DALLAS — Orleans Parish Hospital Service District A is considering a financing plan for a $130 million renovation project at a hurricane-damaged hospital in east New Orleans that could rely on bonds for half of the needed funds.
The hospital service district is one of two in the parish created by the Louisiana Legislature in 2006 to restore medical services to New Orleans after Hurricane Katrina in 2005.
The district has received $40 million of Community Development Block Grant funds from the city so it can purchase the old Pendleton Memorial Methodist Hospital in eastern New Orleans, and two other associated properties.
The district wants to reopen the main facility as an 80-bed acute-care facility in an area that has been without a hospital since Katrina flooded the area more than four years ago.
Paul Page, chief financial officer for Methodist Health System Foundation Inc., said the district is looking at several options for obtaining the $130 million needed to restore the damaged hospital.
“There is some money designated for this project in the state capital outlay program, but the district is considering bond financing as well as grants and conventional mortgage financing backed by the U.S. Department of Housing and Urban Development,” Page said.
The Methodist Foundation is advising the hospital district board and providing staff support to the project because the district has no revenue until it can open a hospital. The foundation has also paid for two feasibility studies that showed the project is viable, Page said.
Debt financing options include conventional hospital revenue bonds, Gulf Opportunity Zone bonds, and Build America Bonds, he said.
“I am interested in the BAB option, ” Page said. “The district will need operating funds to see it through the construction phase, and then you can’t expect significant revenues for at least 12 months.”
A request for proposals for development and oversight of a financial plan for the renovation effort will be issued soon.
“The district wants someone who will not just say, 'Here’s a financial plan, good luck with that.’ We want a firm that can assist in securing the needed funds,” Page said. “We want someone who can take us where we need to go, from issuing the bonds through completion of the project.”
The hospital district is an agency of the state, and would issue its own bonds if the district board opts for that approach, according to Page.
“The goal is to keep the bond financing at 50% of the needed funds,” he said. “The district has the authority to ask voters to approve a property tax for its operations, but there are no plans whatsoever to do that.”
Pendleton Memorial Hospital was licensed for 306 beds before the storm, and actually operated more than 200 beds, Page said, but the renovated facility will be smaller.
“We’re planning on an 80-bed facility, with no bells and whistles, no open-heart surgery, or anything like that,” he said.
Page said the renovation effort should take nine to 12 months once work begins.
A report from PricewaterhouseCoopers commissioned by the district said 50% of its patients would have private insurance, 22% would be uninsured, and Medicare or Medicaid would cover 28%. Residents in the area must currently travel up to 30 minutes to reach an emergency medical center.
In addition to the possible allocation of state capital outlay funds, project financing could also include federal hazard mitigation grants and unspent funds from three federal recovery grants that have not been allocated by the Louisiana Recovery Authority.
