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Decision nears for proposed Snoqualmie Valley hospital

The King County Council is expected to weigh in this month on whether to hold the Valley hospital district to strict rural development rules in its effort to annex the site of a proposed new hospital campus into Snoqualmie.

As part of county comprehensive plan amendments slated for approval this fall, the hospital could be held to a new rural transfer of development rights (TDR) requirement that would mean it would have to purchase the development rights for one acre of land for every four acres it develops at the 70-acre site at Snoqualmie Parkway and Interstate 90.

The amendments are the topic of a public hearing, set for 11 a.m. Monday, Sept. 29, at council chambers at the King County Courthouse in Seattle. The council is expected to make its final decision at its next regular meeting, 1:30 p.m. Monday, Oct. 6, also at the council chambers.

Jay Rodne, attorney for the district, said he is optimistic about the council approving a compromise version of the requirement, reached this summer, allowing the district to purchase development rights from the county’s TDR bank, while setting aside a third of the hospital site as rural land, in perpetuity.

“I think the vote is going to be favorable.” he said.

If the council doesn’t act, it could mean a four-year-delay in any annexation at the site. The district could seek a new hospital site elsewhere. Last year, the district ruled out an alternative site at Snoqualmie Ridge.

The hospital itself will fit on less than 50 acres.

“The bigger issue is, what can we do with the balance of that land,” said hospital CFO Don Galer.

But the district is going to have to take a fresh look at the feasibility of plans to put ancillary services, such as a hotel or college branch campus, on the site.

Rodne said the district would like to see environmental partners such as the Mountains to Sound Greenway Trust step up with financial support, to help defray the cost of setting aside a third of the hospital property as rural.

“We want them to be full partners,” he said.

New hospital

To build the new hospital, the district is approaching the National Development Council, a non-profit community development organization with offices in Seattle, to fund construction through tax-exempt bonds. While discussions with the NDC are still in early stages, the hospital would enter into a lease agreement, for 25 years or more, with the non-profit group, which would issue about $50 million in bonds. The NCD would own the building and the property, and the hospital district would pay back the NDC through lease payments, ultimately owning the property once the bond amount is repaid.

“The title reverts back to the district at the end of the bond period,” said Hospital Administrator Rodger McCollum.

“It’s build-to-suit, lease-to-own,” added Galer.

The district plans to use taxpayer funds from its 47-cent property tax levy to guarantee the lease.

“Tax revenue really is certainty of payment of the lease, that the bondholders will require,” McCollum said.

The district could have the option to buy out the bond amount as early as ten years into the lease.

New station

The hospital’s non-profit partnership would be slightly different from a similar arrangement that was used to build the Snoqualmie Police Station in 1998. According to Snoqualmie City Attorney Pat Anderson, the city created a non-profit corporation called the Snoqualmie Public Facilities Association, with board members including representatives from the city, citizens, and a representative from the Weyerhaeuser Real Estate Company.

Significant differences between what the hospital is proposing and how the city funded its building include the fact that Weyerhaeuser guaranteed repayment of the bond, removing uncertainty that the city’s revenue stream would cover bond payments. The hospital district does not plan to set up a separate non-profit entity, as Snoqualmie did, to build the new facility.

If the district were to default on the lease, the building would remain the property of NDC and its bondholders.

However, if the hospital were to close, that wouldn’t mean that the district would lose its interest in the new building.

“The district would still have its position in that building and property, whether the hospital is operating or not,” Galer said.

“If the hospital went belly up for some reason, the district could still be in business, but not operate the hospital,” he said. “The voters set up the hospital district, and set up a levy for it, because they wanted health care. The levy was not to build or equip the hospital, it was to support the district.”

Timeline

If all goes to plan, the hospital district will see the annexation of the property go through this fall. At the same time, the district is refinancing old bonds, taking out a $3 million bond for design of the new hospital, contracting with the NDC, and selecting an underwriter for the project.

The district expects to see the NDC issue bonds, purchase the property, engage a developer and begin construction by mid-2009. The hospital would receive 30 million from the Snoqualmie Tribe, which currently has title to the old campus, for payment for the old hospital, and retire its limited taxpayer funded general obligation bonds that year. Move-in to the new facility would occur in 2011, when the hospital would begin lease payments.

Galer said the district currently has about $26 million in outstanding debt.

The tribe’s payment will pay off about $23 million in limited taxpayer-funded bond debt, with the remainder of the funds potentially being used toward costs of equipping the new hospital. Outstanding unlimited general obligation bond debt is expected to be retired within the next few years, according to McCollum.

Last month, district commissioners approved a $3 million bond refinancing package with Issaquah Community Bank and Regal Bank for debt from bonds issued in 2000, 2007 and 2008.

The district paid a $30,000 fee to Issaquah Community Bank to close the deal.

Commissioners said the refinancing smooths the way for a issuance of $9 million in limited tax general obligation bonds later this year, which will pay for both the refinancing package and funds to design the planned new hospital at Interstate 90 and Snoqualmie Ridge. The refinancing also improves the interest rate of outstanding bonds.

McCollum said the district could give Valley residents the opportunity to purchase bonds for the new hospital through its contract with the NDC.

“We could have a provision for [bonds] to be bought by local residents,” McCollum said. “There would be people that would want to do that.”

Clinics

The hospital’s set of clinics, which lost money in 2007, remain an important part of providing health care to the Valley, hospital officials said.

The district is working with private physicians in the Valley, but McCollum said that the district started opening its own clinics in the Valley because so many clinics were closing here.

“When we came in, we were losing much of our primary care,” he said. “It wouldn’t be here if we didn’t subsidize it.”

“They probably warrant a subsidy,” Galer said. Clinics refer people to the hospital for services.

“If you take into consideration the total health care delivery system, the clinics are not bad deal,” Galer said. “They’re a good deal. We’d like them to be better.”

More use by Valley residents would help get the clinics to the point where they don’t need a subsidy.

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