The Elk Grove City Council on Aug. 21 unanimously approved the issuance of $900 million in tax-exempt revenue bonds for California Northstate University’s (CNU) proposed hospital in the Stonelake neighborhood.
These bonds would be issued by the California Public Finance Authority, not the city of Elk Grove. The city will not be responsible for issuance or repayment of the bond.
Council Member Darren Suen, who represents the area where the hospital would be built, was absent from this special council meeting, which was a legally required Tax Equity and Fiscal Responsibility Act public hearing.
If built, the hospital would be a 250-bed facility located adjacent to CNU’s current campus on West Taron Drive.
Although CNU’s current plan is for the hospital to be constructed by 2022, the project has not received the city’s approval and the property would need to be rezoned.
Dr. Alvin Cheung, the university’s CEO and president, addressed the importance for CNU to obtain tax-exempt revenue bonds.
“The tax exempt bond will reduce the cost of construction by reducing the interest rate towards the financing of the construction,” he said. “The magnitude of that savings or cost reduction is at around $27 million per year in interest expense of the bond – the difference between taxable and non-taxable.”
During this more than two-hour hearing regarding the CNU hospital project, various speakers shared their feelings on the project and the issue of its funding.
Among those speakers were construction trade representatives and members of Neighbors Ensuring Sincere Transparency (NEST), a community group that continuously spoke against placing a hospital in the Stonelake neighborhood.
One speaker delivered NEST’s official statement, in which the group requested that the council disapprove the resolution for the approval of the issuance of the bonds.
“Apparently, the developers weren’t able to raise enough capital in the private market to proceed with the project as a for-profit hospital,” she said. “This should give the city serious pause.”
Another speaker, who identified himself as a Stonelake resident, shared why he opposes the hospital.
“I do want a hospital in Elk Grove, one that has a track record of success, one that exhibits financial savvy and ability, one that won’t destroy existing small businesses, one that isn’t on a floodplain, right next to a national wildlife refuge, one that we can trust,” he said. “California Northstate University has not earned that trust.”
A speaker, who mentioned that he served on a health and welfare trust board, explained why he is in favor of the proposed CNU hospital project.
“The infrastructure of this community would put a positive note on having a hospital of this class, not only in its capability to serve in trauma, but also in its ability to train the doctors, nurses, medical staff, pharmacology staff that this community so badly needs,” he said.
Jennifer Ring, director of business development for Methodist Hospital, the local affiliate with Dignity Health, used the public comment period to deliver a message regarding Dignity Health’s approved hospital project in Elk Grove.
“I’m here today to affirm our commitment to build a hospital here in Elk Grove,” she said. “Our current plan is to build that hospital on our 28-acre site, where we currently render outpatient surgical services and have several physician offices on the corner of Wymark (Drive) and Elk Grove Boulevard. We intend to build a hospital that will be at least 100 beds, likely more.”
Ring added that Dignity Health, like CNU, also plans to operate a teaching hospital in Elk Grove.
Phyllis Balz, president of Methodist Hospital, told the council that Dignity Health is currently on pace to open the doors to its Elk Grove hospital in six to seven years.
Upon the request of Council Member Stephanie Nguyen, CNU spokesperson Brian Holloway spoke about the concerns of Stonelake Landing shopping center tenants that would be forced to relocate if the university’s hospital was built.
“For those tenants that would like to remain in the Stonelake shopping center, we have offered to relocate them at our expense, paying all expenses, architecture, construction, moving costs, and not raising their rent,” he said.
Holloway added that CNU has also identified possible locations where those tenants could relocate “that are equal in viability or improved.”
Hume responded to that comment.
“The good news is they’re on record now at this meeting of saying that you’ve got all of these things promised to you should you seek to take them up on that,” he said. “So, I would suggest that you take them up on that and hold them to account. And if they don’t perform, you come back and you let us know that they’re not being genuine.”
During the council’s deliberation on the bonds issue, Mayor Steve Ly emphasized that a positive vote on the resolution does not indebt the city to any kind of bond payback.
Ly called CNU’s bond approval request one way in which the university is moving forward.
“I think (approving the resolution) is fine, because we can discuss this when the project comes before us for approval,” he said.
Nguyen stressed that the council would not be approving the CNU hospital project, but would instead – by a council majority vote – be “approving for this to move forward for us to see if this is something that we want to approve or not.”
“I am in support of moving this forward, because I’d like to see this come to council sooner, rather than six or seven years later for us to make that decision,” she said. “I’d like to do this before any of you (business owners) decide to move out (of the site’s business spaces), because we don’t know where that’s going to go yet.”
Echoing Ly and Nguyen’s comments, Council Member Steve Detrick said that he viewed supporting the resolution as a way to determine whether the project is viable to proceed.
“If (CNU) can’t get funding, they’re not going to be able to move forward,” he said. “It doesn’t matter what they come forward with. Without the funding – whether it’s private funding or through their nonprofit – without either one of those, this project isn’t a go.”
Although he approved the resolution on funding for the proposed hospital, Hume noted that CNU has to clear “a lot of hurdles” to obtain the council’s approval on the project.
“When you have businesses here that are countering what you’re telling us what you’re doing to negotiate with (the shopping center’s) businesses, to act in good faith, that’s spending political capital,” he said. “Asking us to make what I consider to be an unorthodoxed-timed decision that doesn’t necessarily have repercussions to the city of Elk Grove or to the residents of Elk Grove is spending political capital.
“And so, you’ve got a lot of hurdles between you and project approvals. You better have a little bit of gas left in the tank when you get there.”