Cleveland Clinic Health System Obligated Group - FMSbonds.com
Cleveland Clinic Health System Obligated Group - FMSbonds.com Cleveland Clinic Health System Obligated Group - FMSbonds.com
the Series 2008A Bonds being included in gross income for federal income tax purposes retroactively to the date ofissuance of the Series 2008A Bonds. The Obligated Group and, subject to certain limitations, the Commission haveeach covenanted to take the actions required of it for the interest on the Series 2008A Bonds to be and to remainexcluded from gross income for federal income tax purposes, and not to take any actions that would adversely affectthat exclusion. After the date of issuance of the Series 2008A Bonds, Bond Counsel will not undertake to determine(or to so inform any person) whether any actions taken or not taken, or any events occurring or not occurring, or anyother matters coming to Bond Counsel’s attention, may adversely affect the exclusion from gross income for federalincome tax purposes of interest on the Series 2008A Bonds or the market value of the Series 2008A Bonds.A portion of the interest on the Series 2008A Bonds earned by certain corporations may be subject to afederal corporate alternative minimum tax. In addition, interest on the Series 2008A Bonds may be subject to afederal branch profits tax imposed on certain foreign corporations doing business in the United States and to afederal tax imposed on excess net passive income of certain S corporations. Under the Code, the exclusion ofinterest from gross income for federal income tax purposes may have certain adverse federal income taxconsequences on items of income, deduction or credit for certain taxpayers, including financial institutions, certaininsurance companies, recipients of Social Security and Railroad Retirement benefits, those that are deemed to incuror continue indebtedness to acquire or carry tax-exempt obligations, and individuals otherwise eligible for theearned income tax credit. The applicability and extent of these and other tax consequences will depend upon theparticular tax status or other tax items of the owner of the Series 2008A Bonds. Bond Counsel will express noopinion regarding those consequences.Payments of interest on tax-exempt obligations, including the Series 2008A Bonds, are generally subject toIRS Form 1099-INT information reporting requirements. If a Bond owner is subject to backup withholding underthose requirements, then payments of interest will also be subject to backup withholding. Those requirements do notaffect the exclusion of such interest from gross income for federal income tax purposes.Legislation affecting tax-exempt obligations is regularly considered by the United States Congress, andmay also be considered by the State legislature. Court proceedings may also be filed the outcome of which couldmodify the tax treatment of obligations such as the Series 2008A Bonds. There can be no assurance that legislationenacted or proposed, or actions by a court, after the date of issuance of the Series 2008A Bonds will not have anadverse effect on the tax status of interest or other income on the Series 2008A Bonds or the market value of theSeries 2008A Bonds.Prospective purchasers of the Series 2008A Bonds should consult their own tax advisers regarding pendingor proposed federal and state tax legislation and court proceedings, and prospective purchasers of the Series 2008ABonds at other than their original issuance at the respective prices indicated on the cover of this Offering Circularshould also consult their own tax advisers regarding other tax considerations such as the consequences of marketdiscount, as to all of which Bond Counsel expresses no opinion.Bond Counsel’s engagement with respect to the Series 2008A Bonds ends with the issuance of the Series2008A Bonds, and, unless separately engaged, Bond Counsel is not obligated to defend the Commission, theObligated Group or the owners of the Series 2008A Bonds regarding the tax status of interest thereon in the event ofan audit examination by the IRS. The IRS has a program to audit tax-exempt obligations to determine whether theinterest thereon is includible in gross income for federal income tax purposes. If the IRS does audit the Series2008A Bonds, under current IRS procedures, the IRS will treat the Commission as the taxpayer and the beneficialowners of the Series 2008A Bonds will have only limited rights, if any, to obtain and participate in judicial reviewof such audit. Any action of the IRS, including but not limited to selection of the Series 2008A Bonds for audit, orthe course or result of such audit, or an audit of other obligations presenting similar tax issues, may affect the marketvalue of the Series 2008A Bonds.Original Issue Discount and Original Issue PremiumThe Series 2008A Bonds maturing January 1, 2025 through and including January 1, 2043 (“DiscountBonds”) have been offered and sold to the public at an original issue discount (“OID”). OID is the excess of thestated redemption price at maturity (the principal amount) over the “issue price” of a Discount Bond. The issue priceof a Discount Bond is the initial offering price to the public (other than to bond houses, brokers or similar persons56
acting in the capacity of underwriters or wholesalers) at which a substantial amount of the Discount Bonds of thesame maturity is sold pursuant to that offering. For federal income tax purposes, OID accrues to the owner of aDiscount Bond over the period to maturity based on the constant yield method, compounded semiannually (or over ashorter permitted compounding interval selected by the owner). The portion of OID that accrues during the period ofownership of a Discount Bond (i) is interest excluded from the owner’s gross income for federal income taxpurposes to the same extent, and subject to the same considerations discussed above, as other interest on the Bonds,and (ii) is added to the owner’s tax basis for purposes of determining gain or loss on the maturity, redemption, priorsale or other disposition of that Discount Bond. A purchaser of a Discount Bond in the initial public offering at theprice for that Discount Bond stated on the cover of this Offering Circular who holds that Discount Bond to maturitywill realize no gain or loss upon the retirement of that Discount Bond.The Series 2008A Bonds maturing January 1, 2012 through and including January 1, 2024 (“PremiumBonds”) have been offered and sold to the public at a price in excess of their stated redemption price (the principalamount) at maturity. That excess constitutes bond premium. For federal income tax purposes, bond premium isamortized over the period to maturity of a Premium Bond, based on the yield to maturity of that Premium Bond (or,in the case of a Premium Bond callable prior to its stated maturity, the amortization period and yield may berequired to be determined on the basis of an earlier call date that results in the lowest yield on that Premium Bond),compounded semiannually. No portion of that bond premium is deductible by the owner of a Premium Bond. Forpurposes of determining the owner’s gain or loss on the sale, redemption (including redemption at maturity) or otherdisposition of a Premium Bond, the owner’s tax basis in the Premium Bond is reduced by the amount of bondpremium that accrues during the period of ownership. As a result, an owner may realize taxable gain for federalincome tax purposes from the sale or other disposition of a Premium Bond for an amount equal to or less than theamount paid by the owner for that Premium Bond. A purchaser of a Premium Bond in the initial public offering atthe price for that Premium Bond stated on the cover of this Offering Circular who holds that Premium Bond tomaturity (or, in the case of a callable Premium Bond, to its earlier call date that results in the lowest yield on thatPremium Bond) will realize no gain or loss upon the retirement of that Premium Bond.OWNERS OF DISCOUNT AND PREMIUM BONDS SHOULD CONSULT THEIR OWN TAXADVISERS AS TO THE DETERMINATION FOR FEDERAL INCOME TAX PURPOSES OF THEAMOUNT OF OID OR BOND PREMIUM PROPERLY ACCRUABLE OR AMORTIZABLE IN ANYPERIOD WITH RESPECT TO THE DISCOUNT OR PREMIUM BONDS AND AS TO OTHER FEDERALTAX CONSEQUENCES AND THE TREATMENT OF OID AND BOND PREMIUM FOR PURPOSES OFSTATE AND LOCAL TAXES ON, OR BASED ON, INCOME.The CommissionLITIGATIONTo the knowledge of appropriate officials of the Commission, there is not now pending or threatened anylitigation against the Commission restraining or enjoining or seeking to restrain or enjoin the issuance of theSeries 2008A Bonds or questioning or affecting the validity of the Series 2008A Bonds or the proceedings andauthority under which they are to be issued. Neither the creation, organization or existence of the Commission, northe title of the present Commissioners or other officers of the Commission to their respective offices, is, to theknowledge of appropriate officials of the Commission, being contested or questioned. To the knowledge ofappropriate officials of the Commission, there is no litigation pending which in any manner questions the right of theCommission to enter into, or the validity or enforceability of, the Base Lease, the State Financing Lease, theAssignment to the Bond Trustee (as defined in Appendix C hereto), the Assignment to the Master Trustee (asdefined in Appendix C hereto) or the Bond Indenture or to secure the Series 2008A Bonds in the manner provided inthe Bond Indenture.The Obligated IssuersThe Cleveland Clinic has advised that no litigation, proceedings or investigations are pending or, to theCleveland Clinic’s knowledge, threatened against any Obligated Issuer except (i) litigation, proceedings orinvestigations for which the probable ultimate recoveries and the estimated costs and expenses of defense will beentirely within the Cleveland Clinic’s insurance policy limits (subject to applicable deductibles) or are not in excess57
- Page 9 and 10: Upon issuance of the Series 2008A B
- Page 11 and 12: (ii) acquisition of magnetic resona
- Page 13 and 14: $147,200,000 Term Bonds Due January
- Page 15 and 16: that the redemption is conditional
- Page 17 and 18: Use of Certain Terms in Other Secti
- Page 19 and 20: County BondsThe Cleveland Clinic an
- Page 21 and 22: The Cleveland Clinic regularly revi
- Page 23 and 24: ESTIMATED SOURCES AND USES OF FUNDS
- Page 25 and 26: DEBT SERVICE COVERAGEThe following
- Page 27 and 28: MedicareGeneralApproximately 29% of
- Page 29 and 30: there is no assurance that the Obli
- Page 31 and 32: Medicare Conditions of Participatio
- Page 33 and 34: fiscal year’s budget that are in
- Page 35 and 36: Federal Regulatory and Contractual
- Page 37 and 38: Stark-type statutes have fewer exce
- Page 39 and 40: party or for any services rendered
- Page 41 and 42: typically in a position to refer pa
- Page 43 and 44: OhioOhio Certificate of Need Progra
- Page 45 and 46: performance demonstration programs
- Page 47 and 48: manifest injustice would otherwise
- Page 49 and 50: and properties owned or operated by
- Page 51 and 52: plan of reorganization, with one ex
- Page 53 and 54: percentage may be composed wholly o
- Page 55 and 56: The Internal Revenue Service Form 9
- Page 57 and 58: Charity Care, Underinsured and Unin
- Page 59: • Proposals to eliminate the tax-
- Page 63 and 64: Frederick R. Nance, Regional Managi
- Page 65 and 66: FINANCIAL POSITION — D. BALANCE S
- Page 67 and 68: The CommissionBecause the Series 20
- Page 69 and 70: APPENDIX ACLEVELAND CLINIC HEALTH S
- Page 71 and 72: TABLE OF CONTENTSPageINTRODUCTION .
- Page 73 and 74: This Appendix to the Offering Circu
- Page 75 and 76: A. ORIGINS AND FUNDAMENTAL MISSIONT
- Page 77 and 78: C. GOVERNANCE OF THE CLEVELAND CLIN
- Page 79 and 80: Voting Members of theBoard of Trust
- Page 81 and 82: Voting Members of theBoard of Trust
- Page 83 and 84: Principal Operating Officers. The d
- Page 85 and 86: In addition to the broad range of o
- Page 87 and 88: The main campus also includes a com
- Page 89 and 90: GovernanceThe Cleveland Clinic is t
- Page 91 and 92: E. UTILIZATIONThe following tables
- Page 93 and 94: Statistical Information. The follow
- Page 95 and 96: I. COLLABORATIVE PROGRAMSIn additio
- Page 97 and 98: Clinic’s charity care policy, see
- Page 99 and 100: statements filed with Digital Assur
- Page 101 and 102: CLEVELAND CLINIC HEALTH SYSTEMConso
- Page 103 and 104: OBLIGATED GROUPConsolidated Stateme
- Page 105 and 106: PART IV.MANAGEMENT’S DISCUSSION A
- Page 107 and 108: increase in minor equipment purchas
- Page 109 and 110: The following table sets forth the
acting in the capacity of underwriters or wholesalers) at which a substantial amount of the Discount Bonds of thesame maturity is sold pursuant to that offering. For federal in<strong>com</strong>e tax purposes, OID accrues to the owner of aDiscount Bond over the period to maturity based on the constant yield method, <strong>com</strong>pounded semiannually (or over ashorter permitted <strong>com</strong>pounding interval selected by the owner). The portion of OID that accrues during the period ofownership of a Discount Bond (i) is interest excluded from the owner’s gross in<strong>com</strong>e for federal in<strong>com</strong>e taxpurposes to the same extent, and subject to the same considerations discussed above, as other interest on the Bonds,and (ii) is added to the owner’s tax basis for purposes of determining gain or loss on the maturity, redemption, priorsale or other disposition of that Discount Bond. A purchaser of a Discount Bond in the initial public offering at theprice for that Discount Bond stated on the cover of this Offering Circular who holds that Discount Bond to maturitywill realize no gain or loss upon the retirement of that Discount Bond.The Series 2008A Bonds maturing January 1, 2012 through and including January 1, 2024 (“PremiumBonds”) have been offered and sold to the public at a price in excess of their stated redemption price (the principalamount) at maturity. That excess constitutes bond premium. For federal in<strong>com</strong>e tax purposes, bond premium isamortized over the period to maturity of a Premium Bond, based on the yield to maturity of that Premium Bond (or,in the case of a Premium Bond callable prior to its stated maturity, the amortization period and yield may berequired to be determined on the basis of an earlier call date that results in the lowest yield on that Premium Bond),<strong>com</strong>pounded semiannually. No portion of that bond premium is deductible by the owner of a Premium Bond. Forpurposes of determining the owner’s gain or loss on the sale, redemption (including redemption at maturity) or otherdisposition of a Premium Bond, the owner’s tax basis in the Premium Bond is reduced by the amount of bondpremium that accrues during the period of ownership. As a result, an owner may realize taxable gain for federalin<strong>com</strong>e tax purposes from the sale or other disposition of a Premium Bond for an amount equal to or less than theamount paid by the owner for that Premium Bond. A purchaser of a Premium Bond in the initial public offering atthe price for that Premium Bond stated on the cover of this Offering Circular who holds that Premium Bond tomaturity (or, in the case of a callable Premium Bond, to its earlier call date that results in the lowest yield on thatPremium Bond) will realize no gain or loss upon the retirement of that Premium Bond.OWNERS OF DISCOUNT AND PREMIUM BONDS SHOULD CONSULT THEIR OWN TAXADVISERS AS TO THE DETERMINATION FOR FEDERAL INCOME TAX PURPOSES OF THEAMOUNT OF OID OR BOND PREMIUM PROPERLY ACCRUABLE OR AMORTIZABLE IN ANYPERIOD WITH RESPECT TO THE DISCOUNT OR PREMIUM BONDS AND AS TO OTHER FEDERALTAX CONSEQUENCES AND THE TREATMENT OF OID AND BOND PREMIUM FOR PURPOSES OFSTATE AND LOCAL TAXES ON, OR BASED ON, INCOME.The CommissionLITIGATIONTo the knowledge of appropriate officials of the Commission, there is not now pending or threatened anylitigation against the Commission restraining or enjoining or seeking to restrain or enjoin the issuance of theSeries 2008A Bonds or questioning or affecting the validity of the Series 2008A Bonds or the proceedings andauthority under which they are to be issued. Neither the creation, organization or existence of the Commission, northe title of the present Commissioners or other officers of the Commission to their respective offices, is, to theknowledge of appropriate officials of the Commission, being contested or questioned. To the knowledge ofappropriate officials of the Commission, there is no litigation pending which in any manner questions the right of theCommission to enter into, or the validity or enforceability of, the Base Lease, the State Financing Lease, theAssignment to the Bond Trustee (as defined in Appendix C hereto), the Assignment to the Master Trustee (asdefined in Appendix C hereto) or the Bond Indenture or to secure the Series 2008A Bonds in the manner provided inthe Bond Indenture.The <strong>Obligated</strong> IssuersThe <strong>Cleveland</strong> <strong>Clinic</strong> has advised that no litigation, proceedings or investigations are pending or, to the<strong>Cleveland</strong> <strong>Clinic</strong>’s knowledge, threatened against any <strong>Obligated</strong> Issuer except (i) litigation, proceedings orinvestigations for which the probable ultimate recoveries and the estimated costs and expenses of defense will beentirely within the <strong>Cleveland</strong> <strong>Clinic</strong>’s insurance policy limits (subject to applicable deductibles) or are not in excess57
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