USDA Staff Discusses Hospital Loan Options with Pocahontas Commissioners
The Pocahontas County Commissioners held a special afternoon meeting on January 21st to meet in person with representatives of the U.S. Department of Agriculture (USDA) to discuss a potential USDA Rural Development construction loan for Pocahontas Memorial Hospital to expand and add outpatient services. Commission President David McLaughlin asked Commissioner Walt Helmick to introduce the purpose of the meeting. Here is some of what Helmick had to say.
“What we’re here for is the hospital situation” said Helmick. “The hospital being one of the major industries in the county, as well as the health provider. And so, we are looking at the expansion and construction of (a) partial new facility. And at this point looking at the financing through the hospital, the County Commission and the USDA Rural Development. We’re trying to establish the need for it, and whether of not we will be looking at the West Virginia Department of Health and Human Services to determine if in fact the facility we have can be restructured to accomplish some of the things we want to do. Anytime you are talking about anything above a million dollars, it’s certainly very significant for Pocahontas County, being a small county. So, we’ll look at all options, and today our issue is with USDA Rural Development, and how they structure a loan of this nature and of this size.”
Representing the USDA were:
- Lisa Sharp, of the Morgantown Office who manages business programs for the USDA Rural Development;
- Janna Lowery also from the Morgantown USDA office, who is the Director of Community Programs;
- And Jeff Owens, an Area Specialist from the USDA’s Fairmont Rural Development Office.
Sharp said that her office manages business loan guarantees for both “for profit” and “non-profit” businesses, whereby the government does not directly loan money, but offers a loan repayment guarantee to private banks who are the actual lenders. She said that in this instance, it might be more economical for PMH to borrow or receive a loan guarantee from the USDA Community Programs, rather than from USDA Business Programs.
Lowery agreed that USDA Community Programs might be more appropriate and said that they also offer loan guarantee programs to protect a private lender for up to 90%, of a loan in the event of a borrower’s default on repayment of the loan but they also offer direct government loans. The current interest rate for a direct loan is 2 ¾% for a term of up to 40 years.
She suggested that PMH use a 30-year term, because that would leave the extra ten years to possibly used to rearomatize the term of the loan in the event they cannot meet the payments in the future. She said that only the length of the loan can be renegotiated, not the interest rate. To get the loan PMH will have to submit the last 5 years of their financial history, and show that they are unable to obtain an economical loan from a private lender since, as Lowery put it, “the government is the lender of last resort.” PMH and the Commission would also have to submit a feasibility study showing that they are able to generate enough additional income from the expansion to be able to repay the loan, and the USDA would also need to conduct an environmental study of the project and review the architectural plans submitted by PMH before the loan could be approved.
Jeff Owens added that he could figure out the monthly loan payments based on a 30-year loan for loan amounts between four and a half and seven and a half million-dollar loan amounts, and would submit them shortly to the Commissioners.
Lowery said that the County Commission would need to be the actual borrower, and Helmick said that since the commission itself is prohibited by law from taking on long-term debt, the loan would have to be made with the commission’s appointed Building Commission on behalf of the County Commission.
No final decision to move forward with this loan application was made at this meeting.