Hospital financing makes sense
October 31, 2010
I want to compliment the Aspen Valley Hospital board of directors, administration team and all members of the hospital community for the great job they’ve done over the past five years rebuilding the financial strength of AVH. Speaking as a three-year member of the AVH Audit Committee and having regularly reviewed the hospital’s finances throughout this period, our community hospital is in great financial shape – quite a turnaround from earlier in the decade, when AVH was near bankruptcy.
It is this same hospital management team that is now asking the community to support its master facilities plan by voting in favor of ballot measures 5A and 5B on Nov. 2. Voters are being asked to approve $50 million in general obligation bonds, to be paid by a very small (3 percent) increase in property taxes. This is the only portion of the financing plan that involves property taxpayers and represents approximately 40 percent of the total cost of the project. Timing for general obligation bonds couldn’t be better. The hospital’s capital advisors, RBC Capital, have stated these bonds are at historic lows right now, with interest rates below 4 percent.
The general obligation bonds represent only one part of a four-part financing plan for the master facilities plan. Philanthropy, use of AVH capital reserves, and a separate series of revenue bonds, to be repaid from hospital operations, comprise the remaining financing tools that will be used.
The least expensive portion of the financing plan is philanthropy. The Aspen Valley Medical Foundation is well under way building its team and creating the necessary background material to raise $30 million or more to support this project. Approving ballot measures 5A and 5B is essential to showing generous donors that the community supports the master facilities plan and is willing to do its part in financing it.
The next piece of financing will come from cash reserves that have been built up during the hospital’s financial recovery. This could range from $12 million to $20 million, depending on the timing of the capital expansion phases.
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The last piece of the financing puzzle is a separate bond issuance called revenue bonds.
These bonds will be more expensive, with interest rates ranging from 5 percent to 6 percent, and will be repaid from ongoing hospital operations. Assuming a successful fundraising campaign and the generous use of capital surpluses from hospital operations, the hospital plans to minimize the use of revenue bonds.
The financing plan for upgrading our community hospital is cost effective, and thoughtfully distributes the financial burden of the project among members of the community, generous donors and hospital operations. I encourage voters to support the Aspen Valley Hospital Master Facilities Plan by voting “yes” on ballot measures 5A and 5B.
treasurer, Citizens for Sustainable Healthcare