Homer hospital expansion cheaper than first estimated

Posted: Tuesday, January 16, 2007

The money needed to complete the expansion of South Peninsula Hospital has been revised downward, resulting in a substantial reduction in the size of a general obligation bond issue service area voters will be asked to OK in a special election expected in May.

It also will mean South Peninsula Hospital Service Area property owners will face a smaller-than-expected increase in their property tax mill rate required to finance the bonds.

Ordinance 2006-40, now before the Kenai Peninsula Borough Assembly, will likely be replaced by a substitute proposed by Borough Mayor John Williams today’s meeting.

The existing ordinance provides for a special election within the service area asking voters to authorize $16 million in bonds. The substitute drops that bond amount to $14.7 million, a savings of $1.3 million.

The original ordinance also would have authorized an increase in the property tax by 1.07 mills, or $107 for each $100,000 in property value. The substitute will save taxpayers $9 per $100,000 in value by dropping the mill levy increase to .98 mills.

The latest expansion of the hospital began in 2003 when voters approved $10.29 million in bonds. The total cost then was expected to be around $16 million with the difference above the bond proceeds to be made up with cash generated by hospital operations.

But unexpected delays coupled with the rapidly rising cost of materials brought about, in part, by U.S. hurricane damage and overseas demands for steel, wood and concrete, drove the price of completing the project well beyond expectations. The project was split into two phases, with Phase 1 nearing completion.

The current estimated cost of completing the next phase now stands at around $15.2 million. Project managers believe about $700,000 will remain after the current phase is complete and be available for Phase 2. The existence of that money has helped allow for the reduction in the bond issue.

Borough Clerk Sherry Biggs said that if the substitute ordinance authorizing the bond issue and special election is adopted at today’s meeting, ballots would be mailed to service are voters April 16. Ballots would be due May 8. Absentee voting would be available as in any election.

Election results would be certified at the May 15 assembly meeting.

The ordinance includes a provision authorizing the mayor to cancel the election if final engineering cost estimates for the project exceed $15.2 million, or if for other reasons the project does not appear financially feasible.

If and when completed, the hospital would include a new nursing and patient care wing offering 18 single-occupancy rooms, now considered the industry safety standard. A laboratory and pharmacy would be relocated upstairs nearer the patient care area, surgery would be enhanced, a safe room added and the parking lot expanded. A rooftop helicopter landing pad also may be built.

Hal Spence can be reached at harold.spence@peninsulaclarion.com.

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