West Maui hospital construction stalled by tax reform bills

The West Maui Hospital and Medical Center project is stalled again.

This time, it’s because congressional tax reform legislation is threatening tax-exempt private activity bonds and cutbacks in Medicare reimbursements, said Brian Hoyle, president of Newport Hospital Corp., which is developing the West Maui facility.

On-site grading for the project began in August 2016 and was completed in June, along with most of the underground infrastructure. Work included installing water and sewer systems, electrical conduits and a drainage system.

The project financing is being held up because of the “ongoing difficulty” with “what’s going on in Washington, D.C.,” he said Wednesday.

The municipal bonds had been the planned financing vehicle to generate a loan of more than $80 million needed to pay for construction of the long-awaited, acute-care medical facility on 15 acres in Kaanapali.

The House version of the tax reform act pending in Congress eliminates private activity bonds, while the Senate version of the measure restores it, Hoyle said. The House approved its version by a vote of 227 to 205. The Senate has yet to vote on its plan.

The bills, if approved, would head to a conference committee where lawmakers would try to come up with a compromise version, he said.

House Democrats were united against the tax reform measure backed by Republicans, Hoyle said. Thirteen House Republicans also voted against the legislation.

While Republicans have a substantial majority in the House, they have only a 52-48 edge in the Senate, he noted.

While the lack of tax-exempt municipal bonds in the House version would be a roadblock for project financing, another problem with tax reform legislation is proposed cutbacks to Medicare reimbursements for critical access hospitals, a measure that would have far-reaching impacts on hospitals in Hawaii and nationally, he said.

The proposed tax reform legislation is “having a dramatic negative effect on any new medical facility,” Hoyle said, especially when most are financed by private activity bonds.

Passage of the legislation “would be a devastating blow to our industry,” he said.

“We’re waiting to see what Congress does,” he said. “All of the health care community does not like this bill. It’s a very bad bill for the state of Hawaii.”

Hawaii’s Democratic contingent in Congress strongly opposes the Republican-backed tax reform bill, he said.

A check of Maui County building permits shows there are three pending for the West Maui hospital.

One of those is for the hospital itself, Hoyle said, while the two others are for a skilled nursing facility and an assisted nursing facility.

Without the hospital being constructed, it would be “almost impossible” to build the other two facilities, he said.

While a private activity bond is the best option to build the hospital, “we have other options” to get financing, he said, although those would take longer to obtain.

Hoyle expressed optimism. “We are persistent. We will prevail,” he said. “This is a roadblock.”

“We need resolution at the Washington, D.C., level before we can move forward,” he said.

The state granted a certificate of need for the West Maui hospital in 2009. The state Legislature has granted the project a $50 million special purpose revenue bond for construction.

When completed, the 25-bed, full-service hospital in Kaanapali will include a 24-hour emergency room, three operating rooms, a 40-bed skilled nursing facility and a 40-unit assisted-living facility. Other features include two medical office buildings and a 40-bed, drug-and-alcohol rehabilitation facility.

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