Voter-approved upgrades at Southwest Memorial Hospital are on hold because interest rates are too high.
In May, voters approved a ballot measure to drop a sunset provision on a .04% sales tax levied by the Montezuma County Hospital District. The sales tax was approved by voters in 2015 and had been set to sunset in 2030.
The approved ballot measure allows the hospital district to restructure its bond debt to finance $23 million in hospital improvements.
It specifically requires the funding be used for a new emergency department, remodel of the surgery center, and for other infrastructure upgrades and maintenance.
However, to move forward with the refinancing and construction projects, interest rates must be 5% or lower, as required by the ballot measure.
Currently, the necessary rate is not available, said MCHD Chairman Dean Mathews, causing the projects to be on hold.
“We’re ready to go with the plans, but we are waiting for interest rates to drop so we can refinance, then we can move forward with construction,” he said.
Currently interests rates are above five percent, and may continue to rise, he said.
The hope had been to secure the bond refinancing and begin construction and upgrades soon after the May 3 election. But the district has been forced to wait until interest rates drop, and it is not clear when that will happen, Mathews said.
The restructured debt, backed up by a permanent sales tax, would free up about $23 million in additional lending for the upgrades.
A new $10 million emergency department building will be built to the north of the current facility. Construction is expected to be 12 to 18 months.
The surgery department would be remodeled and expanded into the current emergency department space at a cost of $3 million to $4 million. Construction would take 6 to 8 months.
Meeting the demand for surgery suites is a critical revenue source for the hospital, Mathews said.
Infrastructure upgrades and maintenance needs at the hospital – estimated to cost between $6 million and $8 million – will also be paid for through the refinancing plan.
Those projects include upgrades to the physical plant, roofing units, boiler replacement, backup generator system, HVAC, electrical systems.
As a result of the approved ballot measure, the hospital will restructure its $32 million bond debt to $55 million over a term not to exceed 40 years, through the issue of revenue bonds backed by the sales tax.
As part of the ballot measure, in exchange for dropping the sales tax sunset, the MCHD property tax mill levy was permanently lowered by 25% to 0.7445 mills from 0.994 mills.
The mill levy reduction would be permanent. Over the next eight years, it would save property owners and estimated $1.1 million.
Referendum 6A passed 55% to 45% with 1,960 voting yes and 1,623 voting no.
jmimiaga@the-journal.com
