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Old developer out, new one in for new Snoqualmie Valley Hospital project

Snoqualmie Valley's Public Hospital District No. 4 has changed the developer for its planned new campus on Snoqualmie Ridge.

The Snoqualmie Valley Hospital board voted 4-1 Wednesday, June 26, to transfer the $38.5 million deal for a new hospital from Moreland Pacific, Inc., of Bakersfield, Calif., to the Benaroya Company of Bellevue.

According to the settlement agreement passed at Wednesday's special meeting, the hospital's public-private partnership to build the new facility fell through.

The district's deal with Moreland dates to November of 2011, when the board winnowed seven proposals down to Moreland's. Moreland was to lease land from the hospital, build a new, modern facility, then lease it back to the hospital, which has an early option to buy it back.

When the deal was made, "there was a lot of uncertainty around payment by the Tribe," hospital administrator Rodger McCollum told the board Wednesday. (In 2012, the board agreed to halve the Snoqualmie Tribe's payment for its old Meadowbrook campus in exchange for an early buyout.)

"We had just recently become profitable," McCollum said. "We elected to go with that model in order to use the developer's balance sheet to finance construction of the hospital."

That method triggered a new approval process for the hospital's certificate of need.

This spring, "it became apparent that the developer was having trouble getting financing or moving forward," said McCollum. "We were very cooperative…. At the end of the day, we came to the conclusion that we were not going to be able to move forward with that developer." The district started the termination process six weeks ago, and turned to Benaroya, a company the district was in talks with about construction for a office building on another part of its property.

With federal and state building codes changing July 1, McCollum said it was necessary to approve the new agreement and apply for state and city permits before the weekend.

Approval "means we can move forward using the codes that the drawings were based on, and not incur additional costs" and more delays, said McCollum.

The settlement agreement calls for Moreland to receive $1 million from an escrow account for its part in the project, including work already done.

Moreland had overseen most of the design work. Many meetings and hundreds of hours were involved, McCollum said.

McCollum said Benaroya and Moreland worked out the settlement amount with involvement from the hospital.

"There could have been a million dollars worth of litigation," he said. "It would have been messy if we hadn't helped facilitate" the agreement.

The vote

While commissioners Dick Jones, Kevin Hauglie, Dave Speikers and Joan Young voted to approve the new deal, commissioner Gene Pollard voted against the new agreements, saying the district needs more time to study the issue.

"People elected me to office…on the basis of a clear statement: no new hospital," Pollard said. "Set this aside until you have a public hearing on whether we should build a new hospital, or not.

"I would feel more comfortable if we had a report from the finance committee on such a major project," Pollard said. He got a verbal one from Speikers.

"We're recommending the agreement because it doesn't lose the district money. It will eventually save the district money."

"This process has been too fast and too obscure for people to study the documents, understand and get a written recommendation and analysis from the finance committee before we act," Pollard said.

"There is no change to the transaction," replied Rodne. "What we are doing is substituting Benaroya for Moreland. The district's obligation remains the same."

Part of Wednesday's discussion revolved around the district's choice of financing. Pollard questioned the reasons behind the choice of a public-private partnership.

"As I understand it, we tried to get traditional financing to build a hospital. That didn't work," Pollard said.

McCollum said the district looked at several finance options—HUD 242, a federal guarantee on loans, as well as another financing program, 630-290, which allows public entities to create non-profits to hold a mortgage.

"In Washington, hospitals can't give mortgages on their properties for security," McCollum said. "We don't have the assets to give for security in a conventional loan."

Committee President Dick Jones commented that the decision to go for a new hospital goes back several years.

"We chose to not go to the voters and put it on their taxes. We feel we've done the right thing," he said.

The price of the hospital remains the same, $38.5 million, said hospital attorney Jay Rodne.

The hospital district's levy is 50 cents per $1,000 in assessed property value, totaling about $3 million annually. About 90 percent of that levy goes to pay off the hospital bond's 45 million debt. No new taxes being incurred because of the new hospital project, which will be paid for out of revenue, McCollum said.

The board also approved an easement for city access to the site. The campus will also include a one-way road egress connecting the proposed affordable housing project to the north with 90th Avenue and the Snoqualmie Parkway. A traffic study following construction of the hospital will determine whether 90th Avenue will require a traffic light.

In making the developer switch, some time has been lost. But that time has been used to refine the plans, for example, to better incorporate hospital equipment, McCollum said.

Once permits are issued, work can begin immediately.

"Once they get the green light, there is going to be an army" on the hill, he told the Record.

More public notice

At the start of the meeting, Pollard objected to the evening's agenda. He wants the district to publish legal notices informing the public well in advance of meeting topics.

"I think this matter is of such import that the public should have better notice," he said.

Speaking up before the close of the meeting, Snoqualmie resident Carol Peterson urged the district to open its internal finance committee meetings to the public.

"I think that's a simple request," said Pollard, who called for the board to consider opening the meetings as an agenda item. The meeting adjourned without further discussion of the request.

Pollard also called on the administration to do more to ensure better attendance at meetings.

The next board meeting is 6:30 p.m. Thursday, August 1, at the Snoqualmie Pass Fire Station, 69802 Old State Highway.

 

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