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Hospital to pay off Evergreen

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

serious negotiations.

"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."

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