As a former two-term AVH board member and a member and later the chairman of the AVH Finance Committee, I feel the need to comment regarding the build-out of the new AVH facility.
About a week ago, I attended a meeting with AVH’s CEO, CFO and board president. They wanted to present their side of an argument that has been festering regarding the scale and cost of the remodel. I want to present some basic information to the public and also my concerns.
I have to admit that they were both prepared and convincing on many points. Mr. Ressler, the CEO, seems to be a tremendous asset to the management of the hospital, and I feel certain that he will be sorely missed. I walked into our meeting feeling, as I did 12 years ago, that the ER and the operating suites were in sore need of remodeling to get them into the 21st century. During my board tenure, the staff needed more working space. Some were crammed into what amounted to closets. Those three items seemed to be the most pressing needs back then and I suggest that they still are.
At the meeting, I was told that the ER, by far the neediest part of the hospital, could not be attended to first. I still don’t understand why. Somehow, all of the first two phases had to be attended to first. If I were still on the board, my order to the architect/construction team would have been to “get the ER done first.” The ER and the operating suites needed to be attended to early on.
The past priorities remain and construction can’t be undone. I’m sorry to burden you with this level of detail but there is no other way to paint the picture that needs painting. My fears are purely financial. They are as follows: Per the AVH end of 2012 profit & loss statement and balance sheet, there is about $3.4 million in long term debt, $11.8 million in construction payable which one would assume will end up as long term debt, and $44.5 million in general obligation bonds. That totals $59.7 million in likely debt. AVH, to their credit, has been paying both principal and interest on their major debt, which I believe has been reduced from about $50 million to the end-of year amount of $44.5 million. That is wonderful.
The remaining phases, if I’m not mistaken, will cost $44 million. Per my meeting with AVH management, this money is to be obtained through philanthropy. I have fears that, given the economy and its impacts on all of us, this may not happen. AVH people are great at this kind of project, but they are not miracle workers. If we are saddled with another $44 million of debt, or even half of that amount, we could be in dire straights. If the $11.8 million and only half of the $44 million were added to the current bonded debt, we would be looking at $81.7 million in bonds to be paid. As mentioned earlier, these numbers are as of last calendar year end. Last year end, total gain at the calendar year end of $15 million per the AVH Profit and Loss statement.
Could we face $82 million in bond debt with a $15 million annual gain? When the later phases are complete, will the bond interest rate be as low as it is now or higher as the economy improves? Will the revenue of AVH remain at the level it is now? Are we ready to gamble the hospital’s future on unknowns like this?
I was told by AVH management that if philanthropy did not materialize, construction would stop. Is that realistic? Could we stop midstream and live with the results?
I know I have thrown a lot on the table, but I would like the AVH administration to answer these questions and put my mind and the public’s concerns at ease. If they do, I will be a wholehearted supporter of the project as it is now defined. I would be happy to get assurances that the $44 million in philanthropy were firmly and specifically committed before the construction and before city approvals are given. I think that $58 million in bond debt could be managed but almost $82 million could be our undoing.