Funding for Hospital Will Not Be a Snap : Health: Obtaining the $51 million needed for expanding the county medical center may be costlier after Orange County’s crisis.

With a favorable judge’s ruling firmly in hand, county officials said this week that the Ventura County Medical Center can finally move forward with its new five-story wing.

The first item of business: getting the $51 million needed to build the 105,000-square-foot structure.

But that may not be as easy as it once was.

Some fear the municipal bond market, shaken by Orange County’s recent bankruptcy, may not be as strong for sellers as it was eight months ago when Ventura County supervisors approved a financing plan.

“The costs are certainly going to be higher than they ordinarily would,” said H. Jere Robings, a self-styled taxpayer advocate.

But at least one bond analyst said Ventura County has nothing to worry about. “As long as it is not an Orange County obligation, it would probably not have a problem,” said Fred Prager of Prager, McCarthy & Sealy in San Francisco.

However, one sticking point could be Community Memorial Hospital’s planned appeal of the recent ruling, which holds that the county medical center can treat any and all patients.

The legal complications could make the planned certificates of participation less attractive to buyers, Prager said.

“We have to take that into consideration,” Supervisor Frank Schillo said. Schillo, who assumed office in January, said he supports building the new wing.

Prager recommended that the county consult a bond counsel for an opinion, a step officials are already considering.

If Community Memorial Hospital’s appeal is upheld, the new wing and the bond-like issue would be deemed illegal.

The private hospital sued the neighboring medical center last year maintaining that the expansion plan and the bond issue were illegal.

The suit alleged, in part, that the Ventura County Medical Center can treat only the indigent and therefore expansion is unnecessary and illegal.

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A judge disagreed this week and ruled that the county’s hospital can treat anybody it wants, clearing the way for construction. Several other parts of the lawsuit are scheduled for trial Aug. 15.

Left to decide is Community Memorial’s claim that the county’s contracts with physicians, its ambulance policy and its refusal to accept all patient transfers from private hospitals violate state law. The suit also maintains that a low-cost medical insurance offered to all county employees, which requires members to use the county medical center, is unfair.

On the other side, Ventura County has filed a cross complaint alleging that the private hospital “has intentionally attempted to interfere with the county’s relationship with doctors by exercising its economic power over those physicians,” Ventura County Assistant Counsel Noel Klebaum said.

He said the hospital is threatening its doctors with economic sanctions if they are found to be working at Ventura County Medical Center. Community Memorial has denied that charge.

But even if Community Memorial succeeds with its side of the suit, the county can still legally build its new wing, Klebaum said.

However, the specter of even more litigation hovers on the horizon as officials usher the financial package through the bureaucratic system.

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The package has to be approved first by the county’s Public Facilities Corp. and then the Board of Supervisors. The five-member facilities corporation hears and must approve all bonds and certificates of participation issued by the county.

“I haven’t discussed it with county counsel,” said John Fay, a member of the corporation. “There is still a question of what effect an appeal will have on the issuance. The investors have to be assured that the litigation has progressed to the end.”

Officials are also fearful the private hospital will legally challenge any decisions that support issuing the financial package, which would delay the project once again. “There may very well be further efforts to stop it along the way,” Klebaum said. Community Memorial Hospital attorneys would not comment on additional litigation, but have not ruled out any further legal challenges.

Despite all that, county officials remained optimistic about finding money before year-end.

Schillo points to the county’s excellent credit rating while medical center administrator Pierre Durandboasts of his hospital’s sound bottom line as reasons why the bond-like issuance will succeed.

“The market is ripe for an issuance,” Durand said. “We should have a favorable issuance.”

Further, the officials are hopeful that the appeal will be heard quickly and resolved before the certificates of participation go to market. County supervisors are scheduled to meet behind closed doors Monday to discuss the issue.

“I think we are going to move on this,” Supervisor John Flynn said.

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Meanwhile, Community Memorial Hospital attorneys, along with Ventura County anti-tax crusaders, are questioning the state’s promise to pick up 70% of the tab, which will balloon to $75 million after financing is factored into the equation.

“The state guarantee is no guarantee,” Robings said, pointing to property tax dollars due counties and cities that the state now uses to balance its annual budget. “A year from now, the state is likely to say, ‘Sorry, but we aren’t going to help.’ ”

Klebaum said state law--not legislative promises--guarantees the funding, which is set aside for hospitals serving a high percentage of Medi-Cal patients.

“The state made a commitment that will be exceedingly difficult to walk away from,” Klebaum said.

Furthermore, Robings said, the public-financed project is a waste of taxpayer money.

“The county is $38 million in the red,” Robings said. “I don’t know why they want to issue more debt.”

Officials said the facility is needed to consolidate several hospital departments that are now housed in cramped and dilapidated quarters. A parking structure would also be built.