Even though ballots for Measure H were mailed out April 4, the arguments for and against the bond are still heating up.
Registered voters in the Kaweah Delta Health Care District (KDHCD) are being asked to vote on a general obligation bond for $327 million to build a new hospital. Ballots are due on May 3, and two-thirds of those who mail in their ballots need to say yes for the measure to pass.
Adjacent to the relatively new Acequia-wing on Floral Street is the future site of Kaweah Delta’s new acute care hospital that will have 273 beds. Two buildings have already been demolished to clear the way for the new hospital.
The plan is to complete the hospital by 2030, with the first and second floors ready for use by 2023. No definite plans have been set for the old hospital. It might be demolished, converted to a rehabilitation center, or used for administrative offices.
The bond is paying for four components of the hospital, with the primary one publicized as being in seismic compliance.
The hospital board voted to put a general obligation bond forward to pay for improving emergency, critical care and essential hospital facilities, expanding facilities for the rapid treatment of trauma, heart attacks and stroke, and finally, improving facilities for the treatment of cancer, diabetes and other diseases, in addition to the seismic upgrades.
Everyone wants a new hospital. The question is who should pay for it.
Many letters to the editor of this paper say “now we’re called to support our hospital and my vote is yes.”
Well, no “we” are not.
Out of 160,000 tax parcels in Tulare County, most of whose owners use the hospital, only 49,714 tax parcels will be responsible for paying the bill.
Some property owners own 10 or 20 tax parcels and some people only own their home. Given that, it’s safe to say the 49,713 tax parcels represent approximately 25,000 property owners. That means 25,000 property owners will be paying for a hospital used by an average of 200,000 patients a year.
Of those 25,000 people who own property in the hospital district, many can’t vote because they live outside the district. The KDHCD has roughly the same boundaries as the Visalia Unified School District.
A disgruntled caller to the Valley Voice called this “taxation without representation.” He owns property inside the hospital district but cannot vote. He told his tenants, who were not paying attention to the election, that if Measure H passes their rents would be going up. “They weren’t too happy to hear about that” he said.
Property taxes will go up for everyone across the board, including retail stores, farmland and warehouses in the Visalia Industrial Park.
When property taxes go up everything gets more expensive, not just rents but food and goods. Measure H will also make it more expensive for Nordstrom to choose Visalia, because the parcel in which they might build is in the hospital district.
Explaining the Tax
Carl Anderson, president of the Board of Trustees for KDHCD, wrote the “Tax Statement” for the Measure H voter pamphlet. He has been on the hospital board for 20 years and is a big fan of the hospital.
He said that the actual cost of the new hospital is $550 million and that the property owners are not the only ones footing the bill. Kaweah Delta will be using its revenue and donations to pay for $223 million of construction.
Anderson said that most people have no idea how a hospital board is run. Unlike county supervisors or city council members, where they have a budget, a hospital board has to run a business. It comprises the only publicly elected officials who are responsible for generating the income and making a budget while keeping the business profitable. After 20 years on the board, Anderson said that a general obligation bond is the last avenue that hospital boards will go down after exhausting every other resource.
This will be the third time, in the hospital’s 50-year history, that it has asked for a general obligation bond. The first time was to build the hospital in 1969, and the second time was Measure M to build the Acequia Wing. For general hospital improvements or clinics they have used cash reserve, philanthropy or a revenue bond where the hospital pays the bond back with its income.
“Kaweah Delta has an impeccable track record of getting construction done on time and on budget. It’s something we are very proud of,” said Anderson.
Anderson said that the Kaweah Board of Directors “make a rigorous effort to ensure that the bond oversight committee is competent and able to make sound decisions throughout process.”
Some voters feel blindsided and wonder why the hospital district hasn’t been working on complying with seismic state standards before now. Anderson said that SB1953 passed in 1999, and the hospital board has been working on it ever since. He said that is why the Acequia Wing, which opened its doors in 2009, was built. He also said that the hospital board has been working diligently in Sacramento to get Visalia an exemption from the bill because it does not have earthquakes. The board got their final answer last year that Sacrament did not want to treat any city differently, and that it has to comply with the seismic standards.
Nevin House, who spoke at a Measure H forum in early April against the bond, said that the board should not consider fighting SB1953 as working to comply with the law. He said that anyone running a business as big and complicated as a hospital “hopes for the best, but plans for the worst.”
To explain the exact cost to the property owner, Anderson wrote the “Tax Analysis” in the voter pamphlet. He said that the $327 million in bonds will be sold off in sections. The pamphlet states that “the exact effect on tax rates cannot be determined until after the bonds are sold.”
The two things that do effect the cost to the tax payer, said Anderson, is one, the amount of bonds sold and two, the total assessed value of all property within the district. Not all bonds will be sold at once, but in four installments over the years. These numbers will vary, but the hospital board worked out an estimation of what it will cost the property owner each year.
In fiscal year 2016-2017 there will be approximately $9.92 increase in the property tax bill per $100,000 of assessed value. In 2020, there will be approximately $88.60 per $100,000 and in 2028 there will be $80.07 per $100,000. To make it easier to digest, the hospital board has calculated that it will cost property owners about $4 a month, per $100,000 of assessed value.
Anderson agreed that many people outside the district use the hospital and will not be responsible for paying for the new building. But, he said, it is the law that it has to comply with the new seismic standards. He also said that those outsiders are the hospital’s bottom line. They are a financial net gain that helps offset the $20 million in uncompensated services the hospital provides each year.
If the bond measure does not pass this year the hospital board could opt to present it again next year.
“Each year that we delay voting for the bond will add $15 million to the project,” said Anderson.
No on H Constituents Respond
Dr. Byron Riegel and Nevin House have been vocal opponents of Measure H. Neither House nor Riegel believe the new hospital won’t be built if the bond measure does not pass. They said that there are many other financial strategies that the hospital board could pursue that wouldn’t put the majority of the cost on property owners.
Measure H opponents argued that a community advisory committee should have been formed by the district to go over all the financing options.
“There are probably 10 other options to choose from. But the public has only been given one option and that is ‘pay the taxes,’” said Riegel.
Riegel believes that if the district had brought in someone who was neutral and skilled in financing they would have had more choices on the table.
“There are other ways to do it,” he said.
“One of the best options would have been partnering with a private hospital to invest in the new building and become part of the hospital system here,” said House.
Riegel cited the case of Ventura Memorial Community Hospital. They had the same problem of not being in compliance with SB1953, and on top of that they had a lousy credit rating.
The hospital looked at its options and decided on a $250 million general revenue bond. Now the bond is almost paid off and was paid for with the hospital’s revenue.
“That is just one of the possibilities that Kaweah Delta could try” he said.
House cited a case in Brawley, in Imperial County, of Pioneer Memorial Hospital. Pioneer Memorial and Scripps Health of San Diego entered into an agreement that lead to Pioneer’s getting a new building that was in compliance with the new California seismic standards. Their affiliation meant that of the six seats on the hospital board, three now are reserved for Scripps.
A board member during the Measure H forum said that Kaweah Delta doesn’t have corporate interests dictating how to provide care to their patients. The goal of the Kaweah Delta Hospital board is to not lose control of their hospital.
“That’s the problem,” said House,”they don’t want oversite and they don’t want to give up power. Losing a little bit of control is the price of having a better business.”
But according to the Visalia Times -Delta, Gail Zurek, the Visalia Chamber of Commerce’s CEO, explained, “it would be fine to have other health care providers interested in building another hospital in Visalia — and bringing more jobs with them — ‘But nobody’s showing up.’”
Another option that an advisory commission could have discussed, House said, would be to sell the bonds all at once instead over 13 years as is currently the plan. The current 42-year bond payment schedule will end up costing more than $666.5 million in principal and dividends. If the bonds are sold all at once and paid over 30 years, the total would be $552 million, which is more than $100 million less. The property owner would pay more every year to pay the bond off faster but it would be less overall because payments and interest would end 12 years earlier.
Opinions differ on how much tax payers will be charged
Both sides of the debate agree in principle that, as the assessed value of a tax parcel goes up, the less the tax payer has to shell out to pay off the bond. To calculate what each property owner will pay depends on the assessed value of the property calculated by the Tulare County Tax Assessor. As the years go by it is logical that the assessed value of your property will go up.
The difference of opinions revolves around by how much.
The hospital board is projecting that assessed property value will go up 5.25% per year. This means that at the bond’s peak in 2020–2021 the tax payer will be shelling out $88 per $100,000 of assessed value per year. But if the assessed value only goes up 3% per year, a figure used by the VUSD, it will be closer to $98 per $100,000. If the assessed value goes up 1%, as a Visalia City Council member predicted, then the cost would be closer to $130 per $100,000.
Those opposing Measure H don’t see property values rising so fast as the hospital baord’s projection.
Riegel and House maintain that the hospital board’s numbers are unrealistically low. The No on Measure H group believes that tax payers will be paying a lot more than the hospital board is saying. Riegel said that it won’t be until 2045 that the tax-payers bill will go down to $4 a month as the construction of the hospital comes to an end.
“That’s a long time to wait” Riegel said.