Telluride Hospital District staff, board members, consultants and advisers gathered Tuesday at Mountain Village Town Hall, adjacent to the future site of a new medical center, for a work session that ended with near-consensus on how to fund the estimated $24 million facility.
Though the meeting was not an official board meeting and the board members were not authorized to make official decisions, the resulting consensus from the meeting was that a combination of philanthropic fundraising and a certificate of participation (COP) bond was their first choice for funding the new medical center. Plan B is a general obligation bond to be voted on by residents of the hospital district and paid on an annual basis by property owners. The final alternative the group discussed was the so-called developer option, in which a private developer would build the facility and lease it to the hospital district.
“The reason I think this is so exciting here in this community is the transformative nature of what you are creating and doing with the new medical center,” Polly Breit, a fundraising consultant for the project, said. “The lasting legacy and impact that this project will have on the community for years to come will resonate with people.”
Breit will work on a philanthropic capacity study this summer, to be completed by Sept. 25, in order to tell the hospital board how much money the local community can raise for the project. But, when pressed at the Tuesday meeting, Breit said that raising $12 million for the new medical facility was not out of the question.
The group’s indication that they prefer a COP to a general obligation bond was based on their perception that bringing a general obligation bond to a public vote was risky.
“I happen to think there’s bond fatigue. I happen to think there’s political risk in relying on voter approval, given the weight of the Telluride vote and the risks of having the facility up here,” former Mountain Village Mayor Davis Fansler said.
Current Mayor Dan Jansen agreed that bringing a bond to a public vote was risky because many in the community do not agree with the board’s decision to build the new medical center in Mountain Village instead of Telluride.
“I worry that the election would be perceived — unfairly — as a moratorium on putting [the medical center] in Mountain Village,” Jansen said.
With a COP, the hospital district would borrow against future revenues rather than relying on property owners to pay each year. Several members of the group mentioned the recent school bond, which narrowly passed in November and has since come under scrutiny, as a reason for “bond fatigue” in the community.
Jonathan Heroux, managing director at Piper Jaffray, the hospital district’s underwriting consultant, worried that the high concentration of second homeowners in Mountain Village would put an undue financial burden on property owners who do not use the hospital as much as locals.
“When I look at these numbers and realize the property owners are not necessarily full time residents here, there’s a case to be made that some folks who perhaps don’t use the facility as much as the locals are really paying a lot for this if you do the general obligation bond,” Heroux said.
But, Heroux added, a general obligation bond would give the district the lowest cost to capital, which he said is typically his number-one goal.
The current medical center is a 10,000-square-foot converted residential building, and the new facility in Mountain Village would approach 40,000 square feet. The added services that the larger facility would allow, including overnight hospital beds, space for visiting specialists and a helipad, would bring in significantly more revenue, according to district board and staff. The added revenue would allow the district to pay COP debt payments as well as put the medical center on sounder financial footing.
Dan Garner, who was the sole member of the five-person hospital board physically in attendance at the meeting (though three others called in), said the new medical center could potentially increase annual cash flow from a current level — around $300,000 -— to somewhere closer to $2 million. The added cash flow also has the potential to reduce the need for an operational mill levy, the tax that currently subsidizes the operations of the medical center.
“The project has the potential of relieving the taxpayers of an operational mill levy in the future because it creates positive cash flow and operates and sustains itself,” THD Finance Director Julie Wesseling said.
Telluride Medical Center Director of Emergency and Trauma Services Diana Koelliker wasn’t quite as sure as Garner and Wesseling that added revenues would translate to a reduction in an operational mill levy.
“I’m a little bit hesitant to project such a rosy financial forecast because I am concerned that our overhead costs are going to be substantially more,” she said. “To say that the mill levy might go away I think is an overestimation. I think it might be redirected so that we can provide those added services during the shoulder seasons when we might not have the income.”
The next meeting of the THD Board of Directors is June 26 at 8:30 a.m. in the Miramonte Building. At that meeting, the board could decide on some of the recommendations of the advisory group that met Tuesday. Based on the general agreement of the group, once the philanthropy capacity study is completed in September, the hospital district can begin determining the feasibility of a COP. Then, the deadline to put a ballot question on a May 2016 special election ballot would be in February 2016.
In the meantime, the medical center faces a U.S. Army Corps of Engineers review on the wetlands on the property. THD withdrew their wetlands mitigation application after the Corps raised questions about the increased size of the building. Their original application said the building would be around 25,000 square feet but that has since been revised upwards to around 40,000 square feet.