MEMORANDUM

TO: Ronald Wm. Drathman, Assembly President

Members of the Kenai Peninsula Borough Assembly

THRU: Mike Navarre, Borough Mayor

FROM: Bonnie L. Golden, Assistant to the Mayor

DATE: August 26, 1999

SUBJECT: Ordinance Reappropriating a State Grant to the South Peninsula Hospital Service Area Expansion Project

Several years ago, the Borough was awarded a state grant through the Capital Matching Grant Program to improve the oxygen system at South Peninsula Hospital. The grant funds are insufficient for this purpose. In February 1999, the South Peninsula Hospital Service Area Board and the South Peninsula Hospital Operating Board requested that the Borough seek reappropria-tion of the grant to amend its purpose. (See attached letter from Charles Franz, CEO at South Peninsula Hospital, dated February 5, 1999.) During its last session, the Legislature did, in fact, approve the reappropriation by amending the grant purpose to state: South Peninsula Hospital Service Area Hospital Addition and Renovation. The State Department of Administration also approved extending the deadline of the grant until June 30, 2000. Upon acceptance and appropriation of the amended grant by the Assembly, the grant funds may be used for the expansion project currently under way. The following provides some background information regarding the history of this grant.

Background: In 1993 the Legislature enacted a bill establishing the Municipal Matching Grant Program. For each capital project grant that a municipality receives, a local match, or local share of the cost, must be provided by the municipality. The local share requirement is based on the population of a municipality and, following the required formula, the Borough's local share percentage is 30%. Proposed projects must be approved by the Borough Assembly and submitted for legislative approval. If approved, grant agreements are not received until August/September, at which time the funds must be appropriated by the Assembly through enactment of an ordinance. Any amendments to a grant must go through a similar process, requiring Legislative and Assembly approval.

On behalf of the South Peninsula Hospital Service Area, the Borough applied for and received funding under the FY'95 Capital Matching Grant Program. The original purpose of the grant was to purchase an on-site oxygen generation system for the hospital. State funding was requested in the amount of $150,000, with a local share in the amount of $64,286. Unfortunately, only $17,183 was awarded as the State's share. Combined with the local share of $7,364, available funds totaled $24,547. The Service Area Board at that time decided to postpone acceptance of the grant until it could determine the best use for these funds, either applying them to the oxygen system or requesting an amendment to the grant purpose. (In the interim, the cost of the oxygen system doubled.) Because the Service Area Board had to direct its attention to other pressing matters, it did not address this issue immediately.

On May 1, 1997, the Service Area Board approved a revised project expected to cost $10,661. It also approved the expenditure of the expenditure of $3,198 as matching funds for this grant and acceptance of the State's share ($7,463) for purchase and installation of equipment for the oxygen supply system. Through enactment of KPB Ord. 97-30, approval was given for acceptance of the grant and appropriation of $10,661. (NOTE: This was only a portion of the total grant amount.) However, to date, only $3,198 of the project funds have been spent; $2,238.60 of the State's share and $959.40 of the local share. The decision for use of the remaining $21,349 was made earlier this year by both the Service Area Board and the Operating Board. They wish to have the funds applied towards their expansion project.

Expenditures for the expansion project were approved by the voters residing in the South Peninsula Hospital Service Area. Proposition No. 5 of the October 1998 general election asked if the service area should "plan, design, engineer and construct an expansion and upgrade of the South Peninsula Hospital". It stated that the estimated cost of the project ($9,238,756) would be funded from the existing tax rate and other sources available to the service area, without incurring bonded indebtedness. The grant funds, both the state and local share, have been identified as a small source of funding for this major project.

cc: Mr. Charles Franz, CEO South Peninsula Hospital

Jeff Sinz, KPB Finance Director