DALLAS — The Louisiana House Appropriations Committee declined Monday to give the go-ahead for construction of a $1.2 billion state hospital in New Orleans until a more complete business plan is developed.
State facilities director Jerry Jones said the government has almost $900 million on hand for the project, and asked for authority to begin construction of the 424-bed University Medical Center, which will serve as a training hospital for Louisiana State University, Tulane University, and other area medical schools.
However, Appropriations chairman Jim Fannin, a Democrat from Jonesboro, said he was unwilling to give the go-ahead until a final business plan being developed by Kaufman Hall & Associates is complete.
A preliminary business plan for the proposed replacement for hurricane-damaged Charity Hospital was developed in 2010 by Verite Healthcare. That study said the facility would need up to $100 million of state support because revenues would not be sufficient.
Fannin said he would not support moving ahead with construction until a final plan is presented to the state Legislature.
“We’ve been talking about this hospital project since 2006,” Fannin said. “To not have a business plan after four years is ridiculous. We have had a lot of motion and not much action.”
Bobby Yarborough, chairman of the University Medical Center governing board that would finance and operate the hospital, promised Fannin that the Kaufman Hall report would be ready at the end of May.
Jones said current estimates that up to $400 million of hospital revenue bonds would be required may not be correct.
He said several of the structures on the proposed campus could be developed through public-private partnerships.
Jones noted that Entergy is interested in building and operating the central energy facility for the complex, and partners could be found to build several parking garages on the site.
Jones said the funds currently available include $474.8 million in insurance payments and reimbursements from the Federal Emergency Management Agency for flood and storm damage to Charity Hospital, $220 million of general obligation bonds approved by the Legislature in 2006, and $75 million of state capital outlay funds.
The facilities director said the state expects another $130 million from FEMA for replacement of damaged equipment at Charity.
Jones said any bonds needed for the project would be issued by the UMC governing board and would not count against the state constitutional limit on net state tax-supported debt.
“The state will not guarantee that debt,” Jones told lawmakers. “That would push us above the debt limit and we cannot have that.”
Louisiana is prohibited from paying debt service that is more than 6% of annual revenues.
Louisiana has applied for bond insurance on the hospital debt from the federal Department of Housing and Urban Development, but Jones said the project might have to go ahead without that enhancement.
LSU officials have said it is unlikely that the hospital revenue bonds could be marketed without the HUD bond insurance.
Jones said the hospital would cost more to build if work does not get under way soon, and the HUD approval process could take 12 months.
“We want to get this project under way and completed as soon as possible,” he said. “There is a construction boom about to get going in New Orleans, and the cost of construction will go up.”
Jones said work on the Veterans Hospital that will be adjacent to the Louisiana State University facility will begin soon, and the New Orleans school district will embark on a massive rebuilding effort as well.