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Build a new GMH using smart financing scheme, and keep the politics at bay

By Troy Torres

There's a rush to build a new Guam Memorial Hospital. For those with the purest intentions, a new hospital is long overdue. For former Gov. Eddie Calvo, it was a failed attempt to cap his legacy. For current Gov. Lou Leon Guerrero, there is a political urgency that belies the smart use of public resources. And for her opponents, this either is a chance to take credit, or to rain on her parade.

Ms. Leon Guerrero has previously committed about half of the direct aid funding to Guam from the national government under the Biden stimulus package to the construction of a new hospital. According to her public statements, she's going to put a $300 million down payment on a hospital no one really knows will cost what.

There is a benchmark, though. A couple years ago the U.S. Army Corps of Engineers, in a report about the condition of GMH, estimated a new hospital could cost $743 million.

Congressman Michael San Nicolas, who recently was in Hawaii for a series of meetings, met with the U.S. ACE district commander in Honolulu, Lt. Col. Eric Marshall about, among other things, the details of its GMH report.

"We also discussed Army Corps ability to do detailed planning and costing of our desire to build a healthcare facility, so that we can fully understand the different cost options between IBC and UFC building standards, what the costs to build with 10/20/30 year growth projections look like, what the costs will be to add modalities like neurosurgery and complex cardiology capabilities, and what the full price points will be from soup to nuts whether value engineered to premium build," Mr. San Nicolas wrote on July 23, immediately following his meeting.

He is coordinating to have Lt. Col. Marshall visit Guam and her senators, who currently are considering an administration-backed bill authorizing development of a new GMH, Bill No. 121 by Sen. Joe San Agustin.

"We are coordinating with Commander Marshall to have him tour Guam shortly and brief local lawmakers on the GMH detail and how Army Corps can help us to make sure we have all of the options on the table, so that we do not rush into a healthcare facility project that does not meet certain needs and specifications or our projected growth into the future," Mr. San Nicolas said.

Bill No. 121 will authorize the design, build, finance, lease, transfer, and maintenance of the new GMH with an up-to-$35 million annual payment to the developer. According to the finance scheme, GovGuam would pay a down payment of $300 million, then every year for 30 years pay $35 million in lease payments to the developer. During that 30 year period, the developer would be responsible for the maintenance and insurance of the hospital facility. Then, so long as GovGuam continues paying the $35 million, the ownership of the hospital will be turned over to GovGuam after the 30 year period.

The funding source for the first year of the lease will be the reimbursement GovGuam is set to receive from the federal government for paying the federal earned income credit to the working poor on island. Every year after that, the Legislature authorizes the governor to make the payments from the "General Fund," which is the same fund to which EITC reimbursements will be posted. In the updated version of Bill No. 121, the Legislature authorizes the governor to use other federal fund sources for the lease payments, or to simply take out a bond or commit GovGuam to another financing scheme.

The math already has become cumbersome for at least one senator. Republican Telo Taitague already has opposed the bill, stating the annual lease payments will be $70 million. Unless Ms. Taitague failed to factor in the $300 million down payment from the Biden stimulus funds, she either must believe this new facility will cost more than $1 billion, or the calculator in her Michael Kors purse is misnumbered.

The discussion does raise a valid point, though. Is the Legislature acting prudently in the committal of the new EIC revenue stream without first considering several financing opportunities? For instance, Congress is preparing to pass the largest infrastructure funding package, which could include funding for the new hospital, or even the associated public health and behavioral health centers also authorized under Bill No. 121. The other consideration is the money GovGuam could make from the existing hospital property once the new hospital is operational. Can that potential revenue source help to offset lease payments?

And though the Army Corps benchmark of $743 million, less the $300 million down payment is what drives the estimate of a $35 million annual lease payment at around a five percent interest rate, there is a need to figure out exactly what we want to build, and how much it will cost to build it.

Bill No. 121, if passed, will create the official mechanism to fund and get a new hospital designed. That process alone will take longer than a year, based on hospital construction best practices and local experience with the design of Guam Regional Medical City. If you've either read the U.S. ACE report on the condition of GMH, or you've been a patient there in the last 10 years, then you know the urgency of the matter. It isn't debatable we need a new hospital. Bill No. 121 will fund a design, and get things going in the right direction.

If senators want to improve this bill, they may consider honing in on the revenue pledge, and opening discussion on smart funding sources.

These are details that can be worked out in this bill. Senators have time to listen to Commander Marshall, when he visits Guam this month. Who knows? Maybe his team has some answers to keep costs down, or to finance this undertaking differently.

If there is a sincere effort from lawmakers and the governor to build this hospital, and use the people's resources the smart way, then Bill No. 121 - with changes - can be part of the answer. Ms. Taitague's misgivings about the San Agustin bill are out of whack, disingenuous, and representative of everything wrong in politics. We need a new GMH, no matter what the politics are.


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