Voters will decide Nov. 2 whether to increase a countywide sales tax by 1⁄4 of a cent to go toward a new Allen County Hospital.
Members of the Allen County Healthcare Committee address questions about the issue.
Recap of how a new hospital would be paid for:
Q: Annual payments on a $30 million financing package will take lots of money — what are the sources of repayment for the $25 million to construct the hospital and the $5 million needed to provide operating money once HCA no longer operates the hospital?
A: The proposed new Allen County Hospital project has three distinct sources of funding for the financing package. The last three days we have discussed each one. Friday, in Part 3, the sales tax component was explored. The day before that, we discussed Medicare reimbursement and before that profits, in Parts 1 and 2.
In Part 1 it was estimated that an annual profit of $1.5 million per year, based upon the average of the last four years, would be available to retire debt.
In Part 2 on the Medicare subsidy for the construction of critical access hospitals, we learned that about $767,394 would be reimbursed annually by Medicare based on 50 percent of the cost of a 30-year bond.
The law provides that Medicare will pay a percentage of the cost of retiring construction debt equal to the percentage of hospital use by Medicare patients, based on billing for those patients. Assuming Medi-care patients account for 50 percent of Allen County Hospital’s billings, a conservative estimate, then 50 percent of the bond and interest payments on the 30-year issue will be paid by Medicare.
Finally, in Part 3, sales tax revenues of $750,000 for the first 10 years of the financing are assumed, with the expectation that after that they would not be necessary.
The sum of these three income items is $3,017,394 annually for the first 10 years. We learned in the previous three articles that to amortize $25 million in Public Building Commission Bonds and a $5 million bank loan the annual payments required for the first 10 years would be $2,155,972 per year.
When you divide revenue by 30, the coverage percentage is 140 percent — which is banker talk for 40 percent more than is needed.
After 10 years the bank loan of $5 million is paid off and the $631,894 used to make that payment is no longer needed. Required debt service funding drops to $1,534,788 in year 11 on the 30-year bonds. The sales tax revenue would no longer be necessary. Profits and Medicare construction subsidies would amount to $2,267,394 or 48 percent more than needed to retire the bonds.
To sum up, the money available to pay for the hospital and provide $5 million in operating capital is clearly available — and the only tax required will be a quarter-cent sales tax — that’s a quarter for every $100 spent — which should be necessary only for 10 years.
Only a few short weeks remain before the election. If you would like to help our voter information effort, write to “Yes Allen County Healthcare,” at A.C.B., Inc, 16 W. Jackson, Iola, KS 66749 or contact the Thrive Allen County office at 365-8128.
