Joint financing approved for new VA facility

7/27/2007

The Toledo Lucas-County Port Authority yesterday agreed to jointly finance with two other Ohio port authorities the construction of a U.S. Department of Veterans Affairs residential facility near Cleveland.

The port's board of directors authorized the issuance of up to $5.25 million in taxable bonds from the agency's Northwest Ohio Bond Fund program to help finance a 122-bed "domiciliary" - in essence, a dormitory - across the street from the Louis Stokes VA Medical Center on Cleveland's east side.

The facility will replace a VA residential building in the Cleveland suburb of Brecksville, It will be owned by the Cleveland-Cuyahoga County Port Authority, which will provide $8,355,000 in taxable bonds for construction plus $3.9 million for improvements to nearby roads and utilities.

The Summit County Port Authority in Akron will kick in $6.75 million in taxable bonds to complete construction funding.

Eliminating the antiquated, decaying Brecksville buildings will save Veterans Affairs $25 million a year, with the new Cleveland facility replacing its 122-bed capacity, Susan M. Fuehrer, the Stokes' center's associate director, told the port board yesterday.

"This is a very good deal for the taxpayer," she said.

As in the case with a Cleveland Cavaliers practice facility for which the Toledo, Cleveland, and Summit County port authorities jointly issued bonds last year, the domiciliary issue is too large under Ohio law for any single port authority to finance.

All three agencies' bond issues will have 25-year terms and will be secured by a first mortgage, a Veterans Affairs "domiciliary service agreement," and other commitments.

The VA will only commit to using the facility for renewable two-year periods, which bothered port director Michael Frank, who among 11 board members at the meeting cast the lone dissenting vote.

"I really doubt that any lending institution would lend money for 25 years with only a two-year guarantee," Mr. Frank said, adding later, "I would look differently if this were in Lucas County. It's just too risky a deal for us to get involved in."

But Tim Long, the managing director for banker Robert W. Baird & Co., said Veterans Affairs is restricted to two-year leases by Congress, not by any lack of commitment to the facility.

The administration is spending $600 million to modernize the Stokes complex, Mr. Long said: "It's not going to go anywhere."

"The demand for domiciliary services is strong, and is likely to remain so," Ms. Fuehrer said.

At the current facility, she said, occupancy sometimes exceeds rated capacity when bunk beds are placed in rooms to accommodate the need.

Facility residents' average stay is 100 days, and typically involves veterans who have received care for mental health problems or addictions and are attempting transitions back into the general working population, Ms. Fuehrer said.

The service area for the Cleveland facility includes Toledo.

The port authority will receive a $40,000 fee upon the bond issue's closing, plus an annual 0.5 percent of the bonds' outstanding balance.

Earlier in the meeting, the port authority board approved a tax-exempt Northwest Ohio Bond Fund issue of up to $8 million. The money will finance the agency's acquisition and improvement of the former Gulf Oil refinery property in East Toledo and to buy a warehouse that Midwest Terminals of Toledo International Inc. recently built in the port authority's general cargo docks facility.

The port authority will lease the property and improvements to Midwest Terminals, the stevedore at the general cargo docks whose lease payments will cover the debt service.

Midwest proposes to redevelop the 181-acre refinery site for dock and warehousing operations.

Gulf closed the refinery in 1982; the port authority would buy the property from Chevron Corp., which bought Gulf in 1984.

As with the VA bond issue, the port board's approval of the Midwest bond issue was by a 10-1 vote.

Director Opie Rollison dissented on the grounds that he does not believe the port authority should own the refinery site, but rather provide financing for a private party like Midwest to buy it.

"It's just a philosophical issue," Mr. Rollison said afterward. "Am I in support of Midwest? Absolutely. Am I in favor of enhancing the port? Absolutely. It's just the mechanism with which we do it - it makes me uneasy from the risk standpoint."

Contact David Patch at:

dpatch@theblade.com

or 419-724-6094.