Hospital to pay off Evergreen
October 2, 2008 · Updated 3:02 PM
SNOQUALMIE - In a surprise turn of events last week, Hospital
District 4 commissioners unanimously voted to issue a bond to pay off
the district's $3 million loan to Evergreen Hospital Medical Center.
The action came during a special commission meeting held at
the Snoqualmie Valley Hospital on Thursday, Jan. 20.
The bond _ known as a Limited Tax Obligation Bond _ will total
approximately $3.58 million and will be used to repay both Evergreen and
a loan of about $150,000 with Bank of America. The bond replaces
existing 1994 and 1996 bonds.
Tom Whitson, vice president of Seattle Northwest Securities
Corporation, did the legwork in setting up the bond and made the presentation to
the commissioners. He reported that under the agreement, private
investors will purchase shares of the bond in $5,000 increments, with Seattle
Northwest purchasing any unsold shares.
The bond went on the market Thursday morning, according
to Whitson. By the end of the initial order period, investors committed
to $1.5 million in bonds.
"We felt confident we could buy the (remaining) bonds," he
stated. "We're comfortable enough that we can go forward with this
transaction. We have substantial commitments for the bonds and we will offer to
purchase the bonds from you and hold them until we sell them to others."
The interest rate for the bond is fixed at 7.5 percent. Payment on
the principle will start in 2007 and the district will retire the bond in 2015.
"There are sufficient revenues to pay the bond and still operate the
facility," Whitson said. "We believe
that this is the most important, to get the loan paid off and put to bed.
We've also set up a reserve fund and have funded a facility maintenance fund."
The bond is secured through the district's 2000 levy of $1,356,000
_ adjusted for a collection rate of 96 percent _ and assumes the
existing levy will not increase. Therefore, Whitson stressed, there should be
no impact by Initiative 695. He added the reserve fund would cover
approximately six months of debt service as a "security feature."
"This sounds very similar to a debt consolidation loan, or an equity
loan," said Commissioner Fritz Ribary. "I
see it as a good tradeoff to get the loan paid and get some flexibility.
That would be close to a good analogy, right?"
"I think it is," Whitson responded. "It gives you the flexibility to go a
little bit further, such as the facilities maintenance fund. You've got to clear
that Evergreen loan out."
District Superintendent Jeff Lyle compared the loan to the
mythological sword of Damocles. While the loan loomed over the district's
operation, few medical organizations expressed an interest in reopening the hospital.
"As an example of how this will help us, with Evergreen the loan
repayment was $360,000 a year," Lyle said. "With this bond, it's $223,000
a year. In effect, we have about $140,000 to bank and get interest on."
Whitson said the payments would probably be made this week
directly to Evergreen and the Bank of America, with the remainder going into
the district's reserve fund.
The hospital first opened in January 1984, following the 1982
approval of a $1.75 million bond issue. The Sisters of St. Joseph of Peace _
Health and Hospital Services operated the facility through April 1992. The
hospital reopened in September 1994, but subsequent bond issues and a
$2.1 million line of credit from Evergreen failed to stop operating losses and
the facility closed again on June 16, 1997.
Efforts by other organizations to reopen the hospital _ such as
last summer's proposal by American College Medical Centers _ failed or
were not accepted. Now, however, Lyle says the path is clear to enter into
"I'm particularly pleased," he commented after the meeting.
"The facility is once again ours, free and clear. Because we've had several
interested parties in the past, this opens the door for one or two of them
to come back and take another look."
Lyle said he expects the district will now receive a one-year
conditional use permit, which will allow the hospital to retain its certificate of
need. In the meantime, Meadowbrook Clinic and Urgent Care will continue to
operate out of the hospital's former emergency room.
"This is a very positive development," said Dr. Dean Steele
of Meadowbrook. "We started the clinic to reopen the hospital. Anything
that opens the hospital will further our goal."
Both Lyle and Commission President Carol Hoch expressed great
appreciation to Evergreen for its assistance.
"This was only possible through the support of the Evergreen board
of directors," said Lyle. "We appreciate their support and especially that of
the citizens. I found it to be a particularly good experience working with
Anne McBride, Evergreen's chief financial officer."
"That was our goal, to see it through," added Hoch. "I'm happy
to say that it looks like we're there.
"This opens up opportunities to talk to other entities, other
users. We've had maybe several who didn't want to go any further because of
the debt. Hopefully this will get the operation going again."
Hoch described the district's relationship with Evergreen through
thick and thin as "great," adding,
"We're grateful not only for their loan in
the first place, we're also grateful to Evergreen for their forbearance. It
has taken time, but it's been worth the wait."