Jul 13, 2017

Measure C - 2017 Recap

The original Masterplan contained 5 phases. Measure C would have covered the first 3 phases at a cost of $32,000,000.00. To complete phase 4 and 5, Kern Valley Healthcare District (KVHD) would have had to secure additional funding in approximately 5 years – most likely through another parcel tax or G.O. bond. The estimated overall cost (including phases 4 & 5) was $58,000,000.00. Measure C was placed before the voters on the June 2017 ballot and was unsuccessful. By law any tax measure placed on the ballot by KVHD requires 66% plus 1 vote for passage.

Many voters felt Measure C was rushed through. We agree with them. What had happened is KVHD applied for a USDA loan and was advised in December 2016 we had been approved for $28,000,000.00, however, we were also informed in January 2017 that we had to have shovel in the ground within 1 year of being approved and that deadline was December, 2017. The 2nd requirement was that voters within the District had to pass a parcel tax or G.O. bond to assure the federal government would be repaid. In order to meet the USDA required deadline of shovel in ground, the Ancillary building was designed to move departments out of the area where the new ER was planned to be built. Since no patients would be housed in that space the construction would be overseen by Kern County Planning and Building Department rather than Office of Statewide Health Planning and Development (OSHPD), satisfying the requirement of meeting the December, 2017 deadline. The ballot measure due to timing constraints had to be placed on the June ballot rather than November.

Immediately after the failure of Measure C, Administration sat down and re-evaluated the plan, discussed the many comments and ideas we heard during the campaign and started re-working the design. This work is the plan which will go before the voters in November, 2018. Approximately 2 weeks after the June election, USDA contacted Kern Valley Hospital’s Administration requesting a meeting. During that meeting we shared the community’s concerns, our reflections on how we could better accommodate and make the necessary changes to reduce the overall cost of our project, and still provide the community a facility with a much needed emergency room, meet the required seismic modifications, and provide adequate patient and employee space. USDA commended us for the work and forethought we had shared. To our surprise, USDA gave us an extension on the $28,000,000.00 loan until December 2019. Again, we have to meet the 2 requirements – pass a measure to guarantee payment to the federal government and shovel – in – ground before December 2019. The $28,000,000.00 has a locked – in interest rate of 2.375%. Effective January 2018, interest rates for USDA loans has increased to approximately 3.5%, but because our interest was locked in, we won’t be affected by the increase.

Since the election, Administration has been meeting with various property owners, community organizations, business owners, community leaders and business organizations. These meetings were very helpful and those participating were very honest and upfront with us.
We have highlighted the concerns community members had relating to the failure of Measure C:
• Resolution 17-01 used the word “MAY” – voters felt this word allowed Administration to use the tax revenue for undefined purposes outside of capital needs. The future resolution will use more specific language such as “will” or “shall”.

• Parcel Tax was unfair – someone living in a large home would be paying the same amount as someone living in a singlewide mobile. Administration is open to either a General Obligation Bond (G.O. Bond aka Ad Valorem Tax) or a Parcel Tax.

• The previous Measure C was for $32,000,000.00 and only covers the first three phases. We didn’t even know what phases 4 and 5 would cost. The overall estimated cost for all 5 phases was $58,000,000.00, however, that was only an estimate. This was a very legitimate concern for the public. The upcoming ballot measure will be for the entire renovation under one ballot measure with a cost of $45,000,000.00. However, we continue to refine our current plan and are looking at additional cost reductions. This current plan will be constructed in 3 phases. Please review MP 002 on our website. The light and dark orange color will be built simultaneously called out as phase 1 (new emergency room and new acute care); the light purple is phase 2 (included in the mandatory seismic requirements) consisting of imaging, hospital pharmacy and lab; phase 3 which is the light blue and pink will also be renovated simultaneously (the portion of imaging, lab and hospital pharmacy not confined to seismic restrictions) and other potential departments such as medical records, education, etc.

• Why isn’t the hospital looking at 4d construction? Originally 4d wasn’t available because we had opted to build a new ER department. That option was fairly new to 8426 SPC 4 or 5. After the failure of Measure C we took a much deeper look at whether a 4d option could be utilized. After much in-depth research, Administration concluded 4d would be a viable option and a cost – cutting measure. Referring back to MP 002 the light orange area (ER) will be constructed under 4d guidelines along with the light purple area. As an additional cost reduction we are exploring whether part of the acute beds could qualify under 4d construction.

• Impending doom, the hospital isn’t even closing before 2030. That is factual if a measure isn’t approved the hospital will not close until October 2030 (our license simply will not be renewed if the seismic requirements haven’t been met). For further clarification you can go to the 2016 California Administrative Code, Chapter 6 Seismic Evaluation Procedures for Hospital Buildings page 82 under section 1.5 Compliance requirements and number 4 specifically calling out what will occur after January 1, 2030; page 87 section 1.7 Notification from OSHPD and page 531 Section 3418A Removal of Hospital Buildings from General Acute Care Services.

• We will just go to Bakersfield. The Heart Hospital would be the only facility that is compliant at this time. A fraction of KMC is compliant. San Joaquin has 1 tower that is not compliant. Mercy Hospital downtown will be closing their in-patient care and move it to Mercy Southwest on Old River Rd.; Memorial Hospital has wings that are not compliant. At this point, no one knows what Kern County healthcare field will look like by 2030.

• You are building this huge Administration building why can’t you move into empty buildings? As previously mentioned there were departments that needed to be moved to build the ER and that building would have been built under Kern County building codes so we could have met the USDA’s requirement by 2018. We have taken the communities advice and are in the process of acquiring a couple of used modular buildings with the plan to pave the dirt lot across from the hospital and place them there to house the departments currently in the light orange area to make way for the new ER (MP 002).

Moving Forward From Measure C

Kern Valley Hospital turned 50 years old this past spring. The building itself is in good condition but the electrical, pipes, heating and cooling, etc. as with any building of this age needs replacing. When Kern Valley Hospital opened our doors in 1968 there were no computers, digital imaging, electronic records, stroke robots – medicine has changed drastically over the years. The upcoming ballot measure in November, if passed, will be addressing those issues along with a new and updated ER and Acute care patient wing.

Administration went back and examined our census. Our emergency room visits are constant and continually increase. We are licensed for 25 acute care beds but after looking at the numbers, very rarely, if ever, have we had all beds occupied to capacity. Based on that data and comparing the old plan vs. the new plan we eliminated 8 beds which helped cut our costs. In addition, we are still conducting a cost analysis to determine if we can reduce additional acute beds. Utilizing 4d construction and re-designing the ER within the existing structure, we were able to cut additional cost and still increase the number of beds from our current 7 to 11. Our lab and imaging will be brought in under the hospital roof so patients will no longer have to go out in inclement weather. This will also enhance workflow efficiency. We will be adding mammography and echocardiography capabilities. In addition, if the population increases in the future it will be easy to add on acute beds or increase the ER space because we will have all the utilities stubbed out. Another cost saving measure was removing the Ancillary building and replacing it with refurbished modular buildings.

While gathering cost data on our chiller and boiler needs, we were informed about an energy conservation program that the State of California offers through the California Energy Commission. We followed up on that lead and applied for a CEC loan which allows us to retrofit our lights with LED’s and the savings cover the cost of a new chiller and boiler. Once those are installed the overall savings will make that payment and still show savings on our utilities. We were approved by the CEC in May and that project will begin in the near future. If the G.O. Bond or Parcel Tax is approved in November, those lights can and will be moved to the new construction and renovated areas. This project allowed additional costs to be removed from the master facilities plan. The boiler and chiller costs would have been included in the overall construction amount.

We have been able to cut the cost from $58,000,000.00 to $45,000,000.00 to be approved under one ballot measure, with construction to cover a new Acute Care Wing and Emergency Department as the first phase. We have taken to heart the feedback and suggestions the community has provided. Of the $45,000,000.00, Kern Valley Healthcare District will be contributing $7,000,000.00 towards the project leaving a total of $38,000,000.00 to be financed, of which $28,000,000.00 will be secured by a USDA loan with a locked-in interest rate of 2.375% for 40 years. The additional $10,000,000.00 will be current market rate of interest. Originally, we were advised the financing of our project could be accomplished through a general obligation bond or parcel tax. As of July 10 we were advised our only option to fund the entire $38,000,000.00 is through a parcel tax. Our financial advisor indicated there had been some legislation passed that restricts the dollar amount a G.O. bond can cover. We want to stress the figures we have provided is a starting point and we are expecting to trim the total cost down once our final analysis has been completed.

In the spirit of transparency, KVHD provided The Kern Valley Sun our preliminary analysis of financing options which was in their June 20th newspaper edition. This information is readily available at Mesa Pharmacy, Mountain View Health Center, Kern Valley Hospital Lobby, Public Relations office, as well as, our website. We encourage the community to review that information so they fully understand the impact to their individual circumstances. Administration will be making a recommendation to the elected Board of Directors at their August 1st board meeting.

We encourage the public to contact your elected Board Members with your thoughts and/or concerns, as well as, Hospital Administration. We are happy to come out and speak to you and are available to attend any meetings to provide additional information.

In 1964 the Kern Valley community came together and worked with the County Board of Supervisors to create the Healthcare District. Many of those community leaders are no longer with us. It is now our turn to continue the legacy they started to see that our Healthcare District remains viable and provides a facility the community can be proud of and serve their healthcare needs into the next 50 years.

New Plan

Original plan