Santa Clara County officials, two months after their 0.626% health care tax won at the polls, have decided to spend $450 million to buy a medical office building and make seismic improvements to existing hospital buildings.
The county is buying a 231,579-square-foot, 10-story building at 1410 S. Bascom Ave., in San Jose that it had been leasing. The building, which will house doctors and medical services, is next to VTA light rail station and down the street from Valley Medical Hospital.
In order to buy the building, pay for the seismic upgrades and pay off an earlier bond issue, the county is going into debt. It will sell $450,000 in tax-exempt bonds that will have a 30-year term.
Officials say the county will come out ahead in the deal. Leasing the building would cost an average $25.5 million a year while repaying the bond will cost an average of $22.9 million a year, according to a report by County Finance Director Margaret Olaiya (See packet page 8b.)
At a public hearing on Tuesday, when the deal received unanimous approval from the Board of Supervisors, some members of the public questioned whether the county would come out ahead, considering the building would be removed from the property tax rolls now that the county is buying it. Records from the county Department of Tax and Collections show that property taxes on the building and land will run $1.1 million this year.
Buying real estate was not mentioned in the county’s ballot title for Measure A, the 0.625% sales tax increase voters approved in November. Instead, the measure’s focus was on filling gaps created by cuts in federal Medicaid (Medi-Cal) funding, mainly Obamacare. Still, the county could argue that funding for the building is coming out of a different pocket than the money needed to run the hospitals.
However, it appears the cuts may not be as severe as many experts predicted. The federal government is only tightening requirements that non-disabled adult recipients work in order to get benefits. And subsidies would be eliminated for non-citizens.
A bill to restore Obamacare subsidies is making its way through the Senate. Democratic U.S. Senator Tim Kaine of Virginia, who part of the group trying to negotiate a deal, told Reuters that legislation to restore the subsidies has a “fighting chance” but it is being delayed by protracted negotiations.
If the funding is restored, the federal cuts feared under the county’s Measure A won’t happen.
Thanks for digging out the facts and presenting them here. I got an email blast from Supervisor Margaret Abe-Koga in which she praises herself for exercising fiscal discipline, as if that was something new for her. I guess it was, recalling her free spending ways on the Mountain View City Council. But her claims seemed too hard to believe. I think these facts help explain what happened. Yes, the county will save a bit of money in the long run, but if conditions change (like there’s a downturn in the local economy) and this deal will look pretty bad. If Abe-Koga wants to show she’s concerned about fiscal discipline, she could reject the automatic pay raises for union members and negotiate a better deal for taxpayers. I won’t hold my breath.