Joint Meeting Council/BFPD
09/15/26 06:00 PM
City Manager Department
Rochelle Clayton
Resolution
Doc ID: 6588
COUNCIL RESOLUTION
AGENDA MATTER:
CONTINUED ITEM FROM THE SEPTEMBER 1, 2026 MEETING - PUBLIC HEARING AND TEFRA
APPROVAL OF TAX-EXEMPT BOND FINANCING FOR THE BENEFIT OF QKA HEALTH
CORPORATION D/B/A HEALTHSIDE PARTNERS AND MEMBERSHIP IN THE CALIFORNIA PUBLIC
FINANCE AUTHORITY
EXECUTIVE SUMMARY:
Upon request from QKA Health Corporation d/b/a Healthside Partners (the “Borrower”) and the California Public Finance Authority (the “Authority”), and based on the Background provided in the Discussion section of this report, the staff of the City of Barstow (the “City”) is recommending approval of a Resolution (see Attachment 1) authorizing the City to:
1. Join the Authority by approving the “Joint Exercise of Powers Agreement Relating to the California Public Finance Authority” (see Attachment 2 (the “Joint Powers Agreement”)); and
2. Approve the issuance of the Bonds financing the Project (as such terms are defined in the notice of public hearing attached to the resolution (the “TEFRA Notice”)) after a public hearing following reasonable public notice, solely for purposes of Section 147(f) of the Internal Revenue Code of 1986, as amended (the “Code”).
DISCUSSION:
Background
As published in the Public Hearing Notice, this public hearing is related to nonprofit QKA Health Corporation, d/b/a Healthside Partners, and its financing plan to acquire substantially all of the assets of Quorum Healthcare Corporation, a for-profit, private equity-backed organization.As part of the transaction, bonds will be sold, and the proceeds will be used to support the purchase of assets, including Barstow Community Hospital in California.
Federal law requires the bond hearing to give the public an opportunity to understand what the bonds will finance and to comment on the transaction in what is called a “TEFRA Hearing”. The hearing is not intended to approve the transaction or any funding requests. No money is being requested from the City, any county government or any other municipal entity related to this transaction.
The hospital remains open and operational. As background, approximately 75% of Quorum Health’s hospitals are sole providers or critical access hospitals. In May, Quorum Health announced it had entered an agreement to become a nonprofit system, allowing it to reinvest more deeply in its hospitals and its communities rather than distribute profits to equity owners. This includes making investments that improve access to care and quality of care in the community.
When Barstow Community Hospital transitions to a nonprofit, it will also expand the opportunity for free or discounted medical services for low-income and uninsured patients who qualify under financial assistance policies.
Background on Bond Issuance
Joint Meeting Council/BFPD
09/15/26 06:00 PM
City Manager Department
Rochelle Clayton
Resolution
Doc ID: 6588
COUNCIL RESOLUTION
The bonds are issued through the California Public Finance Authority (CPFA). CPFA is a joint powers authority started by the County of Kings, and now includes dozens of cities as participant members. In order for a non-government entity to issue a tax-exempt private activity bond, IRS rules require that there be a hearing under the Tax Equity and Fiscal Responsibility Act, or “TEFRA”, where an agency having geographic coverage over that private entity holds a public hearing for the public to learn about the bond issuance. That government agency (here, the City of Barstow) needs to be a member of the JPA to be a participant in the programs the CPFA offers.
To summarize the bond issuance, the bonds are issued by California Public Finance Authority, the hospital is the borrower, and the city is the “host” for the TEFRA hearing. The city can withdraw from the JPA at any time
Background information regarding the Authority
The Authority is a political subdivision of the state of California and was created on May 12, 2015 to assist local governments, non-profit organizations and businesses with the issuance of taxable and tax-exempt financing to promote economic, cultural, and community development opportunities that create temporary and permanent jobs, affordable housing, community infrastructure and improve the overall quality of life in local communities.
The Board of Directors of the Authority is comprised of elected officials. To date, over sixty public agencies have become members of the Authority.
The Authority shares a portion of its annual fees with each local agency that conducts a public hearing.
Each public agency who conducts a TEFRA hearing shall receive at a minimum of 10% of the Authority’s annual administrative fee collected for the term of the respective bonds issued by the Authority.
The Joint Exercise of Powers Agreement explicitly provides that the Authority is a public entity, separate and apart from the Member executing the agreement, and the debts, liabilities and obligations of the Authority do not constitute debts, liabilities or obligations of the Member executing the agreement. The Joint Exercise of Powers Agreement also expressly provides that any Member may withdraw from the agreement upon written notice to the Board of Directors of the Authority.
There are no costs associated with membership in the Authority and the City will in no way become exposed to any financial liability by reason of its membership in the Authority. In addition, participation by the City in the Authority will not impact the City’s appropriations limits and will not constitute any type of indebtedness by the City. A letter from the Authority's Counsel that provides further background is attached as ATTACHMENT 3.
Background information regarding TEFRA:
The Borrower is a 501(c)(3) organization. Section 147(f) of the Code requires that tax-exempt bonds issued for the benefit of 501(c)(3) organizations be approved by the applicable elected representative of the governmental unit having jurisdiction over the area in which the facility to be financed or refinanced with the proceeds of the bonds is located.
The Project is located in the City, and the City Council is the elected governing body of the City.
Under Section 147(f) of the Code, the City Council must approve the issuance of the Bonds financing the Project after a public hearing following reasonable public notice. This is referred to as a “TEFRA hearing” Joint Meeting Council/BFPD
09/15/26 06:00 PM
City Manager Department
Rochelle Clayton
Resolution
Doc ID: 6588
COUNCIL RESOLUTION
and a “TEFRA approval.”
The TEFRA hearing is scheduled to be held immediately prior to the City Council’s consideration of the resolution. Federal tax law provides that notice of the public hearing is presumed reasonable if published no fewer than 7 days before the hearing and the TEFRA Notice was published on Setember 6, 2026 in the Victorville Daily Press.
FISCAL IMPACT:
Joining the Authority will have no impact on the City’s General Fund as there is no cost to join and no obligation regarding the bond issuance exists. The City will receive a portion of the annual administrative fee. The TEFRA hearing and TEFRA approval are a procedural matter of federal tax law. In no event shall the City be liable for the Bonds and the Bonds will not constitute a debt of the City.
RECOMMENDED ACTION:
That the City Council:
1. Hold the TEFRA hearing; and
2. Adopt Resolution 5318-2026 authorizing the Mayor on behalf of the City, to enter into the Joint Powers Agreement and providing the TEFRA approval; and
3. Waive the full reading.