Snoqualmie Valley Hospital, Tribe ink early, discounted buyout
June 27, 2012 · 4:16 PM
The Snoqualmie Valley Hospital District and the Snoqualmie Indian Tribe last week inked a deal for an early payment of the tribe’s hospital purchase, discounted by nearly half the amount.
The tribe originally purchased the property in 2007 for $30 million, after the Tribe’s general membership authorized the purchase.
Since then, $1.75 million has been paid.
The tribe will make a one-time payment of $14 million, on or before July 31, for the property.
Commissioners of Snoqualmie Valley Hospital District voted 3-1 in favor of the early payment in a special meeting held Wednesday morning, June 20.
Vice President Kevin Hauglie and commissioners Dave Speikers and Joan Young voted in favor of the deal. Commissioner Gene Pollard voted against it. Committee president Dick Jones recused himself because of a consultant relationship he has with the tribe.
Hauglie told the Record Thursday that the deal, meant to put the hospital in a stronger financial position, was a good one for the hospital.
“This was not a lightly taken decision,” Hauglie said. “With all the information at hand, my opinion is that we made the right decision for the right reasons, for the district.”
“It's an historic decision, quite frankly,” he added. “It was a mutually beneficial decision for all involved.”
Pollard, however, told the Record that he's convinced it was the wrong decision.
“Each favorable vote cost Snoqualmie Valley hospital approximately $4.5 million," Pollard said in a written statement. “If their decisions were based on recommendations of CEO Rodger McCollum and (Attorney) Jay Rodne, you could also say that poor judgment of those two members of the administrative staff each cost the district $7 million, about the same amount as still owing on the Leisure Time property.”
“Commissioners received the proposed resolution by e-mail only about 36 hours before they were forced to vote,” Pollard added. “They had no time to study it carefully or discuss it as a group. Votes were lined up beforehand in hurriedly scheduled meetings with individual commissioners to get them to commit.”
“This decision is a disgrace to fundamental fairness and good government." Pollard said. “No hospital in the state would stand for this. Valley residents and taxpayers shouldn't, either.”
The tribe approached the district six months ago about a discounted, early payoff. Negotiations began in earnest about a month ago.
Hospital Administrator Rodger McCollum told the Record that the Tribe requested a decision so that they could close on the purchase prior to July 31.
"Waiting until the next board meeting in July would have prevented them from doing that," McCollum stated. We spent or offered to spend whatever time the commissioners required to go over all the details. Mr. Pollard elected to not hear our reasoning."
McCollum said the district saw advantages in a discounted, early payoff, as did Snoqualmie Tribal Administrator Matt Mattson.
The deal was approved Wednesday, signed that day by McCollum and Mattson, and is contingent on payment.
A statement from the tribe describes the new deal as part of “the ongoing, cooperative working relationship between the parties with a common goal of increasing availability and accessibility of health care in the Snoqualmie Valley.”
It's also an acknowledgement of economic conditions in the wake of the recession and dramatically reduced real estate values.
“This agreement is fair,” said Mattson. “It is good for health care in the Snoqualmie Valley and good for the Tribe.”
Half of the $14 million pays down debt from the hospital's Leisure Time Campground settlement. About $100,000 closes debt from the hospital's Maple Valley clinic venture. Altogether, it pays down about 20 percent of hospital debt, McCollum said.
The former Leisure Time campground was the subject of a 2008 $12 million purchase and sale agreement by the hospital district for construction of a new campus. That plan fell through, the parties went into litigation, and both sides agreed to a $6.7 million settlement. When the hospital pays off the remaining $5.9 million, it will hold title and access to the property. Payoff allows the hospital to start using the property, and moving some of its functions there.
About $4 million of the buyout goes into cash reserves, and the remainder pays for equipment, upgrades and moving costs associated with the new, $30 million, 60,000-square-foot hospital to be built on Snoqualmie Ridge.
The original $30 million sale price was based on an earlier developer offer to buy the campus. No appraisal had been done. At the time, the hospital district had projected that a new hospital would cost about $30 million. Neither the tribe nor the district haggled over the price.
The hospital recently brought in three appraisers to value the old campus. Their appraisals ranged between $7 and $20 million, McCollum said.
Nationally, “millions of homes have had to reset their mortgages because there is no property today that is worth what it was in 2007,” McCollum said. “It's a different world.”
The percentage difference in the sale price versus the buyout, he added, matches the difference between the price originally agreed to with Leisure Time and the settlement amount.
The 22-acre Leisure Time property is across Snoqualmie Parkway from the hospital's 13-acre new campus project on Snoqualmie Ridge.
Together, they’re smaller than the current Meadowbrook campus of 50 acres.
The Leisure Time site has existing office buildings and utilities.
“We’re going to be able to consolidate our options on property across the street from the hospital,” McCollum said.
The hospital will conclude its leases for rented spaces in Snoqualmie, the Ridge and Fall City and concentrate offices at the Leisure Time campus,
In the short term, the Leisure Time site offers potential for walking trails, wellness activities, “healthy living kinds of things,” McCollum said. “It would make a great location for fundraising activities,” in partnership with other groups.
He said there are no defined long-term plans for the site, which could, with adjacent properties, become part of the gateway to Snoqualmie if it enters the city's urban growth area. McCollum said steps are already being taken to bring it into the city's growth orbit.
While the hospital remains on track for a projected move-in date of January 2014, “Moving a hospital is really complicated,” McCollum said.
The hospital has nearly completed its construction documents, and will soon seek Department of Health approval and local permits for the project.
The new deal allows the hospital to use the property rent-free until the move-in date. McCollum said that adds value to the deal, to the tune of millions of dollars.
The tribe originally had until May of 2015 to pay the full amount.
Could the hospital district have turned down the discounted deal?
“We could have,” McCollum said. “They could have said, ‘we're not paying it. Sue us.’ I'm pretty sure they would not have paid us the full $30 million because the property isn't worth that.”
"It's the principle of fairness,” he added. “Our ability to negotiate this successfully is a benefit to both parties. In the future, we will collaborate. Working together, there is so much more we can do.”
The tribe bought the property to consolidate its various health and human services programs. The tribe says it will now be able to accelerate its goal to create an integrated health and wellness center there.
The deal, Mattson said, “solidifies our strong relationship and cooperative partnership with the Hospital District. We hope and strive to be partners in providing a wide range of accessible, quality, affordable health care for the citizens of the Snoqualmie Valley.”