For the three decades that landowner Amfac/Pioneer Mill/Kaʻanapali Land Management Corporation has been talking about development upslope of the West Maui resort area, that talk has included plans for some type of health care facility. With the island’s main hospital more than an hour away, in the best of circumstances, the need for some kind of 24-hour medical service is apparent.
In 2008, Newport Hospital Corporation, a private, for-profit company that describes itself as a “healthcare real estate development company,” applied for a certificate of need (CON) from the state Department of Health, paving the way for construction of a 25-bed acute care hospital. Construction was to occur on a 14.9-acre site along Kakaʻalaneo Drive, the still-privately owned roadway linking the mauka Puʻukoliʻi area with Honoapiʻilani Highway.
In response to a question on the CON application relating to control of the hospital site, the company referred to an agreement it had entered into with the West Maui Improvement Foundation calling for development of the West Maui Hospital and Medical Center. In addition, it cited a “property donation and acceptance agreement between Pioneer Mill Company, Limited, and West Maui Improvement Foundation.”
The CON application stated that the facility would have 19 medical-surgical beds, six critical-care beds, and 40 SNF/ICF beds (skilled nursing facility/intermediate care facility).
Total cost at the time was pegged at $45.75 million. Funding sources were to be a $10 million cash contribution and $35.75 million in debt financing. The CON was approved in 2009.
NHC took title to the property in 2015, paying $3.3 million for the land, according to a statement by KLMC’s parent company, Kaʻanapali Land, LLC, to the Securities and Exchange Commission. In 2016, amid great fanfare, it broke ground. Grading of the site was largely completed by 2017. And that’s where things stand now.
In November 2016, the West Maui Hospital Foundation sought Department of Health approval to take over the certificate of need awarded to Newport back in 2009.
The application stated that the only takeover costs would be $12 million, to be paid in cash to Newport Hospital Corporation, for the acquisition of a fully entitled land site, infrastructure, and completed building plans. It mentioned that the Legislature had authorized $50 million in Special Purpose Revenue Bonds, which the foundation was “in the process of obtaining Hawaiʻi State Department of Finance approval for.”
The bond financing, the application continued, in addition to “up to $24 million in additional financing … will all be used to acquire the $12 million land site from NHC … and ultimately pay for the total hospital construction and equipment costs, financing, construction management fees working capital, interest and debt service reserve with capitalized interest funds for the WMH [West Maui Hospital] project. At funding of the SPRB by March 2017, WMHF will be the WHM site owner, licensee, and operator of the WMH. NHC will be responsible for managing the completion of all the construction and project development of the WMH.”
In other words, by November 2016, the cost of building the hospital and acquiring the site added up to $74 million — $14 million more than the estimated cost of construction approved by the DOH just two months earlier.
In a 2018 interview with Hawaiʻi Public Radio, Brian Hoyle, president of Newport Hospital Corporation and now president of the non-profit West Maui Hospital Foundation, Inc., said that initial financing was tied to Lehman Brothers. When that firm collapsed, Hoyle reached out to other lenders and potential development partners, but none has come forward so far.
In January 2019, Hoyle told The Maui News that progress on construction was at a standstill. WMHF had approached four Hawaiʻi hospital groups – Hawaiʻi Pacific Health, Queen’s, Adventist HealthCare, and Kaiser Permanente – to see if they would be interested in building the hospital.
“At this point, we’re on hold,” Hoyle was quoted as saying. Efforts to finance construction through bond financing had not been successful, he said, adding that the West Maui Hospital Foundation lacks the credit to borrow funds needed to build the hospital.
The 2023 Legislature authorized $20 million in special purpose revenue bonds to help finance hospital construction. But that may not come soon enough, according to former County Council member Jo Anne Johnson Winer, who is vice president and treasurer of the WMHF board.
Although the Legislature authorized $20 million in Special Purpose Revenue Bonds, “there is really no way to access those funds rapidly,” she wrote on the foundation’s website. Also, the County of Maui was poised to pass legislation as a guarantor of the bond, “and that is on hold due to the crisis we are facing. With our application for a $20,000,000 USDA loan pending a lengthy approval process, we are at a complete standstill….
“Our immediate need is for $3,000,000 to keep things moving but the remainder is roughly 60 million if we use our original plans for a 25-bed critical access hospital.”
Intersection Improvements
One of the significant expenses that is not mentioned in any of the DOH applications or otherwise acknowledged was imposed on Newport by Kaʻanapali Land Management Corporation (KLMC).
A condition of the Land Use Commission’s approval of the boundary amendment for the Puʻukoliʻi housing project was improvement of the intersection where the new mauka-makai connector road, Kakaʻalaneo Drive, meets Honoapiʻilani Highway. KLMC is to improve the intersection, “including traffic signalization when warranted to be established by a traffic study provided by petitioner and approved by the Department of Transportation,” the condition states.
Kakaʻalaneo Drive is the sole means of access to the hospital site as well as to the proposed Puʻukoliʻi Mauka Village.
In recent reports to the Land Use Commission, KLMC acknowledges this condition, but says that, in effect, it has burdened the new hospital with the duty of compliance.
“In 2014, KLMC sold and conveyed certain property adjacent to Kakaʻalaneo Drive … to Newport Hospital Corporation. … As a condition to the sale … NHC has agreed to complete the improvements required by this condition, subject to reimbursement by KLMC of a portion of the costs thereof,” the company said in its most recent report to the LUC.
The LUC was provided no further information on what the cost might be of the traffic study and the signalized intersection, nor of that “portion” which might be reimbursed by KLMC. However, in a filing last month with the Securities and Exchange Commission, Kaʻanapali Land stated that KLMC committed to fund up to $583,000 “for off-site roadway, sewer, and electrical improvements that will also provide service to other KLMC properties.” Should KLMC pay for commitments above what it has committed to, the hospital is on the hook for the difference. Already, the company stated, KLMC has contracted for $1.07 million for a sewer line, of which its payment share, under the agreement with the hospital, is just $208,000. The hospital’s share is $972,000, which KLMC is treating as a receivable with interest accruing at 6.5 percent. The debt is secured by the hospital’s land.
Other payouts by NHC to KLMC include $525,000 for an option to purchase an adjoining site of 18.5 acres for $4.1 million. That was paid when the sale of the 14.9-acre hospital site closed and was nonrefundable. The option expired December 31, 2020.
— Patricia Tummons
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