Expensive errors plague state hospital bond program, auditor says

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A state agency responsible for $1.7 billion in bonds for children’s hospitals has made costly mistakes in deciding when to sell bonds, the state auditor found in a report Thursday.

The California Health Facilities Financing Authority oversees the selling of bonds approved by state voters in 2004 and 2008 to build and improve children’s hospitals.

State auditor Elaine Howle said in a letter to Gov. Jerry Brown that the authority misjudged when to sell bonds for projects.

‘The authority requested bond sales that were in excess of its cash needs at a time when California’s credit rating was low and interest-rate volatility was high,’ Howle wrote. ‘As a result, the State paid as much as $16 million in interest annually on the idle capital while the State was facing cash shortfalls.’

Howle said the authority could not have foreseen all the circumstances that led to the excessive fund balance, but its estimates of cash needs have been consistently high.

‘This pattern, as well as some hospital project delays that it could have anticipated, indicate that the authority needs to revise the way it makes yearly projections of cash needs,’ Howle wrote to the governor. ‘In particular, the authority currently includes in its estimates the projected cash needs of hospitals that have not yet submitted a project application for approval.’

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-- Patrick McGreevy in Sacramento