Newspaper article THE JOURNAL RECORD

Bond Provisions under Tax Law Give Break to Health Care Institutions

Newspaper article THE JOURNAL RECORD

Bond Provisions under Tax Law Give Break to Health Care Institutions

Article excerpt

NEW YORK - Municipal bond financing provisions under the new tax law provide a welcome break to public and private not-for-profit health care institutions, which have had more than their share of troubles in recent years.

Cuts in federal aid, rising costs, increasing numbers of empty beds and shorter patient stays have combined to put a financial squeeze on these facilities - which, on top of everything, were facing unpleasant restrictions in early drafts of the tax measure.

In fact, for a long while, it was not even clear whether hospitals would be treated as entities essential to government - such as housing, sewer or transportation authorities - thereby entitling them to issue tax-free bonds.

That uncertainty contributed heavily to a record flood of $31.2 billion in health-care issues before Dec. 31, 1985, according to the Bond Buyer, an authoritative financial journal.

In addition, under original proposals, non-profit hospitals would not have been allowed to refinance their outstanding debts by issuing advance refundings.

And they faced potential limits to the amount of new money they could raise with tax-free bonds as well.

The result of all this was that 1985's flood of new issues turned to a trickle after the first of 1986, with only 15 issues totalling $114 million being sold in the first quarter of the year, Bond Buyer said.

But these worrisome prospects were swept aside in the final version of the tax overhaul, leading to a revival in the number of tax-free health-care bonds being issued.

By the end of September, the total value of such issues for 1986 had risen to $4.39 billion.

Dealers said a large percentage of the new health-care issues are taking advantage of provisions permitting one or two advance refundings for each issue. …

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