Voters in the Tulare Local Health Care District (TLHCD) may be asked again to approve funding for the stalled hospital expansion project.
Bond Plan Doesn’t Raise Taxes
At their meeting Wednesday, January 24, TLHCD directors approved a resolution that may eventually lead to voters approving or disapproving $50 million in bond funding to finish the basement, first and second floors of the hospital’s tower expansion project that now stands half-finished.
Begun a decade ago, the expansion project stalled after publicly-approved funding of $85 million ran out with only the shell of the four-story tower completed. An attempt to gain voter approval for added bond funding by a previous board failed.
The current estimate to complete the entire project is $100 million; however, the basement and first two stories could be made usable for around $65 million. District leaders estimate about 75% of that cost – $50 million – could be covered by the issuance of so-called general obligation (GO) bonds.
GO bonds raise funds with repayments coming from guaranteed future revenue, meaning taxes would not be raised to cover their cost. Voter approval would still be required before the district could issue any bonds.
Adventist Health Will Not Participate
The board’s consideration of bond funding comes after leadership at Adventist Health – which currently operates the TLHCD’s hospital as Adventist Tulare – recently made it clear that while the company remains committed to Tulare, it will not help pay to complete the tower.
That led to reluctance by TLHCD director Jevon Price when it came to approving an exploration of bond funding to finish the tower. Price wants to know Adventist’s plans for Tulare, whether it will continue to operate the hospital, before moving ahead.
“Obviously, Adventist sees that this (helping fund tower construction) is a potential money loss,” he said. “We need to be able to know what the plan is, if there’s going to be a need for the project to move forward immediately. … We just found this situation (Adventist’s reluctance to fund the tower project) is happening.”
TLHCD president Kevin Northcraft said the board would not move forward without a long-term guarantee from Adventist Health.
“They have to commit to the lease, to the payments, before we’re going to do this,” he said of the possibility of issuing bonds.
Tulare Needs Tower Finished No Matter What
Even without a firm commitment to operate Tulare’s hospital by Adventist Health or another management firm, TLHCD CEO Randy Dodd says the tower must be finished to keep the district viable.
“Let’s just say the worst-case scenario happens and the sky falls and Adventist Health leaves,” he said. “If we don’t have a tower to offer somebody else to come to this community, we don’t have a hospital.”
Once the tower is at least partially complete, including finishing new operating rooms, Tulare will be able to attract more surgeons and their patients, Dodd said. At a pair of meetings with executives from Adventist Health, Dodd said they made it clear Tulare’s aged facilities are keeping doctors reluctant to use Adventist Tulare.
“The doctors are the issue, and the doctors are probably not going to come back from Visalia to what we have currently,” he said. “This becomes a physician magnet once we complete that (the tower), (it) becomes a beacon of success to the community.”
Price expressed his concern that the number of patients treated at Adventist Tulare hasn’t returned to levels seen before the hospital closed temporarily. Northcraft, however, said the number of patients using the hospital is climbing and will continue to do so.
“When you close down a hospital, you (patients) have to go somewhere else, you establish,” Northcraft said. “The doctors left. The doctors control what hospital gets used. That may have been a one-year loss, but it takes more than one year to get all that back. But it’s happening.”
Earthquake Risk Could Close Hospital
Pending changes in state seismic requirements for hospitals also have to be considered. At present, Tulare’s hospital does not meet the upgraded standards, which have been repeatedly delayed by the legislature.
“I think we have to do this also relative to the earthquake safety code that is going to get kicked down the road to 2030, likely, but it’s still going to become law at some point,” Dodd said. “That hospital doesn’t meet code.”
The tower expansion is intended to meet those new standards. Yet that need to upgrade didn’t stop voters from blocking the sale of GO bonds in 2016. Northcraft, however, believes that failure happened because voters had lost trust in the previous board of directors.
Current board members Northcraft, Michael Jamaica and Xavier Avila all campaigned against passage of the 2016 bond issue.
“We all campaigned against it because they didn’t say how they were going to use the money,” Nothercraft said.
Bond Resolution Contains No Spending Details
Another objection voiced by Price was the lack of description of what a future bond issue would pay for. His concerns were echoed by Albert Aguilar, a one-time member of the committee tasked with overseeing the original tower construction bonds.
“This resolution to me is very ambiguous. You’re talking about you’re going to be financing ‘certain capital expenditures.’ What expenditures? What part of the tower are we talking about doing?” he said. “It’s not indicated on here (the resolution). You make reference to Exhibit A. Exhibit A is blank. All Exhibit A says is, ‘The project consists of completion of a portion of the hospital tower.’ What portion are we talking about?”
Bud Levine, a consultant with the public finance management firm Wulff, Hansen & Co. that is advising the district, said the ambiguity is intentional. The details will be added if the project advances.
“That’s all we know at the moment, because your project hasn’t been completely defined yet,” he said. “Subsequent resolutions when you move forward then would identify much more specifically what you’re going to be financing and what the terms and the structure of the bonds will be.”
Northcraft described Exhibit A as a catchall.
“The description in Exhibit A really just provides the umbrella for all the things that might happen underneath the tower that could be included in these revenue bonds,” he said.
No Plan to Issue Bonds Yet
While the TLHCD board members are thinking about how to pay for the tower’s completion, there isn’t a plan to issue bonds yet. The resolution approved on Wednesday only allows the district to reimburse itself for development costs incurred now if bonds are issued later.
Passing a resolution of intent to issue bonds, whether the bonds are sold or not, could save the district money.
“All this resolution does is preserve your rights when and if you should ever issue bonds to reimburse the development costs that you incur developing out what the project will consist of, the scope of the project, the amount of the project and those various areas,” said Ray Nelsen, also of Wulff, Nelsen & Co. “If you wait to adopt this resolution for a period of months or a year, any money you spend in that interim you cannot recover.”
The resolution passed Wednesday is also symbolic. It demonstrates to community members the district is still intent on finishing the expansion project with a minor action.
“This isn’t a vote to start spending money. This isn’t a vote to start finishing the tower,” said TLHCD director Avila. “This is a vote to get the financing together. That’s all it is.”
Resolution 920 passed with a 3-1 split vote. Price voted against the resolution, and board member Kathy Nesper was absent.
Board Approves Pair of Tower Projects
While planning for how to pay for future work on the tower continues, two projects received the board’s OK during a special meeting held Thursday, February 1.
The board hired a contractor to complete one side of the interior walls of the tower. The district has already purchased the materials needed to complete the work, voting Thursday to hire a firm to do the job.
Only one side of the walls will be finished, allowing future work on their interior components.
Also approved by the board is the installation of the tower’s elevators and dumbwaiters.
After a change in state law in 2023, the TLHCD directors learned the tower project could lose state approval if less than 10% of the project is complete each year. The projects approved on Thursday should insure TLHCD’s compliance.