The Mendocino Coast Health Care District Board learned Thursday that a term sheet for $50 million in modernization funding for Adventist Health Mendocino Coast Hospital has been withdrawn by the lender.
Board Chair Paul Garza told the board the lender cited “several opt-out opportunities in the lease agreement with Adventist Health” as the reason for backing out. He said the district still expects to qualify for about $15 million in revenue-bond financing, leaving “roughly a $35 million gap” to be filled from other sources.
Garza noted that Adventist Health (AH) is reluctant to modify these opt-out clauses because such an adjustment would be carried as a long-term debit on its balance sheet, potentially affecting its credit rating. AH is already managing approximately $1.7 billion in existing loans, according to District Administrator Kathy Wylie.
Adventist Health will help the district assemble a team to seek additional funding from federal or state programs, Garza said. He identified the Federal Emergency Management Agency (FEMA) and the U.S. Department of Agriculture’s Rural Development Agency (RDA) as likely sources.
“This is hardly an ideal situation because of the shutdown of the federal government and the inconsistency of the current administration,” Garza said. “Nonetheless, I hope my fellow board members will agree that while seismic retrofit is our immediate priority, modernization is essential to our hospital’s future success.”
Despite the setback, Garza reported progress on several fronts. Audits for fiscal years 2021 through 2024-25 are nearly complete — a crucial step that will bring the district into compliance with state requirements and allow reimbursement from the California Health Care Access and Information Agency, the grant fund for mandated seismic-retrofit equipment costs.
“It’s very, very good news,” Garza said.
Garza also reported that facility-maintenance estimates were revised downward from about $22 million to approximately $10 million after a continuing review by District Administrator Kathy Wiley, District CFO Wayne Allen, and Adventist Health CFO Richard Ritter. The estimate aligns with earlier expectations of roughly $12 million in maintenance.
Seismic Upgrade Efforts Continue
Donna Huntingdale, president/CEO of Building Rx Construction, reported the draft budget for the state-mandated seismic retrofit projects is currently tracking around $18 million to $19 million.
The board approved an expenditure of $4,000 to update the 2018 geohazards report to meet current code requirements, as mandated by the state. Huntingdale noted that the finalized design bid from the Devenny Group for nonstructural performance work was $561,311, below the maximum value of $571,943 previously approved by the board.
Board Member Jan McGourty said the consultant’s detailed presentation made it difficult for the public to understand how the money would be spent and noted the lack of an executive summary.
“I wouldn’t accept this report if it were up for acceptance without a written narrative or at least an executive summary of its contents,” McGourty said. “I don’t think this request is unrealistic, considering the cost of this contract. Public funds are being used, and the public should be able to understand the work being done.”
Capital and Maintenance Plan Reduced
The board approved a revised Capital Expenditure Plan for calendar years 2025 through 2027, totaling $9,959,528. The revised plan postpones several projects, including the parking lot and a new MRI machine.
CFO Wayne Allen confirmed that the revised expenditure plan aligns with the funds the district is required to deposit into the AH improvement fund, which totals $18,441,000 through December 2027 (adjusted for CPI). Annual facility-maintenance costs were scaled back from roughly $500,000 to about $200,000 per year.
McGourty noted that the requested capital expenditures were $1 million a year over budget. A discussion ensued around deferred maintenance and requirements of licensure.
Federal Rural-Health Funding Potential
The board also received an update on the Rural Health Transformation Program, a federal initiative funded by a $50 billion allocation to be distributed over five years ($10 billion annually).
Approximately half of the total ($25 billion) will be divided equally among states that apply by the Nov. 5 deadline. If all 50 states apply, California would receive about $100 million per year for five years. The remainder will be distributed based on a formula determined by the Centers for Medicare & Medicaid Services (CMS) administrator.
Financial and Administrative Actions
The board approved a proposal to surplus 10 obsolete Hill-Rom hospital beds, valued at $100 each. Five of the beds were approved for donation to Care B&B Inc., a new nonprofit dedicated to bridging the gap between acute medical care and home recovery.
In other financial matters, staff reported September investment income of $93,472. Total cash equivalents for the district are $16.41 million.
The district settled the McDaniel v. Mendocino Coast Health Care District litigation for $100,000. The settlement was fully covered by Beta Insurance, leaving the district responsible only for a $1,000 deductible.
The board is seeking applications to fill the vacancy left by the resignation of Director Paul Katzeff in September. Applications are due Nov. 1, 2025, at 5 p.m., and the board will consider an appointment at its Nov. 13 meeting.
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