13 11Other third-party payors 65 63Self-pay 6 7
100% 100%
NOTE E - PHYSICIAN GUARANTEE CONTRACTS
The District has entered into income guarantee contracts for several physicians. The District, as the guarantor, has agreed to make payments to the physicians, the guaranteed party, per month if the gross cash collections generated by the physicians’ new practice during the month do not equal or exceed a specific minimum amount stated in each physician’s contract. A majority of the physician guarantee contracts have a guarantee period of 12 months and a forgiveness period of 24 months. There is one physician guarantee contract that has a guarantee period of 12 months, and a forgiveness period of 14 months. For those physicians under a guarantee contract with a forgiveness period, they are required, for a minimum of their commitment period, which consists of 24 to 36 months, to diligently and fully devote their efforts and time to the operation of their practice in the Colorado Roaring Fork Valley. In the event that these physicians fail to perform their obligations under their contract, they are to reimburse the District all sums advanced to them minus any amounts forgiven pursuant to the terms of their respective contracts. The District has signed promissory notes with the physicians. The maximum potential amount of future undiscounted payments the District could be required to make under the physician guarantee contracts totaled $57,122 and $233,336 at December 31, 2009 and 2008, respectively. The carrying amounts of the physician guarantee contracts are included in the balance sheets as follows:
2009 2008
Other receivables $ 392,013 $ 256,983Physician guarantees receivable 363,563 694,681
$ 755,576 $ 951,664
Other accrued liabilities $ 57,122 $ 193,707
Aspen Valley Hospital District
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 2009 and 2008
28
NOTE F - CAPITAL ASSETS
Capital assets activity for the years ended December 31, 2009 and 2008 is as follows:
Beginning Endingbalance Additions Deletions Transfers balance
Land 267,057$ -$ -$ -$ 267,057$ Land improvements 1,051,760 - - - 1,051,760 Building 18,888,202 215,280 - (4,024,420) 15,079,062 Fixed equipment 2,716,027 7,229 - 4,024,420 6,747,676 Movable equipment 28,898,928 1,941,843 (238,193) - 30,602,578 Employee housing 8,548,961 26,004 (3,944) - 8,571,021 Construction in progress 3,165,725 623,732 - - 3,789,457
Total cost 63,536,660 2,814,088 (242,137) - 66,108,611
Less accumulated depreciationLand improvements 586,749 34,424 - - 621,173 Building 7,235,830 587,633 - (82,068) 7,741,395 Fixed equipment 2,563,703 351,562 - 82,068 2,997,333 Movable equipment 16,464,970 3,122,418 (231,853) - 19,355,535 Employee housing 2,677,362 307,424 (3,944) - 2,980,842
Total accumulated depreciation 29,528,614 4,403,461 (235,797) - 33,696,278
Capital assets, net 34,008,046$ (1,589,373)$ (6,340)$ -$ 32,412,333$
2009
Beginning Endingbalance Additions Deletions Transfers balance
Land 267,057$ -$ -$ -$ 267,057$ Land improvements 658,338 - - 393,422 1,051,760 Building 13,722,898 - (677,362) 5,842,666 18,888,202 Fixed equipment 2,601,944 - (19,175) 133,258 2,716,027 Movable equipment 26,766,246 1,951,135 (597,513) 779,060 28,898,928 Employee housing 7,802,812 746,149 - - 8,548,961 Construction in progress 5,917,273 4,396,858 - (7,148,406) 3,165,725
Total cost 57,736,568 7,094,142 (1,294,050) - 63,536,660
Less accumulated depreciationLand improvements 566,376 15,455 - 4,918 586,749 Building 7,046,867 558,963 (463,432) 93,432 7,235,830 Fixed equipment 2,533,438 46,719 (18,675) 2,221 2,563,703 Movable equipment 13,954,667 3,156,759 (545,885) (100,571) 16,464,970 Employee housing 2,393,685 283,677 - - 2,677,362
Total accumulated depreciation 26,495,033 4,061,573 (1,027,992) - 29,528,614
Capital assets, net 31,241,535$ 3,032,569$ (266,058)$ -$ 34,008,046$
2008
Aspen Valley Hospital District
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 2009 and 2008
29
NOTE G - RISK MANAGEMENT
The District is exposed to various risks of loss related to torts, thefts of, damage to and destruction of assets, business interruption, errors and omissions, employee injuries and illnesses, natural disasters,employee disability and employee health, dental and accident benefits. Commercial insurance coverage is purchased for claims arising from such matters other than those related to workers’ compensation, short-term disability and employee health care benefits. Settled claims have not exceeded any commercial insurance coverage in any of the three preceding years.
The District partially self-insures the cost of employee healthcare benefits as it purchases annual stop-loss insurance coverage for all claims in excess of $125,000 and $100,000 for the years ended December 31, 2009 and 2008, respectively, per individual participant and aggregate stop-loss at predetermined amounts annually. Other accrued liabilities on the balance sheet include an accrual for claims which have been incurred but not reported. Claims liabilities are re-evaluated periodically to take into consideration recently settled claims, frequency of claims and other economic and social factors.
The following represents changes in related employee healthcare benefit liabilities for the following two years:
2009 2008
Unpaid claims at beginning of year $ 512,000 $ 567,801Total incurred claims and claim adjustment expenses 2,931,816 3,064,228Total payments (2,940,816) (3,120,029)
Total unpaid claims and claim adjustment expensesat end of year $ 503,000 $ 512,000
NOTE H - TAX, SPENDING AND DEBT LIMITATIONS
Colorado voters passed an amendment to the State Constitution, Article X, Section 20 (TABOR), which has several limitations including revenue raising, spending abilities and other specific requirements of state and local governments.
The amendment excludes Enterprises from its provisions. Enterprises are defined as government-owned businesses authorized to issue revenue bonds and receive less than 10% of their annual revenue in grants from all state and local governments combined. The District is of the opinion that their operations qualify for this exclusion.
NOTE I - LONG-TERM DEBT
The District has various components of long-term debt as described below.
Hospital Variable Rate Revenue Bonds - Series 2003, interest is computed at the weekly interest rate as determined by Wachovia Bank N.A. and is payable each April 15 and October 15. The variable rate at December 31, 2009 and 2008 was 0.22% and 1.98%, respectively. Principal is due on demand but if not demanded, is payable in installments through October 15, 2033. The Bonds are special and limited revenue obligations of the District and are secured by net revenues. Additional security is provided by an irrevocable direct pay letter of credit.
Aspen Valley Hospital District
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 2009 and 2008
30
NOTE I - LONG-TERM DEBT - Continued
Pursuant to the issuance of the Series 2003 Bonds, a Reimbursement Agreement was signed between Vectra Bank Colorado, Zions First National Bank and the District. The District was in compliance with all covenants pertaining to this agreement at December 31, 2009 and 2008.
Hospital Refunding Bonds – Series 2007, due 2026, payable in increasing varying annual installments through October 15, 2026, bearing interest rates of 4.375% to 5%, payable semi-annually. The Series 2007 Bonds are issued and pursuant to and are secured by the Bond Resolution. The Bonds are limited obligations payable solely from the net revenues derived from operations of the District.
The District was in compliance with all covenants pertaining to the 2007 Bonds at December 31, 2009 and 2008.
Upon issuance and delivery of the Series 2007 Refunding Revenue Bonds, the District defeased its outstanding Series 2000 and 2001 bonds. Proceeds from the bonds were used to purchase securities that were deposited in trust under an escrow agreement sufficient in amount to pay future principal, interest and redemption premiums on the defeased bonds. This advance refunding transaction resulted in an extinguishment of debt since the District was legally released from its obligation on the Series 2000 and 2001 bonds at the time of defeasance. $275,000 and $410,000 of the Series 2000 and 2001, respectively, are outstanding as of December 31, 2009 with varying call dates through October of 2011.
The advance refunding of the Series 2000 and 2001 bonds resulted in an overall future economic benefit for the District. However, an accounting loss of $991,240 on the extinguishment of the long-term debtwas recorded in 2007. This loss on refunding is shown as a reduction of the outstanding long-term debt on the balance sheet and is being amortized using the straight-line method over the life of the Series 2000 bonds.
During 2008, the District entered into a note payable with principal and interest payable monthly and a final balloon payment due in 2013. The note is collateralized by property and has a variable interest of prime plus 2%. The variable rate at December 31, 2009 and 2008 was 2.21% and 2.59%, respectively.
The District has capitalized lease obligations at varying rates of imputed interest maturing between 2009 and 2014 that are collateralized by leased equipment.
Aspen Valley Hospital District
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 2009 and 2008
31
NOTE I - LONG-TERM DEBT - Continued
A schedule of changes in the District’s long-term debt activity for 2009 and 2008 is as follows:
AmountsBeginning Ending due within Long-term
balance Additions Deletions balance one year portion
2003 revenue bonds payable 11,090,000$ -$ (125,000)$ 10,965,000$ 125,000$ 10,840,000$ 2007 revenue bonds payable 12,530,000 - (455,000) 12,075,000 480,000 11,595,000 Note payable 605,554 - (12,226) 593,328 14,237 579,091 Capital leases 2,234,110 89,277 (687,427) 1,635,960 626,796 1,009,164
26,459,664 89,277 (1,279,653) 25,269,288 1,246,033 24,023,255
Unamortized premium onSeries 2007 bonds 218,857 - (18,736) 200,121 19,314 180,807
Unamortized loss on refunding2000 and 2001 bonds (890,281) - 55,069 (835,212) (55,069) (780,143)
25,788,240$ 89,277$ (1,243,320)$ 24,634,197$ 1,210,278$ 23,423,919$
2009
AmountsBeginning Ending due within Long-term
balance Additions Deletions balance one year portion
2003 revenue bonds payable 11,215,000$ -$ (125,000)$ 11,090,000$ 125,000$ 10,965,000$ 2007 revenue bonds payable 12,970,000 - (440,000) 12,530,000 455,000 12,075,000 Note payable - 605,554 - 605,554 13,509 592,045 Capital leases 1,477,588 1,562,641 (806,119) 2,234,110 653,602 1,580,508
25,662,588 2,168,195 (1,371,119) 26,459,664 1,247,111 25,212,553 Unamortized premium on
Series 2007 bonds 238,881 - (20,024) 218,857 20,024 198,833
Unamortized loss on refunding2000 and 2001 bonds (945,350) - 55,069 (890,281) (55,069) (835,212)
24,956,119$ 2,168,195$ (1,336,074)$ 25,788,240$ 1,212,066$ 24,576,174$
2008
Aspen Valley Hospital District
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 2009 and 2008
32
NOTE I - LONG-TERM DEBT - Continued
Scheduled principal and interest repayments on long-term debt and payments on capital lease obligations are as follows:
Principal Interest Principal Interest Principal Interest
Year ending December 312010 605,000$ 612,291$ 14,237$ 15,382$ 626,796$ 55,898$ 2011 625,000 589,217 14,237 15,013 561,037 33,300 2012 645,000 565,191 14,615 14,635 331,210 13,944 2013 670,000 540,217 550,239 13,090 111,965 1,191 2014 700,000 514,055 - - 4,952 161 2015-2019 3,910,000 2,151,490 - - - - 2020-2024 4,815,000 1,248,115 - - - - 2025-2029 5,755,000 240,280 - - - - 2030-2033 5,315,000 29,480 - - - -
23,040,000$ 6,490,336$ 593,328$ 58,120$ 1,635,960$ 104,494$
Revenue bonds payable Capital leasesNote payable
The following is an analysis of the financial presentation of the capital leases:
2009 2008
Equipment $ 3,833,817 $ 4,049,490Less accumulated amortization 1,887,268 1,404,895
$ 1,946,549 $ 2,644,595
NOTE J - OPERATING LEASES
The District leases various facility spaces and equipment under operating leases expiring through 2014. Future five-year minimum lease payments under these noncancelable leases at December 31, 2009 are:
2010 $ 697,8382011 419,9552012 258,9332013 264,1362014 245,339
Future minimum lease payments $ 1,886,201
Rental expense for all operating leases at December 31, 2009 and 2008 was $1,107,400 and $1,220,000, respectively.
Aspen Valley Hospital District
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 2009 and 2008
33
NOTE K - MEDICAL MALPRACTICE CLAIMS
The District pays fixed premiums for annual medical malpractice insurance coverage under a claims-made policy. Under such policy, only claims made and reported to the insurer are covered during the policy term, regardless of when the incident giving rise to the claim occurred. The District is not aware of any unasserted claims, unreported incidents or claims outstanding which are expected to exceed malpractice insurance coverage limits as of December 31, 2009. Further, the District is subject to the provisions of the Colorado Government Immunity Act which provides a limitation on the liability of the District.
NOTE L - THE ASPEN VALLEY MEDICAL FOUNDATION, LIMITED
The Aspen Valley Medical Foundation, Limited (the Foundation) is an independent non-profit corporation incorporated in 1974. The Foundation’s primary objective is the betterment of healthcare in the Roaring Fork Valley of Colorado. The Foundation’s office is located in the Hospital. The District receives contributions from the Foundation for operations and capital-related items. For the years ended December 31, 2009 and 2008, the District received contributions of $1,003,445 and $121,280, respectively, from the Foundation and as of December 31, 2009 and 2008, pledge receivable amounts are $1,123,055and $1,272,554, respectively.
NOTE M - PENSION PLANS
1. Defined contribution plan
During 2008, the District converted its 403(b) voluntary tax deferred annuity plan into a 457(b) plan. The District’s employees who participated in the voluntary tax deferred annuity plan were allowed to roll over all or a portion of their retirement into the 457(b) plan. The rollover contributions are 100% vested. The District provides the 457(b) plan to substantially all employees of the District. The employees may contribute up to 100% of their salary to the 457(b) plan. The employees’ total salary deferral is limited by the Internal Revenue Service (IRS) annually. Employees are always 100% vested in the contributions they choose to defer. If an employee is 50 years old or older and has met the annual IRS deferral limit, the employee may contribute a catch-up deferral that is also limited by the IRS annually. Contributions from employees to the 457(b) plan were $1,426,248 and $1,276,907 for the years ended December 31, 2009 and 2008, respectively. The District does not make contributions to the 457(b) plan.
During 2008, the District started a 401(a) governmental money purchase pension plan covering substantially all employees who are scheduled to work more than 20 hours per week or 5 months per year. Contribution expense is recorded for the amount of the District’s required contributions, determined in accordance with the terms of the 401(a) plan. The 401(a) plan is administered by the District’s governing body. The 401(a) plan provides retirement and death benefits to 401(a) plan members and their beneficiaries. Benefit and contribution provisions are contained in the 401(a) plan document and were established and can be amended by action of the District’s governing body. The district’s contribution for each eligible employee shall be calculated as of the contribution date and shall be equal to 50% of the employee’s elective deferral contributions. The District’s contributions, for purposes of all employees, excluding the Chief Executive Officer (CEO), shall not exceed 2 1/2% of their annual compensation; 5% for purposes of the CEO. Contribution expense to the 401(a) plan was $305,956 and $290,958 for the years ended December 31, 2009 and 2008, respectively.
Aspen Valley Hospital District
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 2009 and 2008
34
NOTE M - PENSION PLANS - Continued
2. Defined benefit plan
The District also administers a Cash Balance Retirement Plan (the Plan) providing retirement, disability and death benefits to full-time and half-time employees and their beneficiaries. This Plan is a single-employer defined benefit plan wherein a separate cash balance account is established for each employee upon becoming a member of the Plan.
Funding policy
An employee’s benefit under the Plan, subject to certain limitations, is based on the amounts contributed to the employee’s separate account and an annual minimum guaranteed investment rate of return. All investment risks of the Plan are borne by the District. The District makes annual contributions equal to 7.5% of earned salaries for employees who have earned 1,000 qualifying hours during the Plan year. Employees vest in District contributions on a graded scale after the employee is credited with a second year of service. Contributions are intended to provide not only for benefits attributed to service to date, but also for those expected to be earned in the future. The contribution requirements of the Plan members and the District are established and may be amended by the District. Plan participants are not permitted to contribute to the Plan.
Annual pension cost and net pension asset
The District’s annual pension cost and net pension asset to the Plan for the years ended December 31, 2009 and 2008 was as follows:
2009 2008
Annual required contribution $ 1,666,196 $ 1,043,735Interest on net pension obligation (33,833) (29,069)Adjustment to annual required contribution 61,135 35,086
Annual pension cost 1,693,498 1,049,752Contributions made (1,675,000) (1,148,692)
(Increase) decrease in net pension asset 18,498 (98,940)Net pension asset at beginning of year 469,000 370,060
Net pension asset at end of year $ 450,502 $ 469,000
The annual required contribution for the years ended December 31, 2009 and 2008 was determined as part of the January 1, 2009 and 2008 actuarial valuation using the unit credit cost method, respectively. The actuarial assumptions for the years ended December 31 are as follows:
2009 2008
Long-term investment rate of return (net of administrative expenses) 7.50% 7.50%Projected salary increases after ten years 5.50% 5.50%Inflation component per year 3.00% 3.00%
Aspen Valley Hospital District
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 2009 and 2008
35
NOTE M - PENSION PLANS - Continued
Annual pension cost and net pension asset - continued
The actuarial value of assets was determined using techniques that smooth the effects of short-termvolatility in the market value of investments over future years. The unfunded actuarial accrued liability isbeing amortized as a level percentage of projected payroll on an open basis. The amortization period atDecember 31, 2009 and 2008 is ten years.
Three-year trend information
Annual Percentagepension cost of APC New pension
Year ended (APC) contributed asset
2007 506,862$ 97% 370,060$2008 1,049,752$ 109% 469,000$2009 1,693,498$ 99% 450,502$
The Plan does not issue stand-alone financial statements and is not included in the report of any otherpublic employee retirement system or another entity.
NOTE N - CONTINGENCIES
In the normal course of business, the District is, from time to time, subject to allegations that may or maynot result in litigation. The District evaluates such allegations by conducting investigations to determinethe validity of each potential claim. Based upon the advice of legal counsel, management records anestimate of the amount of ultimate expected loss, if any, for each. The District did not record anyexpected losses for the years ended December 31, 2009 and 2008. Events could occur that would causethe estimate of ultimate loss to differ in the near term.
NOTE O - SUBSEQUENT EVENT
During February 2010 the District signed agreements for pre-construction services related to Phase II ofthe Master Facilities Plan. The commitment associated with these agreements totals $2,025,000 and isexpected to be paid during 2010 upon completion of the agreed upon services.
NOTE P - CONTINGENCY (UNAUDITED)
Upon review of patient medical records as part of the normal compliance process, the District identifiedcertain documentation issues that may or may not require repayment of reimbursements received fromthird-party payors for certain services rendered. The District is reviewing its medical records to determinethe extent of the identified issues. The District is unable to estimate the amount of repayment, if any, tothird-party payors. This contingency was identified subsequent to the issuance of the audited financialstatements.
(THIS PAGE INTENTIONALLY LEFT BLANK)
SUPPLEMENTARY INFORMATION
ActuarialAccrued UAAL as a
Actuarial Actuarial Liability Unfunded percentagevaluation value of (AAL) - AAL Funded Covered of covered
date assets Entry age (UAAL) ratio payroll payroll(a) (b) (a-b) (a/b) (c) (a-b/c)
6/1/01 5,311,501$ 5,159,401$ 152,100$ 103% 13,171,042$ 1%
6/1/02 5,505,440$ 6,101,743$ (596,303)$ 90% 14,400,476$ -4%
6/1/03 5,907,744$ 6,908,500$ (1,000,756)$ 86% 16,037,942$ -6%
6/1/04 7,310,833$ 8,040,139$ (729,306)$ 91% 15,046,364$ -5%
6/1/05 7,778,060$ 8,439,829$ (661,769)$ 92% 12,717,916$ -5%
6/1/06 8,834,727$ 9,692,585$ (857,858)$ 91% 12,777,017$ -7%
6/1/07 10,198,381$ 10,220,086$ (21,705)$ 100% 14,584,176$ 0%
1/1/08 9,990,736$ 10,615,471$ (624,735)$ 94% 16,039,223$ -4%
1/1/09 7,418,510$ 11,844,382$ (4,425,872)$ 63% 17,094,569$ -26%
Aspen Valley Hospital District
SCHEDULE OF FUNDING PROGRESS -
Years ended December 31,
CASH BALANCE RETIREMENT PLAN
36
Annualrequired Percentage
contribution of ARCFiscal year (ARC) contributed
2001 703,886$ 100%
2002 851,826$ 100%
2003 999,216$ 100%
2004 914,386$ 105%
2005 778,430$ 96%
2006 887,556$ 109%
2007 492,369$ 100%
2008 1,043,735$ 110%
2009 1,666,196$ 101%
Aspen Valley Hospital District
SCHEDULE OF EMPLOYER CONTRIBUTIONS -CASH BALANCE RETIREMENT PLAN
Years ended December 31,
37
Budgeted Favorableamount (unfavorable)Original Actual variance
Operating revenuesNet patient service revenue 52,615,920$ 55,843,357$ 3,227,437$ Other revenues 2,085,112 2,220,991 135,879
Total operating revenues 54,701,032 58,064,348 3,363,316
Operating expenses 55,367,688 54,140,186 1,227,502
Operating income (666,656) 3,924,162 4,590,818
Nonoperating revenues (expenses)Ad valorem taxes 3,517,093 3,517,092 (1)Investment income 750,000 869,059 119,059Interest expense (1,350,445) (992,601) 357,844Noncapital contributions 37,698 893,879 856,181Gain on investment in joint venture 450,008 43,009 (406,999)Gain (loss) on disposal of capital assets - 12,944 12,944
Total nonoperating revenues (expenses) 3,404,354 4,343,382 939,028
Income before capital contributions, memberdistributions, net, and equity contributions 2,737,698 8,267,544 5,529,846
Capital contributions 662,302 182,910 (479,392)Member distributions - 895,050 895,050Equity contribution - - -
Change in net assets 3,400,000$ 9,345,504$ 5,945,504$
Notes to ScheduleAnnual budgets are adopted as required by Colorado Statutes. Formal budgetary integration is employed as a
management control device during the year. Budgets are adopted on a basis that is consistent withgenerally accepted accounting principles.
Budgets are adopted by resolution in total. There were no supplemental budgets adopted during 2009.
reflected in the actual column above. The decrease in net assets for the component units was $562,978 in 2009.
Aspen Valley Hospital District
STATEMENT OF BUDGETED AND ACTUAL REVENUES AND EXPENSES
Year ended December 31, 2009
Component units operating results are included in the budgeted amount original column above, but are not
38
Midvalley
Ambulatory Snowmass Midvalley
Surgery Clinic Imaging
Center, LLC Associates, LLP Center, LLC Total
CURRENT ASSETS
Cash and cash equivalents 158,531$ 465,890$ 78,355$ 702,776$
Patient accounts receivable, net 453,412 31,323 133,965 618,700
Other receivables - 59,963 5,000 64,963
Inventories 100,330 21,114 - 121,444
Prepaid expenses - 78,866 - 78,866
Total current assets 712,273 657,156 217,320 1,586,749
CAPITAL ASSETS, NET 215,322 147,614 871,426 1,234,362
OTHER ASSETS (NET) - 127,395 - 127,395
Total assets 927,595$ 932,165$ 1,088,746$ 2,948,506$
CURRENT LIABILITIES
Accounts payable 50,617$ -$ 5,969$ 56,586$
Accrued salaries, benefits and payroll taxes - 22,375 - 22,375
Other accrued liabilities 59,061 517,542 - 576,603
Total current liabilities 109,678 539,917 5,969 655,564
CONTINGENCIES AND COMMITMENTS
NET ASSETS
Restricted
Reserved for minority interests 400,779 78,450 540,035 1,019,264
Unrestricted 417,138 313,798 542,742 1,273,678
Total net assets 817,917 392,248 1,082,777 2,292,942
Total liabilities and net assets 927,595$ 932,165$ 1,088,746$ 2,948,506$
LIABILITIES AND UNRESTRICTED NET ASSETS
Aspen Valley Hospital District
COMBINING BALANCE SHEET - COMPONENT UNITS
December 31, 2009
ASSETS
39
Midvalley
Ambulatory Snowmass Midvalley
Surgery Clinic Imaging
Center, LLC Associates, LLP Center, LLC Total
Operating revenues
Net patient service revenue 3,051,268$ 665,815$ 733,033$ 4,450,116$
Other revenues - 13,060 - 13,060
Total operating revenues 3,051,268 678,875 733,033 4,463,176
Operating expenses
Salaries and wages 488,363 356,462 90,493 935,318
Supplies and other 1,288,700 447,664 282,290 2,018,654
Depreciation and amortization 84,398 82,404 172,680 339,482
Total operating expenses 1,861,461 886,530 545,463 3,293,454
Operating income (loss) 1,189,807 (207,655) 187,570 1,169,722
Nonoperating revenues (expenses)
Investment income 10,424 1,542 2,572 14,538
Income (loss) before member distributions
and equity contribution 1,200,231 (206,113) 190,142 1,184,260
Member distributions (1,320,000) - (435,000) (1,755,000)
Equity contributions - - 7,762 7,762
Change in net assets (119,769) (206,113) (237,096) (562,978)
Net assets at beginning of year 937,686 598,361 1,319,873 2,855,920
Net assets at end of year 817,917$ 392,248$ 1,082,777$ 2,292,942$
Aspen Valley Hospital District
COMBINING STATEMENT OF REVENUES, EXPENSES
AND CHANGES IN NET ASSETS - COMPONENT UNITS
Year ended December 31, 2009
40
Midvalley
Ambulatory Snowmass Midvalley
Surgery Clinic Imaging
Center, LLC Associates, LLP Center, LLC Total
Cash flows from operating activities
Cash received from patients and
third-party payors 3,108,733$ 658,331$ 775,478$ 4,542,542$
Cash paid to others - (49,445) - (49,445)
Cash received from (paid to) suppliers (1,273,185) 60,903 (280,836) (1,493,118)
Cash paid to employees (488,363) (334,087) (90,493) (912,943)
Net cash provided by operating activities 1,347,185 335,702 404,149 2,087,036
Cash flows from capital and related
financing activities
Purchases of capital assets (67,623) - - (67,623)
Cash flows from investing activities
Investment income 10,424 1,542 2,572 14,538
Member distributions (1,320,000) - (435,000) (1,755,000)
Net cash provided by (used in) investing activities (1,309,576) 1,542 (432,428) (1,740,462)
Net increase (decrease) in cash and cash equivalents (30,014) 337,244 (28,279) 278,951
Cash and cash equivalents at beginning of year 188,545 128,646 106,634 423,825
Cash and cash equivalents at end of year 158,531$ 465,890$ 78,355$ 702,776$
Reconciliation of operating income (loss) to net
cash provided by operating activities
Operating income (loss) 1,189,807$ (207,655)$ 187,570$ 1,169,722$
Adjustments to reconcile operating
income (loss) to net cash provided by
operating activities
Depreciation and amortization 84,398 82,404 172,680 339,482
Change in assets and liabilities
Patient accounts receivable 57,465 (7,484) 42,445 92,426
Other receivables - (47,505) - (47,505)
Inventories 13,848 6,732 - 20,580
Prepaid expenses - 91,607 - 91,607
Other assets - (15,000) - (15,000)
Accounts payable 1,042 (27,832) 1,454 (25,336)
Accrued salaries, benefits and payroll taxes - 22,375 - 22,375
Other accrued liabilities 625 438,060 - 438,685
Net cash provided by operating activities 1,347,185$ 335,702$ 404,149$ 2,087,036$
Aspen Valley Hospital District
COMBINING STATEMENT OF CASH FLOWS - COMPONENT UNITS
Year ended December 31, 2009
41
© Grant Thornton LLPAll rights reservedU.S. member firm of Grant Thornton International Ltd
This report is confidential. Unauthorized use of this report in whole or in part is strictly prohibited.
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APPENDIX B
BOOK-ENTRY ONLY SYSTEM
DTC will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Bond certificate will be issued for each maturity and interest rate of the Bonds, in the aggregate principal amount of such maturity and interest rate, and will be deposited with DTC.
DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has Standard & Poor’s highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org.
Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Bonds, except in the event that use of the book-entry system for the Bonds is discontinued.
To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC
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and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the Registrar and request that copies of notices be provided directly to them.
Redemption notices shall be sent to DTC. If less than all of the Bonds within an issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the District as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).
Principal, interest and redemption proceeds on the Bonds will be made to Cede& Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the District or the Paying Agent on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, the Paying Agent or the District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, interest or redemption proceeds to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the District or the Paying Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the District or the Registrar and Paying Agent.
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Under such circumstances, in the event that a successor depository is not obtained, Bond certificates are required to be printed and delivered.
The District may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered to DTC.
The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that the District believes to be reliable, but the District takes no responsibility for the accuracy thereof.
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APPENDIX C
FORM OF CONTINUING DISCLOSURE CERTIFICATE
This Continuing Disclosure Certificate (the “Disclosure Certificate”) is executed and delivered by the ASPEN VALLEY HOSPITAL DISTRICT, PITKIN COUNTY, COLORADO (the “Issuer”) in connection with the issuance of its Tax-Exempt General Obligation Bonds, Series 2010A (the “2010A Bonds, in the aggregate principal amount of $12,045,000 and its Taxable General Obligation Bonds, Series 2010B (Direct Pay Build America Bonds) in the aggregate principal amount of $37,955,000 (the “2010B Bonds” or, collectively, the “Bonds”). The Bonds are being issued pursuant to a bond resolution adopted by the Board of Directors of the Issuer on November 18, 2010 (the “Bond Resolution”). The Issuer covenants and agrees as follows:
SECTION 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the Issuer for the benefit of the holders and beneficial owners of the Bonds and in order to assist the Participating Underwriter in complying with Rule 15c2-12(b)(5) of the Securities and Exchange Commission (the “SEC”).
SECTION 2. Definitions. In addition to the definitions set forth in the Resolution or parenthetically defined herein, which apply to any capitalized terms used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings:
“Annual Report” shall mean any Annual Report provided by the Issuer pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate.
“Dissemination Agent” shall mean, initially, the Issuer, or any successor Dissemination Agent designated in writing by the Issuer and which has filed with the Issuer a written acceptance of such designation.
“Material Events” shall mean any of the events listed in Section 5 of this Disclosure Certificate.
“MSRB” shall mean the Municipal Securities Rulemaking Board. As of the date hereof, the MSRB’s required method of filing is electronically via its Electronic Municipal Market Access (EMMA) system available on the Internet at http://emma.msrb.org.
“Participating Underwriter” shall mean the original underwriter of the Bonds required to comply with the Rule in connection with an offering of the Bonds.
“Rule” shall mean Rule 15c2-12(b)(5) adopted by the SEC under the Securities Exchange Act of 1934, as the same may be amended from time to time.
SECTION 3. Provision of Annual Reports.
a. The Issuer shall, or shall cause the Dissemination Agent to, not later than nine (9) months following the end of the Issuer’s fiscal year of each year, commencing nine (9)
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months following the end of the Issuer’s year ending December 31, 2010, provide to the MSRB (in an electronic format as prescribed by the MSRB), an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Certificate. Not later than five (5) business days prior to said date, the Issuer shall provide the Annual Report to the Dissemination Agent (if other than the Issuer). The Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross-reference other information as provided in Section 4 of this Disclosure Certificate; provided that the audited financial statements of the Issuer may be submitted separately from the balance of the Annual Report.
b. If the Issuer is unable to provide to the MSRB an Annual Report by the date required in subsection (a), the Issuer shall file or cause to be filed with the MSRB a notice in substantially the form attached as Exhibit “A.”
c. The Dissemination Agent shall:
(1) determine each year prior to the date for providing the Annual Report the appropriate electronic format prescribed by the MSRB;
(2) if the Dissemination Agent is other than the Issuer, send written notice to the Issuer at least 45 days prior to the date the Annual Report is due stating that the Annual Report is due as provided in Section 3(a) hereof; and
(3) if the Dissemination Agent is other than the Issuer, file a report with the Issuer certifying that the Annual Report has been provided pursuant to this Disclosure Certificate, stating the date it was provided and listing all the entities to which it was provided.
SECTION 4. Content of Annual Reports. The Issuer’s Annual Report shall contain or incorporate by reference the following:
a. A copy of its annual financial statements prepared in accordance with generally accepted accounting principles audited by a firm of certified public accountants. If audited annual financial statements are not available by the time specified in Section 3(a) above, unaudited financial statements will be provided as part of the Annual Report and audited financial statements will be provided when and if available.
b. An update of the type of information identified in Exhibit “B” hereto, which is contained in the tables in the Official Statement with respect to the Bonds.
Any or all of the items listed above may be incorporated by reference from other documents, including official statements of debt issues of the Issuer or related public entities, which are available to the public on the MSRB’s Internet Web Site or filed with the SEC. The Issuer shall clearly identify each such document incorporated by reference.
SECTION 5. Reporting of Material Events. The Issuer shall file or cause to be filed with the MSRB, in a timely manner not in excess of ten business days after the occurrence of the event, notice of any of the events listed below with respect to the Bonds:
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a. Principal and interest payment delinquencies; b. Non-payment related defaults, if material; c. Unscheduled draws on debt service reserves reflecting financial
difficulties; d. Unscheduled draws on credit enhancements reflecting financial
difficulties; e. Substitution of credit or liquidity providers or their failure to perform; f. Adverse tax opinions, the issuance by the Internal Revenue Service of
proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds;
g. Modifications to rights of bondholders, if material; h. Bond calls, if material, and tender offers; i. Defeasances; j. Release, substitution or sale of property securing repayment of the Bonds,
if material; k. Rating changes; l. Bankruptcy, insolvency, receivership or similar event of the obligated
person;1 m. The consummation of a merger, consolidation, or acquisition involving an
obligated person or the sale of all or substantially all of the assets of the obligated person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and
n. Appointment of a successor or additional trustee or the change of name of a trustee, if material.
SECTION 6. Format; Identifying Information. All documents provided to the MSRB pursuant to this Disclosure Certificate shall be in the format prescribed by the MSRB and accompanied by identifying information as prescribed by the MSRB.
1 For the purposes of the event identified in subparagraph (b)(5)(i)(C)(12), the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for an obligated person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the obligated person, or if such jurisdiction has been assumed by leaving the existing governing body and official or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the obligated person.
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As of the date of this Disclosure Certificate, all documents submitted to the MSRB must be in portable document format (PDF) files configured to permit documents to be saved, viewed, printed and retransmitted by electronic means. In addition, such PDF files must be word-searchable, provided that diagrams, images and other non-textual elements are not required to be word-searchable.
SECTION 7. Termination of Reporting Obligation. The Issuer’s obligations under this Disclosure Certificate shall terminate upon the earliest of: (i) the date of legal defeasance, prior redemption or payment in full of all of the Bonds; (ii) the date that the Issuer shall no longer constitute an “obligated person” within the meaning of the Rule [add any other applicable obligated persons]; or (iii) the date on which those portions of the Rule which require this written undertaking are held to be invalid by a court of competent jurisdiction in a non-appealable action, have been repealed retroactively or otherwise do not apply to the Bonds.
SECTION 8. Dissemination Agent. The Issuer may, from time to time, appoint or engage a Dissemination Agent to assist the Issuer in carrying out its obligations under this Disclosure Certificate, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent.
SECTION 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the Issuer may amend this Disclosure Certificate and may waive any provision of this Disclosure Certificate, without the consent of the holders and beneficial owners of the Bonds, if such amendment or waiver does not, in and of itself, cause the undertakings herein (or action of any Participating Underwriter in reliance on the undertakings herein) to violate the Rule, but taking into account any subsequent change in or official interpretation of the Rule. The Issuer will provide notice of such amendment or waiver to the MSRB.
SECTION 10. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the Issuer from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Material Event, in addition to that which is required by this Disclosure Certificate. If the Issuer chooses to include any information in any Annual Report or notice of occurrence of a Material Event in addition to that which is specifically required by this Disclosure Certificate, the Issuer shall have no obligation under this Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Material Event.
SECTION 11. Default. In the event of a failure of the Issuer to comply with any provision of this Disclosure Certificate, any holder or beneficial owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Issuer to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an event of default under the Resolution, and the sole remedy under this Disclosure Certificate in the event of any failure of the Issuer to comply with this Disclosure Certificate shall be an action to compel performance.
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SECTION 12. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the Issuer, the Dissemination Agent, the Participating Underwriter and the holders and beneficial owners from time to time of the Bonds, and shall create no rights in any other person or entity.
DATE: December 15, 2010
ASPEN VALLEY HOSPITAL DISTRICT, PITKIN COUNTY, COLORADO
By: President, Board of Directors
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EXHIBIT “A”
NOTICE OF FAILURE TO FILE ANNUAL REPORT Name of Issuer: Aspen Valley Hospital District, Pitkin County, Colorado
Name of Bond Issue: Tax-Exempt General Obligation Bonds, Series 2010A in the aggregate principal amount of $12,045,000 (the “2010A Bonds), and Taxable General Obligation Bonds, Series 2010B (Direct Pay Build America Bonds) in the aggregate principal amount of $37,955,000 (the “2010B Bonds” or, together with the 2010A Bonds, the “Bonds”). CUSIP: Date of Issuance: ________________ NOTICE IS HEREBY GIVEN that the Issuer has not provided an Annual Report with respect to the above-named Bonds as required by Section 15E of the Resolution, adopted on November 18, 2010, and the Continuing Disclosure Certificate executed on December 15, 2010, by the Issuer. The Issuer anticipates that the Annual Report will be filed by ______________________.
Dated: ______________, _____
ASPEN VALLEY HOSPITAL DISTRICT, PITKIN, COLORADO By: Its:
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EXHIBIT “B”
INDEX OF OFFICIAL STATEMENT TABLES TO BE UPDATED
(See Page v to this Official Statement)
(THIS PAGE INTENTIONALLY LEFT BLANK)
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APPENDIX D
FORM OF BOND COUNSEL OPINION
December 15, 2010 Aspen Valley Hospital District 0401 Castle Creek Road Aspen, Colorado 81611
$12,045,000 Aspen Valley Hospital District
Pitkin County, Colorado Tax-Exempt General Obligation Bonds, Series 2010A
Ladies and Gentlemen:
We have acted as bond counsel to Aspen Valley Hospital District, Pitkin County, Colorado (the “District”), in connection with the issuance of its Tax-Exempt General Obligation Bonds, Series 2010A, in the aggregate principal amount of $12,045,000 (the “2010A Bonds”), pursuant to an authorizing resolution of the Board of Directors of the District adopted on November 18, 2010 (the “Bond Resolution”). In such capacity, we have examined the District’s certified proceedings and such other documents and such law of the State of Colorado and of the United States of America as we have deemed necessary to render this opinion letter.
Regarding questions of fact material to our opinions, we have relied upon the District’s certified proceedings and other representations and certifications of public officials and others furnished to us without undertaking to verify the same by independent investigation.
Based upon such examination, it is our opinion as bond counsel that:
1. The 2010A Bonds constitute valid and binding general obligations of the District.
2. All of the taxable property in the District is subject to the levy of an ad valorem tax to pay the 2010A Bonds without limitation of rate and in an amount sufficient to pay the 2010A Bonds when due.
3. Interest on the 2010A Bonds is excluded from gross income under federal income tax laws pursuant to Section 103 of the Internal Revenue Code of 1986, as amended to the date hereof (the “Tax Code”), interest on the 2010A Bonds is excluded from alternative minimum taxable income as defined in Section 55(b)(2) of the Tax Code, and interest on the 2010A Bonds is excluded from Colorado taxable income and Colorado alternative minimum taxable income under Colorado income tax laws in effect as of the date hereof. The opinions expressed in this paragraph assume continuous compliance with the covenants and
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representations contained in the District’s certified proceedings and in certain other documents and certain other certifications furnished to us.
4. The opinions expressed in this opinion letter are subject to the following:
5. The obligations of the District pursuant to the 2010A Bonds and the Bond Resolution are subject to the application of equitable principles, to the reasonable exercise in the future by the State of Colorado and its governmental bodies of the police power inherent in the sovereignty of the State of Colorado and to the exercise by the United States of America of the powers delegated to it by the Federal Constitution, including, without limitation, bankruptcy powers.
6. In this opinion letter issued in our capacity as bond counsel, we are opining only upon those matters set forth herein, and we are not passing upon the accuracy, adequacy or completeness of the Official Statement relating to the 2010A Bonds or any other statements made in connection with any offer or sale of the 2010A Bonds or upon any federal or state tax consequences arising from the receipt or accrual of interest on or the ownership or disposition of the 2010A Bonds, except those specifically addressed herein.
7. This opinion letter is issued as of the date hereof and we assume no obligation to revise or supplement this opinion letter to reflect any facts or circumstances that may hereafter come to our attention or any changes in law that may hereafter occur.
Respectfully submitted,
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December 15, 2010 Aspen Valley Hospital District 0401 Castle Creek Road Aspen, Colorado 81611
$37,955,000 Aspen Valley Hospital District
Pitkin County, Colorado Taxable General Obligation Bonds
(Direct Pay Build America Bonds), Series 2010B
Ladies and Gentlemen:
We have acted as bond counsel to the Aspen Valley Hospital District, Pitkin County, Colorado, Colorado (the “District”), in connection with the issuance of its Taxable General Obligation Bonds (Direct Pay Build America Bonds), Series 2010B, in the aggregate principal amount of $37,955,000 (the “2010B Bonds”), pursuant to an authorizing resolution of the Board of Directors of the District adopted on November 18, 2010 (the “Bond Resolution”). In such capacity, we have examined the District’s certified proceedings and such other documents and such law of the State of Colorado and of the United States of America as we have deemed necessary to render this opinion letter.
Regarding questions of fact material to our opinions, we have relied upon the District's certified proceedings and other representations and certifications of public officials and others furnished to us without undertaking to verify the same by independent investigation.
Based upon such examination, it is our opinion as bond counsel that:
1. The 2010B Bonds constitute valid and binding general obligations of the District.
2. All of the taxable property in the District is subject to the levy of an ad valorem tax to pay the 2010B Bonds without limitation of rate and in an amount sufficient to pay the 2010B Bonds when due.
3. Interest on the 2010B Bonds is included in gross income for federal income tax purposes pursuant to the Internal Revenue Code of 1986, as amended to the date hereof.
4. The interest on and income from the 2010B Bonds are exempt from all taxation and assessments in the State of Colorado. The opinion expressed in this paragraph
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assumes continuous compliance with the covenants and representations contained in the District’s certified proceedings and in certain other documents and certain other certifications furnished to us.
The opinions expressed in this opinion letter are subject to the following:
The obligations of the District pursuant to the 2010B Bonds and the Bond Resolution are subject to the application of equitable principles, to the reasonable exercise in the future by the State of Colorado and its governmental bodies of the police power inherent in the sovereignty of the State of Colorado, and to the exercise by the United States of America of the powers delegated to it by the Federal Constitution, including without limitation, bankruptcy powers.
The provisions of this opinion letter concerning federal tax issues are not intended or written to be used and cannot be used by any taxpayer for the purpose of avoiding penalties that may be imposed on any taxpayer by the Internal Revenue Service. This writing supports the promotion or marketing of the transactions or matters addressed herein. Each taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor.
In this opinion letter issued in our capacity as bond counsel, we are opining only upon those matters set forth herein, and we are not passing upon the accuracy, adequacy or completeness of the Official Statement relating to the 2010B Bonds or any other statements made in connection with any offer or sale of the 2010B Bonds or upon any federal or state tax consequences arising from the receipt or accrual of interest on or the ownership or disposition of the 2010B Bonds, except those specifically addressed herein.
This opinion letter is issued as of the date hereof and we assume no obligation to revise or supplement this opinion letter to reflect any facts or circumstances that may hereafter come to our attention or any changes in law that may hereafter occur.
Respectfully submitted,