EDA propels bond issue for new hospital project forward

FRONT ROYAL – The morning of May 25, the Front Royal-Warren County Economic Development Authority Board of Directors began the process of local approval of a $60-million Industrial Revenue Bond issue to Warren Memorial Hospital (WMH) for construction of its new facility off Leach Run Parkway. Total cost of the project encompassing a 175,000 square feet, including a 36-bed, private room hospital and medical office building on the approximate 150-acre campus is projected at $97.7 million.

Only three people spoke at the 8 a.m. EDA board public hearing – Valley Health Chief Financial Officer Pete Gallagher; Mike Graff of McGuire-Woods, who represent Valley Health in the bond transaction; and Sands Anderson bond counsel Dan Siegel, who represents the EDA in the matter. Following the approximate 10-minute public hearing, on a motion by William Biggs, seconded by Gray Blanton, the EDA board voted 6-0 (Baker absent) to adopt a resolution endorsing the bond issue.

Similar actions will be required by the Warren County Board of Supervisors and Front Royal Town Council.

Prior to the public hearing EDA board members Ron Llewellyn and Tom Pattison acknowledged appointments to the WMH Foundation Board, but noted no financial conflict that would force them to recuse themselves from the discussion or vote.

Two things that were stressed at the public hearing and in written summaries of the bond process was that by endorsing the bond issue neither of the two local municipal governments, nor their EDA are accepting any financial obligation for repayment of the bond; nor would they incur any penalty were the bond not to be issued “for any reason”.

The hospital as borrower will also pay a fee of $240,000 to the EDA upon issuance of the bond, as well as cover any EDA costs associated to the bond issue.

Pete Gallagher, CFO Valley Health, left, and Mike Graff of McGuire Woods made the case for a municipally-supported bond issue to help finance the new hospital construction.

And your signature here – Siegel gets EDA Board Chairman Greg Drescher’s ‘John Hancock’ on some post-vote paperwork.

Amongst the myriad paperwork accompanying the bond proposal presented to the EDA, as it will be to the town and county’s elected boards, were justifications for such an Industrial Revenue Bond issue through the town-county EDA. Those justifications revolve around adding jobs and other direct or indirect economic benefits to the community.

The hospital’s bond issue application to the EDA cites an increase in both the number of jobs and wages tied to the new Valley Health facility. It predicts 501.7 full-time jobs in 2021, the projected first year the new WMH will be open, compared to 313.8 full-time jobs in 2016.

As for salaries, an average hospital-associated wage of $76,623 is projected for 2021, compared to $62,443 in 2016.
One benefit that will not be realized is any direct increase in tax revenues from the new hospital. It is noted that as a “charitable, 501 © 3 organization” WMH is tax exempt. However, other benefits of an economic, social and “other non-monetary” nature to the community are claimed.

“A new (hospital) facility will be alluring as new businesses are recruited to the area,” the application states, adding that, “In most new hospital settings, adjacent economic development is typically triggered, increasing the vitality of the area.”

It was also stated that the presence of a modern, new hospital would make the community more attractive “as individuals and families make decisions regarding locating their residences.”
Something tells us some of these “indirect benefit” contentions may be contested at coming town and county government public hearings on the bond issues.

Citizens rallying around “Birth Local”, a group formed in reaction to Valley Health’s decision to exclude an obstetrics and birthing unit in the plans for the new Warren Memorial Hospital, have repeatedly called for town or county officials to delay zoning or other permitting approvals for the hospital until some compromise on maintaining full maternity and birthing services locally is reached.

Many of those “Birth Local” supporters speaking to the issue have asserted a negative impact on individuals and businesses looking to relocate due to the absence of a maternity unit in a new county hospital facility.

Valley Health and hospital officials have countered that WMH’s maternity numbers – estimated at about 330 per year or less than one a day – do not currently support inclusion of that service here. They note that many county women already decide to have their children delivered elsewhere, at either Valley Health’s Winchester Medical Center or other facilities to the east. Valley Health’s plan is to maintain pre-natal services locally and funnel births to Winchester Medical Center.

Valley Health has also acknowledged there is space at the new hospital campus to add a maternity unit in the future when the numbers justify it.

Following the urging of both town and county officials to continue a good-faith discussion with “Birth Local” on a local maternity services compromise, Valley Health officials have said they were open to such ongoing discussion. We imagine there might be an update on the status of that promise shortly as the town council and county board hold their public hearings on support of the Industrial Revenue Bond for the new Warren Memorial Hospital project.