The Kenai Peninsula Borough Assembly is considering a major bond to fund improvements and repairs at South Peninsula Hospital in Homer.
The $38.5 million bond includes funding for expanding the hospital’s infusion clinic and much-needed maintenance work. According to a memorandum related to the bond, the funding would prioritize replacing the hospital’s emergency power plant, improving older facilities and buying properties.
South Peninsula spokesperson Derotha Ferraro said the hospital has many needs and unique barriers to addressing those needs. Expanding the hospital is a challenge due to its location and nearby land availability.
“We have an aging facility. We have the need to expand services for the community. And we are definitely kind of landlocked, we have a big hillside behind us, a creek and a park, beside us and private property kind of below and on the other side,” Ferraro said. “And so it makes it really challenging to expand services and do more for the community when we’re so locked in.”
The assembly also approved an ordinance at its May 21 meeting that would put $13 million from the bond towards purchasing three buildings, two of which the hospital has leased for years.
Borough Mayor Peter Micciche said purchasing the properties outright saves the borough money and gives it control over the land.
“If you continue to lease, you would pay between one and two million (dollars) more over that length of time, depending on escalation in the future, and you would still just be leasing. You would still not be able to do the permanent improvements that you’d like to do on the land,” he said. “(It would) be very difficult to make the improvements that the hospital needs to make in order to be competitive and provide services for the people of the Southern Kenai.”
The resulting bond would add a property tax with a 0.67 mill rate for people living in the South Peninsula Hospital Service Area, which runs from Ninilchik to southern Kachemak Bay, excluding the City of Seldovia. It also extends across Cook Inlet into Kamishak Bay. That means every $100,000 of assessed property value would be taxed $67.
This was determined based on assessed property values for the next fiscal year, and that the borough would pay about $2 million a year including interest — $2,605,000 with 3.5% interest over 20 years.
Borough Finance Director Brandi Harbaugh said during a finance committee meeting earlier this month that the current mill rate is expected to drop considerably over the next couple years.
“There’ll be a substantial decline in the current mill rates associated with the hospital,” Harbaugh said. “And we see the end in sight for that, which frees up the potential for mill rates to be utilized to pay this debt and to remain in the same range of mill rates and tax for the folks in the area.”
Central Peninsula Hospital in Soldotna passed a similar bond nearly 20 years ago 2003 to expand its services. Micciche says the mill rate for that bond decreased until the hospital ultimately forgave it with the money it generated from expanding services.
“People don’t have to travel for critical care. They can stay right at home, which also has a better outcome on recovery and more locally accessible treatment, less travels,” he said. “That brings the cost down to those that are receiving those services, and the entire system benefits because of that.”
Micciche hopes to see those benefits for South Peninsula Hospital as well.
The Assembly will hold a public hearing for the ordinance on Tuesday. If the Assembly greenlights the bond, voters in the hospital service area will still need to approve it in October.
