January 1, 2018 | Allen Van Driel, CEO
The New Year has dawned with bitter cold temperatures and great optimism. The bitter cold will, hopefully, be short-lived, while we look for the optimism to persist through the year.
A year ago at this time we were just in the beginning stages of site preparation for construction of the new Smith County Memorial Hospital. As 2018 dawned, the building is enclosed, paving of parking and driveways is mostly complete, and the interior of the building is progressing nicely. We have discussed the projected completion date extensively in recent weeks. Although we are not yet quite far enough along to commit to a completion date, we expect it to be late this summer. That is somewhat ahead of the original projection for completion, which should result in some cost savings to the project. Overall, the project is on the projected budget, although there have been some minor design changes that have added slightly to the original cost estimates. Most projects of this magnitude see some change orders during construction, and we do not believe that we have experienced anything out of the ordinary.
Two very positive developments have contributed to the project’s cost. The first was the receipt of a grant from the Kansas Department of Transportation for widening and construction of a turning lane on Highway 36 at the entrance to the new hospital. Prior to the beginning of construction, we submitted a request to KDOT for an entrance from the highway into the hospital. After several months, we were asked by KDOT to provide an updated traffic study to determine how the location of the hospital would affect traffic flow on the highway. Although the traffic study did not indicate that a turning lane was an absolute necessity, KDOT expressed a desire to have the highway widened and the turn lane constructed. We certainly agreed with this plan, although it was not within our budget. We worked with the civil engineering firm that had provided services for the hospital site to design the highway project. The designs and budget were submitted to KDOT and were approved. KDOT notified us that they not only approved of the design of the project, but would contribute the full amount of the construction budget, or approximately $620,000. We currently are working with Smith County officials to act as the fiscal agents for the project. We anticipate that a request for bids will be published in the coming weeks, and construction is expected to begin in early April. More details will be announced when the bids are final, but we do not anticipate the need for major disruption of traffic along Highway 36 during the project.
The second very positive development is the availability of funding from federal New Markets Tax Credits to add features to the building project that were not originally included. The New Markets Tax Credits, or NMTC, is a very complicated series of financial transactions whereby large investors purchase federal tax credits. Through a series of inter-related transactions, the result is expected to be the addition of more than $2.5 million in additional funding to our project. This funding will not add to the project indebtedness and, thus, will not result in any tax burden to the local taxpayers, but provides the addition of almost 10% of the project cost to us. The County Commissioners, the Public Building Commission Board, and the SCMH Board of Trustees have been working diligently for quite some time to finalize the transactions. We currently expect that the final closing documents will be signed in late January. This model has not previously been used for any hospital construction projects in Kansas, although it has been used in Nebraska and numerous other states. We are working very closely with the U.S. Department of Agriculture on this project (they, in fact, originally brought it to our attention), since they are providing the long-term financing of the building project. Needless to say, we are extremely excited about this addition to the project financing.
Finally, we have recently been advised that SunPorch of Smith County is in the final stages of securing financing to proceed with construction of the first phase of their senior living complex. As most of you have no doubt heard from their public presentations, the SunPorch plan is to construct skilled nursing facilities in small (10 resident) increments, using a new model of care, referred to as the Greenhouse model. Additionally, SunPorch plans to construct assisted living facilities in increments of about 12 residents each. Their first phase calls for construction of two of the 10 bed skilled nursing facilities and one of the 12 bed assisted living facilities. We look forward to commencement of construction as soon as financing and weather allow.
With these descriptions, I hope you can understand why there is so much excitement and optimism as we begin the New Year. We hope you share our optimism and look forward to continuing to share details with you in the coming weeks.