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Despite higher taxes, we can’t afford not to build

10/17/2009

As chairman for the Plumas District Hospital Measure A Citizen Oversight Committee, I would like to provide some updated information relative to the growing concern over the current tax rate (for the hospital bonds). The hospital did its original analysis for the bond and related tax rates in early 2008. At that time, the current economic downturn that has hit all of us was not even on the radar screen.

 

The current issues that have impacted all of our tax assessments for the bond are:

When the first $3.2 million bond issue was projected in spring 2008, the interest rate was in the low 4 percent range. When the bonds were released three months later, the rate was up more than 2 percent, and the issued interest rate was more than 6 percent.

This initial release was for accomplishing the testing, plans, permits and drawings and make-ready construction projects. These items were necessary so the new facility could proceed as needed to meet the state-mandated earthquake safety standards required by 2013.

To begin construction in 2010, the second release of $12.1 million will occur this winter.

Last July, when the bond interest rate had to be estimated and sent to the county for its assessments calculations, the interest rate had jumped to 7 percent. This increase has led to the necessity of increasing the tax assessment.

All of these issues have led to the current tax assessment situation.

On the matter of the higher interest rate on the $12.1 million of bonds to be released, there is the possibility of refinancing these bonds if the interest rate does go down. However, that rate is locked in for seven years before such a refinancing can occur.

The hospital board and administration have been working diligently to save costs by paring back the construction plans estimated at $22 million last year. Since then the plans have been reduced by 12 percent. The proposed 27,155-square-foot building has been reduced to 23,911 square feet. Two weeks ago plans were reviewed with the Office of State Health and Planning. Regulators stated the cuts were too severe and additional space was needed for storage, restrooms and kitchen facilities that could mean adding back in $1 million in costs, revising the new estimate to nearly $21 million. This is still a reduction from the initial proposal.

The board and administration have also been implementing several cost-saving measures to make up the difference from the $15.1 million in community funding to complete the project.

To help make sure the project can become a reality the Plumas District Hospital Health Care Foundation is also working hard to help subsidize the difference between the community funding, organizational financing and the projected cost so the hospital remains an integral component to our community’s physical and economic well-being.

I know many people are unhappy about the current tax assessment, but to do nothing is not the answer. It is not practical to retrofit the existing hospital, as it would be practically impossible to make it meet all of the current codes, and it does not resolve the many complex problems or even simple ones. Nor is it prudent to delay the construction. The hospital’s strategy to quickly get this project to market is validated by the substantial decline in material prices and the intensity of competition in the construction industry. This will result in our community receiving much more value for our invested dollar.

The shame of the whole issue is that because of past state cuts in funding of infrastructure, from schools to hospitals, as well as an over-regulatory state government, we begin to argue and look badly at our local service providers and neighbors.

In reality, they are not trying to mislead us or take advantage of us, but only provide the services we need to create a sustainable community right here in our hometown.


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