It’s fair to say that Matt Rees, CEO of the Southern Humboldt Community Healthcare District, is moving fast with his push to have the district build a new hospital on a 2.9-acre property immediately west of Garberville that’s now owned by College of the Redwoods.
After all, he’s only been on the job three months.
But it turns out that when it comes to hospital construction projects, Rees is something of an old hand.
As CEO of Pershing General Hospital in Lovelock, Nev., from 2003 to 2010, Rees oversaw the construction of a more than 9,000-square-foot facility that housed a clinic, a retail pharmacy, spaces for physical therapy and a business office.
“We obtained the financing for it, planned it and did the construction,” Rees recalled last week, explaining that the job was made possible by a loan from the U.S. Department of Agriculture.
At Mayers Memorial Hospital in Fall River Mills, Calif., where he ran the show from 2010 to 2015, Rees made possible an ongoing $26 million expansion effort by obtaining just this past August another USDA loan — this one for a 40,000-square-foot facility that will replace the hospital’s existing emergency room, radiology and laboratory services.
“I had done all the work on it,” he said, referring to the loan.
One thing these experiences taught Rees was that USDA is a good place for rural hospital districts to turn to when it comes to seeking financing for construction projects.
“They’ve got money set aside for [rural] health care facilities,” Rees explained. “The full amount has not been used many years in the past.”
A second is that now is a good time to get a USDA loan.
“The interest rates with a USDA loan are currently 2.875 percent, so they’re extremely low. When I first started to work with USDA [on loans], the rate was 4.25 percent,” Rees related, adding that that was five years ago.
A third is that when it comes to construction projects, the sooner you get going, the better.
At Fall River Mills, Rees said one of the things that was included in the budget for the new facility expansion was an inflation factor of $1 million per year.
Why $1 million? Because what with the time it takes to gain the necessary approvals from the state, along with the advent of new construction codes and other requirements, that’s roughly how much that gets added per year to a project’s total cost.
As an example, Rees said that over a period of just a few years “building codes and state requirements for electrical [systems] increased costs by 25 percent” on the Fall River Mills project.
“As you wait longer to build, there are more codes and regs that get put in. If we wait and build a new hospital in five to eight years, then it will cost millions more.”
Which bring up another reason why Rees is in something of a hurry. He’s counting on voters approving a parcel tax increase beyond the current $125 per parcel to help finance the building of a new hospital — perhaps to $155 per parcel or slightly more.
But that’s assuming the district and CR can come to terms. If CR decides it doesn’t want to sell — the district has made an offer of $350,000 — the project won’t happen at all, at least not in that location.
A delay in getting started increases the chances that interest rates could go up. In which case the parcel tax increase would need to be greater — perhaps up to $250 per parcel, Rees said, if interest rates on USDA loans were to return to the 4.25 percent level.
“If interest rates were to go up to 6 to 8 percent, which has been [the case] in the past, then it could be $300,” he added.
So in pushing hard now, Rees emphasized: “I’m trying to look out for the district and the taxpayers.”
In terms of a price tag for a new hospital, Rees is estimating $35 million, although he said that’s very rough.
A $17,000 planning study to be performed by a Santa Rosa architectural firm that the district’s hospital board approved last week should provide greater clarity.
“That will tell us about what square footage we would need” in a new facility, Rees explained. That, in turn, will make it possible to estimate with some precision the project’s cost and the size of the parcel tax increase that will be needed.
“In the next 90 days, we should have a good idea [about the parcel tax],” Rees predicted.
Rees said that when he first took over as CEO, “it was not the plan” that building a new hospital would be one of the first projects he would undertake. But it didn’t take him long to realize that the alternative — upgrading the district’s existing facility, Jerold Phelps Community Hospital, so that it meets state seismic standards slated to take effect in 2030 — wasn’t going to be feasible. Or worth it.
Among other things, he said the location — the hospital is tucked into a Garberville neighborhood — is less than ideal. “The location is inefficient. There’s no parking,” he pointed out.
The building itself, which is decidedly on the small side, is also “inefficient,” he added.
When he learned of the CR property, situated on Sprowel Creek Road alongside U.S. Highway 101, he immediately saw advantages — such as easy access for ambulances and sufficient room behind the single structure on the site, the Redwood Playhouse, for building a new hospital.
It was enough, obviously, to convince him to take action.
“I realized that we needed to move on this now so that the cost to the healthcare district and to taxpayers would be less in the long run and the short run,” he said.
One person impressed by Rees’s boldness is hospital board member Gary Wellborn.
“I’m very pleased,” Wellborn said last week. “Matt’s a doer.”