St. Luke’s seeks DEDA’s bonding helpAs St. Luke’s hospital expands the size of its downtown medical campus, the health-care provider is turning to the Duluth Economic Development Authority for financing help.
By: Peter Passi, Duluth News Tribune
As St. Luke’s hospital expands the size of its downtown medical campus, the health-care provider is turning to the Duluth Economic Development Authority for financing help.
St. Luke’s is seeking to use DEDA’s authority to issue $83 million in low-interest bonds. More than $58 million of that would pay off older bonds and cover previous capital expenditures. An additional $18.5 million would go toward new capital expenditures. The rest of the money would go to cover sundry debt service and issuance costs.
“Today’s interest rates are at a historically low level,” said St. Luke’s CEO John Strange.
If DEDA authorizes the issuance of tax-exempt bonds on behalf of
St. Luke’s, the organization could lock in a fixed-interest rate for the next 30 years. The authority is expected to take up the matter when it next meets Aug. 22.
DEDA has issued bonds on behalf of St. Luke’s in the past and has done the same for its local rival, Essentia Health.
Issuing the bonds does not pose any risk to the authority, said Christopher Eng, DEDA’s executive director. He said St. Luke’s would bear sole responsibility for paying off the bonds, and even if there were some unforeseen financial difficulty, it should have no impact on DEDA or its credit rating.
“We’re serving as a conduit by allowing them to use our bonding authority,” Eng explained.
DEDA will charge a 1 percent commission on the bonds, netting it $830,000 if commissioners approve the deal.
“That’s money we could use for other possible projects,” Eng said.
By supporting the continued growth of St. Luke’s, Eng maintains that DEDA is fulfilling its economic development mission.
St. Luke’s now provides the equivalent of about 1,775 full-time jobs, with
average annual individual pay probably running about $50,000, Strange said.
So far this year, St. Luke’s has recruited 14 more doctors, and Strange said that for every physician hired, another two to four additional support positions typically are created.
As work on a new $27 million medical office building nears completion in downtown Duluth, Strange said the modern facility should be sufficient to accommodate St. Luke’s needs for the next five to seven years.
“We’ve been making do with the space we have, but we have a lot of growing needs to be met,” he said. The new structure will feature surgery rooms equipped with the latest electronic imaging technology. A skywalk will link the fourth floor of the new medical building with surgery facilities across the street.
As St. Luke’s increases its presence in downtown Duluth, it also will need more parking. Several homes and businesses neighboring the medical campus already have been removed, making way for temporary gravel lots. But St. Luke’s has earmarked another $4.5 million for additional land acquisition and the creation of paved parking lots, Strange said.