Voters hold the key to $2.3 billion hospital repair.

Voters hold the key to $2.3 billion hospital repair

Los Angeles County's ailing hospital network needs $2.3 billion of renovations and repair over the next few years, beginning in the next fiscal year, but the work will remain undone if voters do not approve general obligation bonds.

The bonds are necessary to do the work because the Department of Health Services' entire operating budget for the current fiscal year is $2.2 billion, 23 percent of the county's $10.2 billion entire budget.

"Basically, the whole package is predicated on general obligation bonds," said Gunnar Green, the health department's chief of capital planning. He noted his department currently only has a budget of $7 million for capital improvements.

Because of changes mandated by Proposition 13, increases in property taxes require a two-thirds majority for passage. But in this past election, voters approved bond measures only for items such as transportation proposals which have direct benefits for them.

According to the County Department of Health Services' recent improvement proposal approved by the board of supervisors, the lion's share of financing would come from issuing $2.1 billion in general obligation bonds. The bonds would have to be approved by voters on the November 1992 ballot.

An additional $19.7 million would be raised from bond anticipation notes, of which $4.1 million has already been approved by the Board of Supervisors. Those notes are a short-term financing method before the sale of long-term general obligation bonds.

The Board of Supervisors has not yet begun debate on the matter but it will have to work out the financing details before completing its proposed 1991-1992 fiscal budget in April.

The county's infrastructure repairs may have been neglected over the past 10 years, said Norman Murdoch, the county's director of economic planning, because "it has been in a financial squeeze due to limitations on property taxes and capital improvement projects have been deferred."

This year, the county is also facing a decline in sales tax revenues because of the recession.

Murdoch, however, said he advocates the sale of general obligation bonds during a recession because the construction work can stimulate the sluggish economy and the county can pay low interest rates on the bonds.

Los Angeles area construction companies that specialize in hospital projects such as Swinterton & Walberg Builders are following these deliberations closely.

"We are looking to bid on those projects, especially hospital building and medical office building projects in the $20 to $60 million range," said Alice M. Wilson, director of business development at Los Angeles-based Swinterton & Walberg Builders. She added "it's well well known in the industry that medical projects are a strong market both in the private and public sectors."

The Health Department's Chief Executive Officer Richard B. Dixon and Director Robert C. Gates wrote in their proposal to the Board of Supervisors that the poor conditions of county hospitals have reached "critical proportions" that need immediate remedies.

In their letter, Dixon and Gates wrote, "the plan will address many but not of all DHS' [Department of Health Services] captial needs. It is focused on our most urgent and well-defined projects." Dixon and Gates also explained in their proposal that the total financing requirements of all these projects would be approximately $1.7 billion in current dollars. However adjusted for inflation, the total final pay out is estimated to be $2.3 billion.

The Department of Health Services estimates that the $2.1 billion in bonds would translate into property tax increase of $47 on an average home with an assessed value of $250,000 during the first year of bonds and $705 over the 33-year life of the bonds.

However, Dixon and Gates argued in their letter that if voters do approve these bonds, the county will have to dip into the general fund to pay the interest on the bonds. The health services department plans to pay the interest using the property taxes, operational savings from having more efficient hospitals, State and Federal Medi-Cal funds and Medicare capital reimbursement.

The long-term capital plan calls for the replacement of the Los Angeles-County USC Medical Center at a cost of $1.18 billion and construction of a new hospital in the San Gabriel Valley.

In addition, the plan includes renovation and improvements at various other facilities including Harbor/UCLA, Martin Luther King Jr./Drew and Olive View Medical Centers, High Desert Hospital and other health and comprehensive health centers.