Government and Health Care

County to tackle financing for clinic merger this week

August 2, 2013
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The Kent County Finance Committee and Board of Commissioners will decide this week whether to consolidate two county health clinics under one roof and how to finance that merger.

The consolidation plan involves moving the Kentwood clinic, 1620 44th St. SE, and the Wyoming clinic, 852 47th St. SW, into the former Kentwood Library at 4700 Kalamazoo Ave. SE. The vacant building has 16,000 square feet of space.

The Kentwood City Commission has offered the building to the county for $300,000 after initially listing it for $900,000.

Moving both clinics there would save the county an estimated $131,700 annually from terminating two leases and reducing the number of workers needed. In addition, the county would gain $41,600 each year in rent from Michigan Community Dental Clinics, which is expected to set up shop in the consolidated clinic.

County Assistant Administrator Wayman Britt said a decision on whether to purchase the building has to be made soon because other parties are interested in the structure and are willing to pay more.

The cost to consolidate, of course, exceeds the building’s price tag. Britt said it will take roughly $2.8 million to complete the transaction and become operational at the Kalamazoo Avenue location. He also said the effort is $1.6 million short of the figure.

Britt recently presented the county’s Executive Committee with five options to finance the merger. One would have commissioners transfer funds from general operations to the capital improvements budget. Another would simply allocate the necessary $1.6 million from general operations to the project. Britt noted both options would reduce the general fund’s cash balance.

Another option he presented would be to borrow the $1.6 million. This alternative would preserve the general fund’s balance but would create more debt and add interest payments to the tab.

A fourth alternative is to buy the building by taking its cost from the $1.2 million already in hand and hold on to it while a search is made to fill the funding gap from outside sources. For instance, Britt said he has applied for a $700,000 Economic Vitality Incentive Program grant from the state because the consolidation project meets EVIP’s guidelines.

“We have a 50-50 chance to get the EVIP money. We have a good project. We feel reasonably confident that we are going to get something,” he told the Executive Committee.

But there is no guarantee the county would be able to raise the entire amount in a timely fashion. If the county wasn’t able to do that, the $131,700 targeted as savings would continue to be spent.

The fifth option, however, was favored by Britt, County Fiscal Services Director Stephen Duarte and members of the Executive Committee. Under this alternative, the county would use the $1.3 million it transferred from the general operating fund to the Lodging Excise Tax account and pull $300,000 from the fund balance, or cash reserve, of the capital improvement budget for the needed $1.6 million.

“I like the option because it puts us in the driver’s seat,” said Britt.

The appeal of this option is it doesn’t involve borrowing, doesn’t take an additional allocation from the general operating budget and doesn’t rely on outside sources for funds.

However, it does drain the capital improvement fund balance, using 87 percent of the $354,000 in it. It also counts on the 5 percent hotel-motel tax raising enough revenue to pay for the DeVos Place bond debt, which is $6 million this year. If the tax receipts don’t accomplish that, the county will likely have to dig into the general fund to cover the debt-service gap.

The Finance Committee will make its recommendation before the full commission meets on Thursday.

The $1.2 million the consolidation effort does have includes $180,000 from MCDC, $431,250 from the capital improvement fund and $562,500 from private donors, mostly local foundations.

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