Quick Take:
Wednesday evening, the board of the Pajaro Valley Health Care District heard a presentation on the possibility of buying the real estate Watsonville Community Hospital sits on through a future bond measure. Currently, the district pays $250,000 per month in rent for the facility, and it is looking for ways to save money long-term.
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When the previous owners of Watsonville Community Hospital sold it to the Pajaro Valley Health Care District, the sale didn’t include the land the hospital sits on and the hospital building itself.
The district spent more than $65 million to buy the hospital’s assets. Both its building and the land it sits on are both owned by Alabama-based investment firm, Medical Properties Trust. Currently, the hospital leases the building from the investment firm for $250,000 a month, according to board documents.
On Wednesday evening during its regular meeting, the Pajaro Valley Health Care District board started discussing a potential 2024 ballot measure that would enable it to purchase the land and the building from Medical Properties Trust. The meeting was open to the public.
Board members also talked about establishing a property tax to support the hospital’s operations.
Financial advisor Jon Isom of Isom Advisors made the presentation to the board on the possible tax and bond measure.
Watsonville Community Hospital declared Chapter 11 bankruptcy in December 2021. Following the creation of the Pajaro Valley Health Care District by legislators including state Sen. John Laird, a community campaign and a state donation raised over $65 million to purchase the hospital. Following two decades of private ownership, the hospital became public Sept. 1.
Efficiency and cutting costs have been a goal since public ownership of the hospital was first eyed. Even prior to the transfer of ownership, hospital’s leaders began working on a business plan to get the hospital out of a cycle of $20 million in annual losses. Wednesday’s consideration of land and building purchase is an additional effort by hospital leaders to raise funds and cut on expenses. The agenda item was only informational and didn’t include a potential action by board members.
During his presentation, Isom described his firm’s history of bond campaigns, its research to understand the probability of a successful bond measure for the district as well as the suggested timeline to put a bond measure before the public.
Based on the firm’s research, Isom said the area’s voter-turnout history has varied from a low of 29% in June 2018 to a high of 73% in November 2020. It estimated that March 2024 turnout could be 45% while November 2024 turnout would be 75% — projections that will help the board decide not only whether or not to pursue the bond, but also for which election.
The board didn’t take any action Wednesday night regarding pursuing a bond, but will instead vote at its May meeting on whether to explore pursuing a bond measure. In that scenario, the district would prepare and conduct surveys and do outreach on a proposed measure before eventually adopting a resolution in November calling for a bond measure to appear on the March 5 primary ballot. The district could also decide to put the measure on the November 2024 general election ballot, or not pursue a measure in the near future.
Board members discussed what a survey would look like, how to draft a successful bond measure and the benefit of owning the hospital building. The district has the option to purchase the land and building for $40 million — compared to its current annual lease payment of over $3 million.
“There’s no downside from my perspective on purchasing the property,” said interim hospital CEO Matko Vranjes.
District consultant Cecilia Montalvo said compared to other health care districts that were created through the approval of a district’s voters, who at the same time approve a tax to support the district’s operations, the Pajaro Valley Health Care District was created through legislation.
“I think that we have such a unique situation here, having this district created by legislation and the legislature was able to create this district, but the legislature does not tax the people,” she said. “A tax on the people requires a vote of the people — and so we were pretty unique to have to go back after the fact and say that we need that money.”
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FOR THE RECORD: This story has been updated to reflect the news of Wednesday’s meeting.
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