Revisions in building and financing schedules will postpone construction of a new Cook County hospital in Chicago by a year from the date originally projected, which could increase the cost of the estimated $550 million project.
Cook County officials argue that the schedule change was anticipated and that construction of the West Side hospital can easily remain within budget.
"Everything is on schedule, as it should be," said Ruth Rothstein, director of the current Cook County Hospital and chief of the Cook County Bureau of Health Services.
Rothstein and other county officials last week confirmed that it will take as much as a year longer than they initially stated to select contractors for the public works project-a contracts bonanza that was estimated in 1994 to cost $551 million to build and another $1 billion in debt service to finance.
Groundbreaking for the 1.2 million-square-foot facility will occur after major construction contracts are signed.
Construction of the 464-bed medical center and adjoining outplacement clinic-meant to replace the near-century-old County Hospital-will take as long as six years, according to the county's earlier projections.
County officials in 1994 told the Illinois Health Facilities Planning Board that their deadline for signing construction contracts was Jan. 1, 1997. But earlier this month, the state oversight body quietly granted an extension on the deadline to Dec. 1, 1997.
In addition, a contracting deadline for a 700,000-square-foot parking garage near the new hospital was pushed back from June 1, 1996, to June 1, 1997. County officials have pegged the cost of that project at $25 million.
Other adjustments involve financing changes that should delay the need to raise taxes to pay for the project.
County officials now say they have abandoned the original plan to fund the hospital's construction through six separate bond issues between 1995 and 2000. Instead, the county is relying on short-term debt instruments known as tender notes, according to Thomas Glaser, Cook County's chief financial officer.
"We'll go to the market on the basis of cash-flow needs," he said. "I wouldn't expect to go through six bond issues to build the hospital. My guess is we'd do it in two series."
Rothstein said the deadlines and assumptions contained in the initial application to state hospital regulators have changed since the application was filed because plans for the new hospital have been something of a work in progress.
"They were artificially estimated; don't make them sound like they were in granite," she said. "At the time we went to the (Facilities Planning) Board, we went with a program, but we had no schematics. The board understood we would have to come back."
A former county official who was involved in putting together the 1994 state application for the new hospital agrees with Rothstein's explanation for the delay.
"We were looking into a crystal ball-and it was cloudy," said H. Woods Bowman, who was the county's CFO under former board President Richard J. Phelan and is now a DePaul University professor. "I'm not surprised that the early assumptions didn't turn out."
Nevertheless, delays in contracting for the program could raise the total cost of the project.
"Construction costs don't go down-they go up," observed hospital consultant James Unland, president of Chicago-based Health Capital Group. "Interest rates are pretty good right now, but the bond market has been very volatile. I don't know what the holdup is for them in going to the market."
In fact, interest rates for tax-exempt bonds to finance the construction are currently much better than the 7% rate originally projected by county officials in 1994. If Cook County were to go to the bond market today, the tax-exempt rate of about 6.25% would result in debt-service savings of roughly $20 million annually, according to Chicago-based investment banking firm John Nuveen Co.
County CFO Glaser said there's plenty of time to issue bonds for the new hospital.
Initial architectural and engineering work is being funded by previous Cook County short-term financings that total $25 million and do not require any debt service until they expire in five years, he said.
Glaser also noted that the county can avoid raising taxes by tapping a number of previously issued long-term bonds that will be paid off starting in 1998, freeing up an estimated $330 million in debt service to be applied to the new hospital bonds.