A month ago, the $100 million jump in the cost to build El Camino Hospital’s new, seismically upgraded building shocked hospital officials. Today, the $450 million figure seems like a best-case scenario.
Ken King, El Camino’s vice president of facilities, laid out several contingency plans March 23 at a facilities board subcommittee meeting about how to fund the new hospital in light of rising construction costs, several of which require a second public bond measure.
Not only did the construction cost estimate for the new hospital leap $30 million higher this month, to $480 million, but El Camino cannot issue its $148 million in bonds because of an unresolved lawsuit. Self-represented attorney Aaron Katz sued the hospital a year ago because, as a Mountain View property owner but a resident of Saratoga, he was not eligible to vote on the November 2003, $148 million bond measure.
The entire case could take a year to resolve, said the hospital’s interim CEO Marla Gularte. Meanwhile, hospital construction costs throughout California continue to rise because all hospitals in the state must be seismically retrofitted by 2013 and there are not enough contractors to go around.
Unable to secure bonds until the Katz case is resolved, El Camino is stuck in a waiting game. King laid out various options and their implications, including scaling back the project to fit a smaller budget — an option he argued does not meet community needs for a hospital.
In an ideal scenario, King said, the case would end by May 1, allowing El Camino to keep its current construction bids and its estimated project cost of $480 million. But it will have no choice but to re-bid the project if the Katz lawsuit remains unresolved past early May, when the current bids expire.
If El Camino is forced to re-bid the project, the cost could rise to around $530 million, King said.
“It’s pretty tough out there for hospital projects,” said Joe Francini, a representative from El Camino’s contracting firm, Rudolph & Sletten. “I don’t think it’s going to get any better if we try to go back out [for new bids].”
Katz’s original case was thrown out on a technicality, not the merits of the case, and so far the hospital has heard nothing on his appeal. Gularte said at the meeting that the hospital is “currently moving down both paths” — to either deal with the suit in court or settle it out of court.
Though keeping the $480 million quote is the best-case scenario for the hospital, it is still not ideal. The project had originally been budgeted at $339 million, and even with $148 million in bonds, El Camino still falls short.
During the meeting, King brought up several ways to find more funding, including a second bond measure (which voters could see on the ballot as soon as this November), selling other properties, and spending its $46 million in cash reserves. The latter option would leave the hospital with a dangerously low margin of reserves, Gularte said.
“Get on with it,” was the resounding feedback from Lillian Hansen, Bud Ratts and Bob Grimm, the subcommittee’s three community members, who do not want to see the project stall for another year, nor do they want it scaled back.
The full hospital board of directors will most likely review the options at its next public meeting April 5.
E-mail Molly Tanenbaum at mtanenbaum@mv-voice.com
