The Brookhaven Development Authority in June approved issuing $1.1 billion in tax exempt revenue bonds to Children’s Healthcare of Atlanta for the massive development of its North Druid Hill Campus that will include a new $1.5 billion hospital slated to open in 2025.
The deal does not put the city on the hook for any debt and allows CHOA to offer tax-exempt bonds due to the BDA’s nonprofit status, officials say.
As part of the financial agreement, CHOA will pay the BDA a one-time $400,000 cash payment once the bonds are issued and a $187,000 administrative fee each year from 2020 through 2029. CHOA is also responsible for hiring the financial representatives, attorneys and other personnel necessary to handle all dealings with the issuing and repayment of the bonds.
The BDA approved the bond resolution at a special called June 17 meeting. Another meeting is tentatively scheduled for July 17 after the bonds are expected to go to market when the BDA is expected to vote on documents outlining details such as interest rates, the amount of interest to be paid on the bonds and maturity date of the bonds.
The BDA, a nonprofit public body with separate powers from the City Council, is also agreeing to waive the requirements of performance audit or performance review of the bonds.
City Attorney Chris Balch explained at the June 17 meeting that the city nor the Development Authority is loaning or borrowing $1.1 billion, as some residents have asked. The BDA is acting as a “conduit” for financing the CHOA project.
“The borrower is CHOA,” he said. “The city is not on the hook to pay off any of these bonds.”
A CHOA spokesperson reiterated in a written statement “these bonds are structured so that Brookhaven taxpayers are not liable for repayment in any way” with the funding to go directly toward developing its new hospital and pediatric campus at North Druid Hills.
Two 8-story administrative buildings and a 7-story parking deck are now under construction along the Northeast Expressway as part of the campus.
The office buildings when finished will house employees now working out of one-story buildings in CHOA’s office park on Tullie Road and Tullie Circle. Walking trails and some 20 acres of green space are also included in the plans.
Construction of the new hospital on the site of the old office complex is expected to start next year and open in 2025. The new hospital will have 446 beds in two 19-story patient towers. The new hospital will replace the 235-bed Egleston Hospital located on Clifton Road near Emory University. Plans for Egleston have not been determined, according to CHOA officials.
CHOA opened its Advanced Center for Pediatrics at the campus last year.
By issuing the revenue bonds, BDA is allowing CHOA to access its tax-free borrowing powers so its investors will not have to pay taxes on interest they earn. This allows CHOA to obtain a lower interest rate on the bonds, Balch said.
“We are offering them a tax-free conduit. As a municipality we can issue bonds and undertake this and save them money,” he said. “That is the purpose and goal of this.”
Balch said the benefit to the city is the approximate 1,600 jobs to be created in the city by CHOA’s medical campus development now being built on approximately 70 acres of property at the I-85 and North Druid Hills Road interchange. CHOA’s presence in the city also promotes economic development, he said.
Balch said city financial experts have no serious concerns that CHOA will not be able to pay off its bond debt over 30 years.
The path leading the BDA to issuing bonds for CHOA originated in the community investment agreement signed between the city and CHOA in December 2017. The agreement was signed after the City Council approved annexing some 20 acres south of I-85 into the city specifically for CHOA’s medical campus expansion.
CHOA promised as part of the agreement to invest $40 million in traffic improvements around its campus, including funding the matching grant for replacing the I-85/North Druid Hills intersection; an improved access point from North Druid Hills Road; and improvements on several nearby arterial roads. CHOA also plans a path from its campus to the Peachtree Creek Greenway.
Included in the agreement was the clause that CHOA would “strive” to issue up to $400 million of tax exempt bonds through the BDA to be used to build out its new campus.
Shirlynn Brownell, the city’s director of economic development and executive director of the BDA, said because CHOA is going above the $400 million amount, the city was able to negotiate the fees it would be paid for issuing the bonds.
Those fees – the $400,000 and then the annual $187,000 payment a year for 10 years – will be used by the BDA to attract companies, fund marketing initiatives and seek out other economic development opportunities for the city, Brownell said.
“What it does is give me some walking-around money to promote economic development,” she said.
The $1.1 billion revenue bonds issued for CHOA is BDA’s second major funding action. In 2016, the BDA approved a $36 million tax abatement to the Atlanta Hawks for construction of the team’s practice facility at the Emory Sports Medicine Complex in Executive Park. The abatement is good for 15 years with the Hawks paying the city a “payment in lieu of taxes,” or PILOT, of $302,900 a year for the next 15 years. The Hawks’ first payment was last year.
The BDA transferred nearly $172,000 of that Hawks first payment to the city as part of a repayment plan for the city’s $1.7 million purchase of the closed QuikTrip station at 3292 Buford Highway. The city purchased the gas station last year using money out of its budgetary reserve, then transferred the property to the BDA. The BDA will make the nearly $172,000 payments to the city for the next 10 years to pay off the $1.7 million.