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WHY HAVEN’T WE STARTED YET? - Update From the CEO (October 2016)
I know most people in the community are anxiously awaiting visible signs of construction at the site of the new Smith County Memorial Hospital. I hear many questions about the project. “When will we break ground?” “Why haven’t they started working yet?” “Is there a problem?” “Have they hit a snag?” Allow me to take a few moments to update the status and answer some of your questions.
We, like many of you, had initially hoped that we would be ready to break ground and “move some dirt” this fall. However, for a variety of reasons, we have known since earlier this summer that the time line had been pushed back. This was partly because of the care we took in arranging the project financing through issuance of revenue bonds by the Public Building Commission, and obtaining commitment from the USDA for long-term financing of the project. It also was partly due to conditions in the construction industry. Like us, many other organizations (hospitals, schools, businesses) decided that the availability of record-low financing made it a good time to undertake construction projects. The result was that the architects and construction contractors have been inundated with projects competing for their time and talents. The method being used for the project calls for the construction management firm (Hutton Construction) to deliver a Guaranteed Maximum Price to us before construction work can begin. What this Guaranteed Maximum Price means is that based on our agreement regarding the building plans, Hutton will determine the price. After that GMP is delivered to us, any cost over-runs are the responsibility of the Construction Manager (unless they are a result of change orders we agree to). Once Hutton has delivered the GMP, they will begin issuing requests for bids for various portions of the building project. These include (but certainly will not be limited to) site preparation (dirt work), plumbing work (much of which will be installed below the concrete), preparation and pouring of the concrete slab, procurement and erection of the structural steel, installation of wall studs, sheetrock, ceilings, flooring, electrical components, and many, many other parts of the project.
At the present time, we expect the GMP to be delivered to us during the second half of November. With that time line, and following preparation of bid documents, requesting of bids, and hiring of some subcontractors, we will be ready to begin work. The current timeline calls for a groundbreaking in February, with initiation of serious construction work in March. The construction timeline allows for up to 18 months for actual construction, although that may change based on weather, availability of materials, availability of workers, and many other factors. So our present time line is to have construction completed during the third quarter of 2018.
For those who have heard (or maybe shared) the idea that there are problems with the project and it will not go forward, I want to reassure you that this is completely false. Construction funding in the form of revenue bonds have been sold, and funds are being drawn as needed to pay building expenses. At this point, those expenses are mostly architect fees and a few minor expenses necessary to validate the status of the plans (this includes geotechnical engineering, or soil boring services). The architects have spent hundreds of hours working on plans. Some of that time has been in Smith Center meeting with myself, with the Board, the Medical Staff, and with key staff members to assure that the plans are drawn the way we want them. In addition, much more of the architects’ time has been spent in their offices, drawing plans and specifications based on our discussions. So while we understand the anticipation, and perhaps anxiety, that people in the community are feeling, rest assured that the building project is moving forward at an appropriate pace. I’m sure the community will be even more excited when there are more visible signs that construction is underway. In the meantime, please enjoy the anticipation as we work to make sure the project is done right and on time. As always, if you have questions about the project, we invite you to submit them through our project website – www.scmhfuture.org.
Building Project Progresses - Update From the CEO (July 2016)
It seems like everywhere I go, people ask me “How’s the hospital building project coming along?” In the blog I wrote two months ago, I mentioned a lot of behind the scenes activity going on in relation to the hospital building project. We are excited becausealthough there is still not a lot of visible activity on the new site, there definitely have been important milestones reached this month.
One of those important milestones was closing the sale of the property for the new facility. The photo that accompanies this article shows the closingtransaction taking place. Kenton Weltmer and Bruce Hardacre, representing the Smith County Memorial Hospital Board of Trustees, and Gayle and Kristi Jones, the sellers of the property are shown with Karen Panter of Collier Abstract and Title on June 17. The site, as mentioned previously, is located south of Highway 36 and east of the current Orscheln building. This means it is directly east of the Smith Center High School.
Another milestone achieved this month involved financing for the building project. On June 29 the Smith County Public Building Commission issued revenue bonds to provide the construction financing for the project. Piper Jaffray & Company were the Bond Underwriters for the transaction. They were able to negotiate the terms of the arrangement so that we can draw funds from the available amount when we need them, rather than receiving the whole amount at once. The advantage of this arrangement is that we don’t pay interest on the money until we draw it from the available funds. This will save us a considerable amount of money over the term of construction.
The third milestone achieved this month was receiving notification from the US Department of Agriculture that our application for a Rural Development Loan was approved. This loan will provide long term financing for the project once construction is complete. I mentioned during the Town Hall meetings held earlier this year that part of our financing strategy is to use the USDA financing to provide long term financing (the term of the loan is 35 years) at a very low interest rate. The Public Building Commission and the Board of trustees will meet with USDA representatives next week to receive the letter of commitment for the loan. The extra good news that we received in conjunction with the notice of approval is that the USDA long term interest rate will drop again effective July 1. The unprecedented interest rate of 2.75% is the highest interest we will be required to pay for the loan. If the interest rate should happen to be lower than the 2.75% rate at the time construction is complete and USDA disburses funds, we will get that lower interest rate. But the rate cannot be higher than the current rate. I mentioned in my last blog that the decrease in interest rates since we did our financial projections would save us considerable money over the term of the loan. This further drop makes the savings greater.
The architects and construction manager are continuing to work on final designs and site plans for the building. When they are more final, we will share them. Stay tuned to this website for developments. As always, if you have specific questions about the project, you may feel free to submit them through the website as well.
Please enjoy a safe harvest season!
WHERE DO WE GO FROM HERE? - Update from the CEO (April 2016)
Last month we announced the results of the advisory referendum regarding the hospital building project. With results showing that 80% of the voters are in favor of the project, it seems to most folks like we should be making progress to get started. Hardly a day goes by, and absolutely not a week goes by, that we don't have someone ask what the next steps are and when we will begin to see visible signs of progress. So, here's a brief update as of the first week in April.
Shortly after the votes were counted, The County Commissioners, the Public Building Commission Board of Directors, and the Smith County Memorial Hospital Board of Trustees met to begin the legal process for the financing. Each Board passed a resolution that, taken together, will provide the legal basis for the financing. The PBC Board published the legal notices in the newspaper that are required for them to issue bonds. The three Boards met with a representative from Piper Jaffray, the company that will underwrite the bonds. Piper Jaffray is publishing, with our assistance, information about the building project for banks who might be interested in participating in the bond issuance. When that information is complete, the underwriters will request proposals for the bond issuance. The proposals they receive will be reviewed competitively, and an award will be made to the firm with the best proposal.
While the financing process is underway, several other things are in process simultaneously. The purchase of the land for the building project is being finalized. The boundaries of the property have been surveyed to provide a legal description for the recording of the sale. Meanwhile, the architect and the construction management firm have been working on schedules for completing building designs and construction timelines. These are not final yet, but significant discussion has been held. Discussions have begun with the Kansas Department of Transportation about the location of access roads to the property. Work was finalized by an independent auditing and accounting firm on projected financial statements in support of our loan application to the U.S. Department of Agriculture. This loan would provide long term, low interest rate financing for the project. The bonds that the PBC Board will issue will provide the short term financing for construction. Last week we received the welcome news from the USDA that the interest rate on their long term loans dropped, effective April 1, to 2.875%. This unprecedented rate, which is 3/8% below the rate when our loan projections were constructed, will save us approximately $2.5 million over the repayment term of the loan. So, while we hoped that we would have a commitment from the USDA by the end of March, the slight delay actually worked in our favor.
What does all of this mean? Is means that while you can't see visible signs of construction in progress yet, there is actually a lot of activity underway behind the scenes. All of this behind the scenes work is necessary to set the stage for us to actually begin construction. We hope by this time next month that we will know more details about bidding and construction schedules. As information becomes clear to us, we will certainly share it with the public. It is very clear that the public is interested in what is happening. As details develop, the best way to stay up to date is to follow our progress on this website.
That's where we are for now. If you have specific questions, feel free to ask in person, or you can submit them via this website as well.
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