Recession could play into Aspen hospital expansion plans
The Aspen Times
Aspen CO, Colorado
ASPEN ” Were the Aspen Valley Hospital District to sell bonds right now to finance its estimated $100 million expansion project, repayment would cost nearly twice as much as district officials had originally planned, an official confirmed last week.
Noting that economists are projecting the current recession will last well into 2010, hospital district Chief Financial Officer Terry Collins said the hospital isn’t eager to borrow money for an expansion in the current market.
“The bond market right now is not in good shape,” he said.
The hospital district typically could sell revenue bonds or general obligation bonds, two of the financing tools being considered for future bond issues, at between 3 and 4 percent interest rates, which would cost the hospital as much as $1.1 million per year, according to Collins.
But right now, he said, the best the hospital could expect is between 7 and 8 percent, which would mean as much as $2 million per year in interest payments, or nearly double what the hospital’s management has originally projected.
“So we wouldn’t want to go any time soon,” Collins said of the hospital’s plans to borrow money for the expansion.
The hospital has applied to the city of Aspen for permits to expand the 30-year-old facility’s size by 214,000 square feet from its existing 75,700 square feet, in order to meet changes in health-care technology and requirements as well as patient demands.
The expansion is to be accomplished in four phases. The first phase, which included an upgrade and expansion of the hospital’s maternity and gynecological facilities, is complete. The remaining three phases are expected to be finished by 2016.
With the understanding that the city’s review process could take months, Collins said the hospital’s management and board had originally and tentatively planned to “go to the market” with a bond issue no early than the end of 2009.
“I still wouldn’t count that out because a lot can happen between now and the end of the year,” he said. “I think it’s still too early to tell if we can stay on that schedule.”
The financing plan for the expansion, Collins explained, is divided into several parts.
Approximately $50 to $60 million of the money, he said, would come from revenue bonds, which are sold to investors and repaid from the hospital’s revenues, and from general obligation bonds, which are backed by receipts from property taxes and require voter approval.
Another $10 million or so, he said, is to come from the hospital’s own cash reserves, and the rest would come from fundraising in the community, as plans exist now.
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