[StBernard] St. Bernard Parish hospital hits financing snag

[Westley Annis]

The state has pledged the final funds needed to build an estimated $69
million hospital in St. Bernard Parish
<http://www.nola.com/politics/index.ssf/2010/02/new_st_bernard_hospital_site
_c.html> , but new problems have arisen with the project's financing because
the state money won't be available until at least next year.

A $41 million portion of the project's budget will be available this year,
possibly within weeks, but the parish will likely have to amend its
application to the state to reflect a scaled-back budget for the project.
The hurdle comes because a portion of the hospital's construction budget
counted on the proceeds of a federal tax credit program that will expire for
the parish later this year. 

St. Bernard has been without a hospital since Hurricane Katrina swamped
Chalmette Medical Center in 2005. The parish's hospital board has secured a
site
<http://www.nola.com/politics/index.ssf/2010/03/st_bernard_hospital_board_fi
na.html> on land donated by the Arlene and Joseph Meraux Charitable
Foundation, but the project has not yet gone to construction because of
various bureaucratic requirements necessary to unleash the mix of federal
and state financing needed to pay for it.

$17 million pledged ... in 2011

The state Division of Administration <http://doa.louisiana.gov/doa/>  sent a
letter to parish officials last week pledging $17 million in capital outlay
money toward the hospital project, but the letter noted that the money would
not be available until at least July 2011. To reap the benefits of the tax
credit program, that money would have to be spent this year.

The issue affects only a small portion of the entire budget -- possibly less
than $2 million -- but the parish will have to revise the project budget and
send it back to the state Office of Community Development
<http://doa.louisiana.gov/CDBG/cdbg.htm> for approval, according to the
state. Once that is done, the state can release $41 million in federal
community development block grant money and allow the parish to advertise
for construction bids.

Because of the different pots of federal and state money, the community
development office needed assurances that all the financing was in place
before releasing the money.

"From our standpoint, we can't begin to let them draw down the (federal
money) and use the funds if there's a hole in the project," said Christina
Stephens, a spokeswoman for the Office of Community Development. "This
doesn't change our level of commitment to the project. We're still very much
committed to helping them, it's just a matter of getting the numbers to
work."

'It's a bureaucratic hangup'

Wayne Landry, the parish's hospital board chairman, sent information to the
state on Friday from the parish's tax credit adviser showing that the
financing gap could be as little as $1 million. He said he expects the
application to be amended and the issue to be resolved by the end of this
week.

What they're talking about is an immaterial part of the money," Landry said.
"It's a bureaucratic hangup, instead of us all just sitting in a room and
talking about it. The right hand and the left hand are not talking in Baton
Rouge."

The hospital board is awaiting approval from the state to put some
preliminary site construction work out to bid. The donated site, on a vacant
piece of land across from the Chalmette Battlefield
<http://topics.nola.com/tag/Chalmette/photos.html> , must be filled with
dirt that sits on the site for about two to three months. And the parish
must complete a wetlands mitigation process before construction can
officially begin.

The current plan is for a 40-bed hospital and a medical office building, the
size of which has not yet been determined. Landry has pushed for $5 million
of the parish's federal block grant dollars be moved from slab removal
toward construction of the hospital, to pay for a larger medical office
building. Parish President Craig Taffaro has opposed the plan.

Taffaro argues that the lingering slabs were left behind by private property
owners who did not sell to the Road Home program, and are unlikely to pay
for them to be demolished on their own.

Cost concerns 
Councilman Frank Auderer this week noted concerns about the cost of the
hospital, saying he believes the hospital and medical office building
estimates are increasing.

"There are so many projects, and we're putting half of our grant monies into
the hospital. It's that important of a project to all of us," he said.
"Blight is also a problem for us. We need to make certain we take care of
that."

Landry has consistently argued that a larger medical office building is
essential to the financial viability of the hospital, enabling it to attract
specialists that will keep the institution afloat. 

It's still unclear how the hospital will pay operating costs once the
hospital is built. It's unlikely that community development block grant
money can go toward operations, meaning the hospital service district board
will have to come up with a funding source. Landry said Friday that "the
smart thing to do, but not the popular thing to do" would be to implement an
ad valorem tax <http://www.investopedia.com/terms/a/advaloremtax.asp>  as
early as this year to generate money for the hospital operations.

"That hospital will in fact, once it's operational, for the first five years
at a minimum, will definitely have to be supplemented in order to survive
financially," he said. "I am the last guy in America that wants to impose
any kind of taxes on anything, but the reality is it just cannot survive
without being supplemented in some fashion."


Chris Kirkham can be reached at ckirkham at timespicayune.com or 504.826.3321.