Eligible voters in the South Kenai Peninsula Hospital service area may have the opportunity to vote on a bond package for improvements to the South Peninsula Hospital in the upcoming regular borough election.

The Kenai Peninsula Borough Assembly introduced Ordinance 2024-12 at their last regular meeting on Tuesday, June 4, which if approved will ask SPH service area voters to decide on Oct. 1 whether to include a $38.5 million general obligation bond for South Peninsula Hospital improvements.

The bond would provide for the planning, designing, acquiring property for, renovating, constructing and equipping the SPH campus — capital improvements which are noted in the ordinance as “necessary” and “beneficial to the service area and KPB community.”

A public hearing on Ordinance 2024-12 will be held at the next assembly meeting on Tuesday, June 18.

According to a memorandum submitted to the assembly by Borough Purchasing and Contracting Director John Hedges, the issuance of bonds in an amount “not-to-exceed” $38.5 million is expected to have annual debt service requirements on approximately $2,605,000. Voter approval of the bonds, according to Ordinance 2024-12, would authorize an annual tax increase of approximately $67 for each $100,000 of assessed taxable property value in the service area, or an increase of 0.67 mills.

The increase is based on the total fiscal year 2025 assessed valuation, a 3.5% average rate of interest and a 20-year payback period, in order to retire the proposed principal bond debt, Hedges wrote in the memo.

“It’s currently anticipated that the bonds would be paid for with service area funds, and thus the anticipation of 0.67 mills to support that payment,” KPB Finance Director Brandi Harbaugh said during the June 4 finance committee meeting preceding the regular assembly meeting.

Harbaugh did also note that the mill rate associated with the hospital is currently set at 1 mill, but is forecasted to be 0.34 mills starting next year, ultimately not creating a large change for mill rates and taxes in the service area.

“It will stay at 0.34 for a couple of years … and then it will drop to 0.01. So there’ll be a substantial decline in the current mills rates associated with the hospital, and we see the end in sight for that, which frees up the potential for mill rates to be utilized to pay this debt and to remain in the same range of mill rates and tax for folks in the area,” she said.

Mayor Peter Micciche, who is sponsoring the ordinance, said that the proposed bond had “some realistic comprehensive planning.”

“If you remember (Central Peninsula Hospital), when they did expand and had a real plan that they put together and delivered and executed, they ended up essentially forgiving the mill rate to the folks in our service area,” he said. “So when you look at the plans that are coming along with this initial bond, I think you can see a similar situation in the future.”

The capital projects planned for improving the SPH campus are based on a master plan created through collaboration starting in 2022 between the borough, the service area, South Peninsula Hospital, Inc. and the City of Homer, according to the memo. The “prioritized” areas of focus include renovation and improvements to the existing facilities’ aging and dilapidated infrastructure; consolidation of services currently located off hospital campus, allowing for more effective operations and higher quality of service; site and parking improvements; campus expansion to allow for improved hospital access; emergency power plant replacement and improvements; and “other capital improvements identified in the hospital master plan,” Hedges wrote.

“Completion of the project is expected to result in expansion of services, lower operating and maintenance costs for the hospital addition (and) reducing energy consumption,” the memo states.

Micciche said that the proposed bond amount is “fit for purpose.”

“Depending on how you look at $38 million, in some contexts it’s a lot of money, and in some contexts it isn’t,” he said. “$38 million is fit for purpose … it’s designed for growth, versus a less comprehensive approach.”

More information about Ordinance 2024-12 is available on the borough website at kpb.legistar.com.