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$900 million in state bonds sought to finance controversial Elk Grove hospital

This is what to expect as California Northstate University unveils plans for new Elk Grove hospital

CNU unveils plans to build a 250-bed teaching hospital next to its campus in Elk Grove. The CNU CEO and president and Mayor Steve Ly give details and show what it will look like.
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CNU unveils plans to build a 250-bed teaching hospital next to its campus in Elk Grove. The CNU CEO and president and Mayor Steve Ly give details and show what it will look like.

California Northstate University hopes to sell up to $900 million in tax-exempt bonds through a state agency to finance its proposed medical center in Elk Grove, indicating the hospital may become a nonprofit operation.

The private university’s proposed 250-bed, 12-story hospital has been mired in controversy since its initial announcement. Residents have expressed concern about its size, location, planned helistop, flooding issues, the demolition of Stonelake Landing shopping center required to make way for the project, and a lack of transparency.

The hospital had been initially proposed as a for-profit venture in December. The university had also previously floated the idea of the city of Elk Grove providing financing, according to 2017 emails released earlier this year, though the proposal never came to fruition.

But CNU has now turned to a nonprofit model for possible financing. This month, the university re-established an existing affiliated nonprofit foundation to apply to the California Public Finance Authority, which would in turn issue millions in tax-exempt bonds to pay for the hospital’s construction.

Overseas and out-of-state private investors are “still an option,” but the university is “more strongly” leaning toward tax-exempt bond financing, said CNU spokesman Brian Holloway.

As required by federal law, the tax-exempt bonds can be issued only if the project gets local approval — in this case, by the Elk Grove City Council. The council will review the proposal Aug. 21.

Approving the bond proposal does not mean Elk Grove is responsible for repaying the bonds. Approving the financing of the hospital also doesn’t automatically greenlight the hospital: City staff is still reviewing CNU’s application, which could take up to another year to complete.

“I think it’s obvious but the points are pretty strong (in terms of) what the hospital brings to the community – emergency medical services, jobs, revenue for the city,” said CNU spokesman Bob Magnuson. “All those things factor in to it being a public benefit.”

The university’s affiliated nonprofit Northern California Health Services and Research Foundation — previously known as Northern California Pharmacy and Health Sciences Foundation — was originally established in 2011 to support the school’s teaching facility and “help people who couldn’t make co-payments and large deductibles,” Magnuson said.

Expanding the foundation to represent the hospital is a “logical expansion of that commitment (to) serve the community,” Magnuson said.

Before being re-established this month, the foundation had been relatively inactive in the last two years.

Last year, the foundation reported no assets and no revenue, according to California Department of Justice records. In 2017, the foundation reported no assets and $4,022 in revenue. When originally formed, the foundation reported about $34,240 in assets and $45,000 in revenue.

The university hopes the city will approve the hospital by the end of this year, Holloway said, and that the hospital will be open for operation in 2022.

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Alexandra Yoon-Hendricks covers Sacramento County and the cities and suburbs beyond the capital. She’s previously worked at The New York Times and NPR, and is a former Bee intern. She graduated from UC Berkeley, where she was the managing editor of The Daily Californian.
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