Floyd Valley Hospital planners can move forward with a low-interest loan application to help pay for about $15.8 million of the proposed hospital north addition.
The Le Mars City Council unanimously approved a resolution Tuesday endorsing the municipal hospital's application for U.S. Department of Agriculture (USDA) Rural Development dollars.
Floyd Valley Hospital (FVH) Administrator Mike Donlin said the council's approval will help hospital planners pursue a "key part" of the financing for the hospital north addition. Work on the addition could begin as soon as next spring.
"The interest rates are so favorable and the money appears to be available if we can get the application and the environmental studies and all those things done," Donlin said. "There's no rock solid guarantee that we'll get it done, but the action the city council took today got us a huge step closer."
The north addition will involve construction of a two-story addition with surgical operating rooms and administrative offices on the top floor and a new family medicine clinic on the lower level along with renovations in the existing hospital building.
The total estimated cost for the work is about $22.7 million, according to hospital planners.
That includes $16 million in construction costs, $2 million for medical equipment, $3 million to refinance existing debt to add it on the USDA loan and other miscellaneous fees associated with financing, according to earlier information from the hospital's director of financial services, Daryl Friedenbach.
Donlin told the council that design work for the north addition is ongoing.
While a timeline is not set in stone, Donlin said he anticipates the hospital might seek bids on the project in late winter.
A ground breaking may be held as soon as mid-spring 2013, he added.
Donlin said the planners don't know at this point how long construction will take, but he's estimating it will be about 18 months.
The city council approved endorsing the USDA loan application after a public hearing Tuesday during which no one from the public commented.
While the city of Le Mars will officially be the entity making the application to the USDA, the city will not be financially responsible for the loan, Donlin said.
"We have the legal opinion on record -- this does not incur debt on the city in any kind of way," he told the council. "This will be solely the hospital's project and the hospital's obligation to fulfill."
Hospital planners are aiming to submit the application by early next month.
If the USDA approves the low-interest loan in this fiscal year, which, for the USDA, ends Sept. 30, FVH would have a large portion of the north addition financing guaranteed at a low-interest rate, Donlin said
Recent USDA rural development loans have been approved with interest rates in the neighborhood 3.375 percent with terms for paying them back as long as 30 or 40 years, he said.
There could be other pieces of the financial plan for the project in the future, such as revenue bonds or construction financing, but those would be brought before the city council first, he noted.
If the application doesn't get to the USDA in time for approval this September, the hospital would have to wait for the next fiscal year's application process, Donlin said.
"With elections and all kind of other uncertainty in the world, that's why we're trying to move as quickly as we are," he explained.
If the USDA loan didn't materialize, the hospital could go through regular bonding channels, which would require paying more interest, Donlin said.
He told the council that, at present, hospital leaders were focusing on submitting the USDA application.
"It's a wonderful opportunity for a rural community to do something like this at their hospital," Donlin said. "We'll give it our best shot."