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Comox-Strathcona still on track to pay down new hospital debt

Reserves for capital projects should increase over annual debt in 2023-24
Campbell River’s new hospital was one of two major projects for the North Island Hospitals Project. File photo/Campbell River Mirror

The administrative body that oversees local capital contributions for hospitals on the north part of the Island is raising surplus funds while paying off debt for the two new facilities over a 10-year-term.

Some, though, are suggesting the Comox Strathcona Regional Hospital District should consider paying down the debt early.

The CSRHD raises roughly $17 million each year through tax requisitions in the Comox Valley and Strathcona regional districts. At the most recent board meeting, staff provided the board, comprised of local government representatives from the two regions, with an update on the plan to pay down the debt on the two North Island Hospital campuses in Campbell River and Courtenay. Due to COVID-19 delays to meetings earlier this year, the news, along with an audit report, came a little later than expected.

“Typically, you would receive these in the spring,” corporate financial officer Myriah Foort told the board in September. “This is really wrapping up last year’s financial statements.”

She outlined how the regions were able to take advantage of strong reserve funding and low-interest rates to pay down more debt and also reduce the term of the debt, from 20 years to 10.

“It left us in a very good position,” she said.

At present, the term ends in 2028, with an interest rate set at 3.2 per cent. The leaves CSRHD with annual debt servicing of about $10.7 million. Of this, about $7.9 million covers debt principal with $2.9 million is for interest each year.

Of the annual tax requisition of $17 million, CSRHD transfers about $5 million into reserves, which could cover future capital projects. As Foort indicated, over the 10-year term, the amount going to reserves will intersect and start to increase over the debt amount in 2023-2024.

Edwin Grieve, one of the Comox Valley directors, asked where the reserves are being held. Foort confirmed these are with the Municipal Finance Authority of BC, which provides financing for local governments in the province, typically offering low-cost financing to them.

Several board directors were pleased to hear the organization was on track in terms of debt for the North Island Hospitals.

“It’s encouraging to see our reserves in a very healthy, healthy place at this point, and then only increasing,” said Will Cole-Hamilton, a Courtenay representative.

However, Brenda Leigh, a director from the SRD, asked about the amount of debt payment, and suggested that before taking on more debt or more projects, CSRHD should pay down more debt, especially in the current economic circumstances.

“We should be looking at getting rid of that debt ASAP,” she said. “I don’t think interest rates are going to stay low forever.”

Leigh also veered into the topic of the organization possibly funding long-term care facilities in the future, to reduce demand on acute care facilities, a topic that was on the agenda at the same meeting.

RELATED STORY: Long-term care need pressuring acute care in Comox Valley, Strathcona

CSRHD board chair Charlie Cornfield said he appreciated her comments but that the topic will be discussed during strategic planning sessions, now set for spring.

Grieve also responded to the issue of funding and debt interest, saying through MFA, the low interest rate for borrowing for the hospitals is locked for the 10-year term, adding there is no advantage to paying it off early.

“This isn’t, you know, like a car payment or bank loan. It’s a little different,” he said. “There will be no change in the interest rate, and it’s fixed.”

RELATED STORY: Comox Strathcona Regional Hospital District looks for better return on tax funds

In recent years, a dilemma for the board in terms of its tax requisition amount has been whether to keep it at $17 million a year to generate surplus funding for the future or reduce the total to $15 million for area ratepayers for a tax reduction.

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