Watsonville Community Hospital governing board to vote on issuing $60 million in bonds

Following the successful passing of Watsonville Community Hospital’s $116 million bond measure in the March election, hospital leaders have been moving forward with complicated, behind-the-scenes work. 

Tony Nuñez, chair of the Pajaro Valley Health Care District’s governing board, said the next step in that process is a public hearing and the board’s vote June 26 on a resolution authorizing the board to issue up to $60 million in bonds – the first batch of the total it plans to use. 

“It’s another step in a never-ending hurdle race,” said Nuñez. “You want to slow down a little bit, but you realize you’re still running the race. You need to be running at 100% in order to keep going and clear the other hurdle.”

Nuñez said he thinks the first use of funds should go toward the purchase of the hospital building and the land it sits on, which would cost about $40 million. 

The health care district holds the first right of refusal to buy the hospital building and land from its current owner, Alabama-based investment firm Medical Properties Trust. The deadline for that option ends Dec. 31, 2025, so the district needs to have its financing completed for purchase before then. 

Nuñez said the board decided on the $60 million amount for this first batch with the idea of the purchase of the building and land in mind. 

“[The $60 million amount] was to complete the purchase of the hospital property, but then also to have some initial capital for us to do some of the [renovation] projects,” he said. 

Nuñez said it’s too soon and there are too many factors to know when the money will be available to the hospital if the resolution is passed next Wednesday, so it wants to move expeditiously. In addition to the property purchase, the district aims to get started on funding its list of infrastructure improvements. 

Hospital leaders plan to use the rest of bond funding for a variety of projects including purchasing a new CT scanner, doubling the size of its emergency department, renovating heating, ventilating and air conditioning systems and the roof, as outlined to voters in March. 

The bond measure’s approval comes as the hospital has taken significant steps toward recovery after its previous owners declared bankruptcy in December 2021. Following a community-led campaign and support from legislators like state Sen. John Laird, the Pajaro Valley Health Care District was created and it purchased the hospital out of bankruptcy in August 2022. 

In December, hospital CEO Stephen Gray told Lookout the hospital had managed to reduce losses in 2023 by about 70 to 80% from 2022’s estimated $30 million in losses. Despite the significant reduction, the hospital is still pushing to generate enough revenue to cover its high costs due to low reimbursement rates from government insurers and low revenue from privately insured patients. 

Hospital leaders say with the bond funding, they can continue to get the hospital out of financial trouble. By purchasing the building and land the hospital sits on, the hospital would no longer spend $3 million annually in lease payments, and could reinvest that money into the hospital’s operations and staff. By making the infrastructure improvements, like purchasing a new CT scanner and doubling the emergency-department size, the hospital could provide a higher quality of care to patients and bring in more revenue. 

The June 26 public hearing starts at 5:15 p.m. in the Kathleen King Community Room, located at 85 Nielson St. in Watsonville. District officials say community members are welcome at the meeting to discuss their views about the issuance of the bonds and how the funds should be used, or they can submit written comments before the meeting. Written comments can be mailed to: Clerk of the Board, Pajaro Valley Health Care District, 75 Nielson St., Watsonville 95076.

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