Growthophobes often ask, “why is there such rapid and massive growth in Meridian?” The answer: the city uses citizen money to pay developers to locate there.
When an out of state entrepreneur came to town with plans to make money off a for-profit osteopathic med school, the city mothers and fathers at Meridian fell all over themselves, even going so far as to commit $200,000 in cash to the developer. That money is collected from the hard working residents of the city in the form of property taxes. State taxpayers were also tapped.
Apparently that wasn’t enough, so they “forgave” up to $100,000 in building permits and fees. Try that if you want to build a new garage or patio onto your house.
On the face of it, the “Idaho College of Osteopathic Medicine” seems to be a new branch of Idaho State University. Far from it. The ICOM is strictly a for-profit private venture, but it appears Dan Burrell, the force behind the venture, is adept at obtaining funding from sources as diverse as the Wisconsin Public Finance Authority, Idaho Department of Commerce, and City of Meridian.
He leases land from New Mexico State University research park at Las Cruces for his BURRELL COLLEGE OF OSTEOPATHIC MEDICINE in a deal somewhat similar to the ISU deal which has him leasing land at the Meridian Campus for his private venture.
Dr. Kevin Boberg, Vice President of Economic Development at NMSU, told the GUARDIAN his orders in vetting BCOM were two-fold: “No public money was to be spent, and the project had to benefit New Mexico communities,” said Boberg who also was complimentary about the BCOM “integrity and drive.”
Boberg confirmed that Rice University Foundation of Houston is a “silent partner,” with Burrell, monitoring the diversity of the student body at its investment. One document listed Rice as a 53% partner. With Burrell in the venture for profit, NMSU leasing land for profit, and Rice investing presumably seeking profit for its endowment fund, it would appear the price of an osteopathic education would cost more than comparable classes at a public school.
The GUARDIAN has obtained hundreds of pages of documents detailing various aspects of the deal. Because of the volume of material and the complexity of the project, along with heavy political involvement by everyone from Gov. Butch Otter to local politicos, it is difficult to comprehend or explain.
A letter from Mayor Tammy de Weerd to the Public Finance Authority of Wisconsin “approving” a $55,000,000 revenue bond sale on behalf of the private osteopathic school is an example of the obfuscation. Why is the Meridian Mayor sending an official approval of a private financing scheme to a Wisconsin State Government lender? (see Meridian letter and Wisconsin policy below).
The answer is Wisconsin policy. The Wisconsin Public Finance Authority requires local government approval for capital improvement projects. It appears that Wisconsin sells tax-exempt bonds on the national market to benefit private borrowers…in 43 states according to their own statements on a website.
Exhaustive research by a GUARDIAN reader turned up concerns among educators, medical doctors, and others. Chief among the concerns was enough positions for students in the medical community at local facilities.
June 20, 2017
To: Public Finance Authority
c/ o Wisconsin Counties Association
22 East Mifflin Street, Suite 900
Madison, Wisconsin 53703
RE: Public Finance Authority
Taxable Educational Facilities Revenue Bonds
Idaho College of Osteopathic Medicine Project)
To Whom It May Concern:
Mayor Tammy de Weerd
City Council Members:
Keith Bird Joe Borton
Luke Cavener Genesis Milam
Ty Palmer Anne Little Roberts
The Public Finance Authority (” Authority”) proposes to issue not to exceed $ 55, 000, 000
principal amount of its revenue Bonds captioned above ( the ” Bonds”) to finance or refinance
certain costs in connection with the Idaho College of Osteopathic Medicine project for Idaho
College of Osteopathic Medicine, LLC ( the ” Borrower”) to be located entirely within the
jurisdictional boundaries of the City of Meridian, Ada County, Idaho ( the ” Project”). This letter shall constitute approval by the City of Meridian, of such financing of the Project by the Authority for purposes of Section 66.0304( 11)( a) of the Wisconsin Statutes.
The undersigned certifies that she is the highest ranking executive or administrator of the City of Meridian.
This approval does not constitute an endorsement of the Project. This letter may be produced as evidence, and shall be conclusive proof, of the approval granted herein in connection with any proceedings relating to the issuance of the Bonds and may be relied upon any party thereto in connection therewith.
Tammy de Weerd
Office of the Mayor . 33 E. Broadway Avenue, Meridian, ID 83642
Phone 208- 888-4433 . Fax 208- 884- 8119 . www.meridiancity. org
WISCONSIN PUBLIC FINANCE AUTHORITY POLICY
POLICY RELATING TO LOCAL GOVERNMENT APPROVAL
FOR CAPITAL IMPROVEMENT PROJECTS
April 6, 2016
This POLICY RELATING TO LOCAL GOVERNMENT APPROVAL FOR CAPITAL IMPROVEMENT PROJECTS (“ Policy”) is adopted by the Board of Directors of the Authority Board”) effective as of the date stated above.
Wisconsin Statutes Section 66.0304(11)(a) imposes the following requirement (“ Local Approval
Requirement”) with respect to Bonds issued by the Authority:
A commission may not issue bonds to finance a capital improvement project in any
state or territory of the United States unless a political subdivision within whose
boundaries the project is to be located has approved the financing of the project. A
commission may not issue bonds to finance a capital improvement project in this state
unless all of the political subdivisions within whose boundaries the project is to be located
has approved the financing of the project.”
Section 4 of the Amended and Restated Joint Exercise Agreement Relating to the Public
Finance Authority dated September 28, 2010 ( the “ Joint Exercise Agreement”) contains a substantially identical requirement:
the Commission shall not issue Bonds to finance any capital improvement project
unless one or more political subdivisions (” Approving Agency”), within
whose boundaries the project is to be located, as and to the extent required by the
Joint Exercise of Powers Law, shall have approved the financing of the project.
Such approval may be evidenced by resolution, certificate, order, report or such
other means of written approval as may be selected by the Approving Agency. No
such approval shall be required in connection with Bonds that are issued to refund
Bonds previously issued.”
REASONS FOR POLICY
The term “ capital improvement project” is not defined in either Section 66.0304 or in the
Joint Exercise Agreement. The absence of a precise definition has the potential of resulting in
uncertainty and confusion and inconsistent application of the Local Approval Requirement, all of which the Board believes can be detrimental to and undermine the Authority’ s public purposes as contemplated by Section 66.0304 and by the Joint Exercise Agreement. Further, Program Staff advises the Board that attempts to obtain local approval are often frustrated by the reluctance and occasional refusal) of local government officials outside Wisconsin to commit in writing to approve a financing by a Wisconsin agency with which they are unfamiliar under a Wisconsin law with which they are unfamiliar, as well as and in addition to the frequently-expressed concern that by giving such approval the local government will become liable on the Bonds. The Board believes that to the extent the inability to obtain local approval results from such factors that are or appear to be unrelated to the project itself, it similarly has the potential of undermining the Authority’ s public purposes.
This Policy is intended to address the concerns expressed above by establishing a definition
of “ capital improvement project” that can be universally and consistently applied to all future financings by the Authority.
Further, the Authority was established by local governments, primarily for local governments,
for the public purpose of providing local governments a means to efficiently, and reliably
finance projects that benefit local governments and nonprofit organizations and other eligible
private borrowers in the State of Wisconsin and throughout the country. In light of the foregoing, the Board may determine that, notwithstanding that a project being financed is excluded from the definition of “capital improvement project,” local approval of the financing by the Authority is appropriate as a matter of Board policy.
Local approval as prescribed by Wisconsin Statutes Section 66.0304(11)(a) and Section 4
of the Joint Exercise Agreement will be required for all Authority tax-exempt or taxable bond
issues that finance or refinance the acquisition, construction or rehabilitation of real property unless two tests are met: FIRST, the project must fall outside the definition of “ capital improvement project” articulated below, and SECOND, the Board must determine as a matter of policy that not obtaining local approval does not frustrate or undermine the public purposes for which the Authority was established.
Test 1: Definition
A project is a “ capital improvement project” if the proceeds of tax-exempt or taxable
Bonds issued by the Authority are used by a participant, in whole or in part, to finance the acquisition
of real property (a “ Facility,” which term shall include land, buildings and other structures,
and permanent fixtures appurtenant thereto) or to refinance outstanding indebtedness previously
used to acquire, construct or rehabilitate a Facility already owned by the participant, or which
indebtedness is secured by such Facility, unless all of the following are true:
a. No portion of the proceeds of the Bonds will be used to pay the costs of the construction,
demolition, expansion, rehabilitation, renovation, upgrading, addition to or remodeling
of the Facility being acquired or refinanced (“ Disqualifying Costs”); and
b. No portion of the proceeds of the Bonds will “replace” other funds of the participant
that have previously been earmarked or set aside to pay Disqualifying Costs, including,
without limitation ( i) indirectly financing Disqualifying Costs incurred by the
seller of a Facility as a condition to or otherwise in connection with sale of the Facility
to the participant and built into the purchase price, and (ii) refinancing one or more
outstanding loans that were (A) incurred within one year prior to (or, if earlier, in anticipation
of) the Authority issuing Bonds to refinance such loans, and (B) the proceeds
of which loans were used to pay Disqualifying Costs.
Test 2: Board Policy
Even if a project is not a “ capital improvement project” as defined above, local approval as
prescribed by Wisconsin Statutes Section 66.0304(11)(a) and Section 4 of the Joint Exercise
Agreement will be required if the Board determines that local approval is appropriate, taking into
consideration the impact of the financing on the local community based on any factors the Board
may deem appropriate to consider in making such determination. Such factors might include (by
way of illustration and not limitation) the continuity of ownership, management or operation of
the project; whether approval of the Facility by a local political subdivision was obtained for any
other purpose at an earlier date; the level of state or local regulation or licensing of the Facility or
the ownership or management thereof; the quality, experience and reputation of the owner, manager
or operator of the Facility; and whether there is any evidence of material complaints, legal
violations or problems in the local community with the Facility or its owner, manager or operator.
APPLICABILITY AND OTHER CONSIDERATIONS
Nothing in this Policy shall prohibit a participant from seeking and obtaining local approval
although not required under this Policy.
Before the Authority issues Bonds it shall require that the facts demonstrating to its satisfaction
that the project is not a “ capital improvement project” and that support the Board’s determinations
under the Board Policy test articulated above be certified to by the applicable participant
or participants through its or their representations and warranties set forth in the Bond documentation.
This Policy may be amended, supplemented or revoked by the Board at any time. The interpretation
of this Policy is within the Board’ s sole and exclusive discretion and any determination
by the Board in respect thereof shall be final, binding and conclusive.
The Authority shall have no pecuniary liability for any costs, losses or damages arising out
of any person’s reliance on this Policy or the Board interpretation or application thereof.
This Policy shall be superseded by any provisions of applicable law inconsistent herewith.
Bonds: The Public Finance Authority Taxable Educational Facilities Revenue Bonds ( Idaho College of
Osteopathic Medicine Project) Series 2017, in the total principal amount of $ 50,000,000 ( the
Bonds”) are being issued by the Public Finance Authority (the “ Authority”) pursuant to Section
66.0304 of the Wisconsin Statutes ( the “ Act”), a Joint Exercise Agreement executed by certain
Wisconsin political subdivisions, an authorizing resolution of the Authority and an Indenture of
Trust, dated as of August 1, 2017 (the “ Indenture”), between the Authority and U.S. Bank National
Association, as trustee (the “ Trustee”). The Bonds are being issued and delivered in fully registered
form and registered in the name of Cede & Co., as the registered owner and nominee for
The Depository Trust Company, New York, New York (“ DTC”). The Bonds are being issued in
Interest: Interest on the Bonds is payable on February 1 and August 1 of each year, commencing on
February 1, 2018.
Principal: Principal of the Bonds is payable on August 1, 2023, the maturity date of the Bonds.
Redemption: The Bonds are subject to extraordinary, optional and mandatory redemption in the manner and
under the circumstances described in the Indenture.
The Authority: Pursuant to the Act and Section 66.0304 to the Wisconsin Statutes, the Authority is a unit of
government and a body corporate and politic separate and distinct from, and independent of, the
State of Wisconsin and the Authority Members. The Authority was established by local
governments, primarily for local governments, for the public purpose of providing local
governments a means to efficiently and reliably finance projects that benefit local governments and
nonprofit organizations, and other eligible private borrowers in the State of Wisconsin and
throughout the country.
The Company: The Idaho College of Osteopathic Medicine, LLC (the “ Company”) is a single-purpose limited
liability company organized under the laws of the State of Idaho for the purposes of owning and
operating a college of osteopathic medicine (the “ College”).
The Project: Proceeds of the Bonds will be loaned by the Authority to the Company pursuant to a Loan
Agreement, dated as of August 1, 2017, between the Authority and the Company ( the “ Loan
Agreement”), and applied, together with other available moneys, ( i) to finance the costs of
acquiring, constructing and equipping a facility (the “ Facility”) for the operation of a college of
osteopathic medicine ( the “ College”); ( ii) to fund the Debt Service Reserve Fund established
pursuant to the Indenture; ( iii) to fund a portion of capitalized interest with respect to the Bonds;
and (iv) to pay certain costs of issuance (collectively, the “ Project”).
Certain funds of the Company have been or shall be (i) applied to pay certain costs of issuance; ( ii)
applied to satisfy working capital requirements for the College; ( iii) applied to fund a portion of
capitalized interest with respect to the Bonds; ( iv) applied to fund an operating reserve fund (the
Operating Reserve Account”) as required by the American Osteopathic Association’ s Commission
on Osteopathic College Accreditation (“ COCA”); and ( v) deposited into an escrow account ( the
Teach-Out Reserve Account”) as required by COCA and the Idaho State Board of Education (the
SBOE”), pursuant to a Four-Party Account Agreement, dated as of May 3, 2017 ( the “ Escrow
Agreement”), by and between the Company, the SBOE, Southwest Capital Bank ( the
Depository”) and COCA Holders of the Bonds shall have no interest in the Operating Reserve
Account or the Teach-Out Reserve Account or funds on deposit therein ( other than
investment income from the accounts), which must remain unencumbered in accordance with
Preliminary; subject to change
the requirements of COCA and the SBOE, until released.
The Facility will be located on property ( the “ Project Site”) within the ISU-Meridian Health
Science Center of Idaho State University (“ISU”) in Meridian, Idaho, leased from ISU pursuant to a
Ground Lease, by and between the Company, the SBOE and ISU.
ISU is a doctoral research and teaching institution founded in 1901. At the main campus in
Pocatello, and at locations in Meridian, Idaho Falls and Twin Falls, ISU offers access to more than
250 programs. Over 14,000 students attend ISU. Idaho State University is the state’s designated
lead institution in health professions. The ISU-Meridian Health Science Center, which spans four
acres, houses nine distance -learning classrooms; the L.S. Skaggs Pharmacy Complex; Counseling
and Speech and Language clinics; and human patient simulation and clinical/medical science
laboratories. The Delta Dental of Idaho Dental Residency Clinic, which opened in 2011, provides
advanced training for dentists and treatment for underserved patients.
The College will be a privately-funded, fully-accredited college of medicine. The mission of the
College is to provide a critically-needed solution to acute physician shortages in Idaho and the
contiguous Rocky Mountain States’ region: Montana, Wyoming, South Dakota, and North Dakota.
The College is not part of Idaho State University.
The Facility is planned as a three-story building with an area of approximately 90,000 square feet
located on the Project Site. In accordance with a Collaborative Affiliation Agreement ( the
Affiliation Agreement”) between the Company and ISU, ISU will provide certain services with
respect to the College, including access to information technology and computer labs, library
services, health center and fitness center access and emergency notifications, all of which are to be
operating expenses of the College. The stated purpose of the Affiliation Agreement is to allow ISU
to facilitate and advance its health science mission, core themes and strategic plans, and to assist the
Company in its mission to establish a private College of Osteopathic Medicine on the University’s
Operation of a college of osteopathic medicine in the United States requires accreditation from
COCA, which is designated by the U.S. Department of Education to accredit institutions granting
the osteopathic degree. The requirements for pre-accreditation include funding of sufficient escrows
to provide for operation of the College until graduation of the first class of students. Funds
deposited into the Escrow Account are intended to satisfy that requirement.
Security: In the Loan Agreement, the Company has agreed to repay amounts in installments which will be
sufficient to pay, when due, the principal of, premium, if any, and interest on the Bonds, and to
fund and replenish various funds established under the Indenture. The Authority has assigned all of
its right, title and interest under and pursuant to the Loan Agreement (except for its rights to receive
certain payments relating to indemnification and attorneys’ fees and expenses and to receive notices
thereunder) to the Trustee to secure payment of the Bonds.
To secure its obligations under the Loan Agreement, the Company will execute a Leasehold Deed
of Trust, Security Agreement, Assignment of Leases and Rents and Fixture Filing (the “ Deed of
Trust”) for the benefit of the Trustee, encumbering the Facility and other property interest of the
Company and the leasehold interests of the Company in the Project Site.
There has been established with the Trustee the Debt Service Reserve Fund with respect to the
Bonds. There will initially be deposited in the Debt Service Reserve Fund from proceeds of the
Bonds an amount equal to the Debt Service Reserve Fund Requirement, preliminarily estimated at
2,500,000. If there are insufficient funds in the Bond Fund created pursuant to the Indenture, the
Trustee will transfer from the Debt Service Reserve Fund to the Bond Fund amounts necessary to
make such payment of principal or interest on the day on which such payment is due.
Preliminary, subject to change
Neither the Authority nor any Authority Member or Sponsor, nor any political subdivision or
agency of the State of Wisconsin, will be obligated to pay the Bonds or the interest thereon
except from funds held by the Trustee under the Indenture, and neither the faith and credit
nor the taxing power of the State of Wisconsin or any political subdivision or agency thereof
is pledged to the payment of the principal of, premium, if any, and interest on the Bonds. The
Authority has no taxing power.
The Idaho College of Osteopathic Medicine at Idaho State University is a free-standing,
privately funded, separately licensed and accredited and independently operated entity and is
not part of Idaho State University. Idaho law prohibits ISU from using public funds to
support a private college such as the College.
The Bonds are offered in a transaction not involving a public offering to sophisticated
investors who, in making their investment decision, rely solely on the financial viability of the
Project. The Company has been organized specifically for the purpose of establishing and
operating the College, and no source of revenue is anticipated for the Company beyond
student tuition and operating income of the College. No guaranty of payment of the Bonds
will be made by any member of the Company or any entity affiliated with the Company. Each
initial purchaser must execute an investor letter.
The issuance of the Bonds does not obligate, directly, indirectly or contingently, the State of
Wisconsin or any political subdivision thereof to levy any taxes or appropriate or expend any
funds for the payment of the principal of, premium, if any, or interest on the Bonds.