RDOS board members upset by lacking hospital funding

Photo: File photo

Directors from the board of the Regional District of Okanagan-Similkameen took numerous pot shots at the provincial government for placing increasing financial pressure on regional hospital districts by not providing adequate funding.

The Interior Health Authority presented their 2025 capital funding requests to the RDOS board in late November and the board was then tasked to consider options that will affect the 2025-2029 financial plan for the Okanagan-Similkameen Regional Hospital District which is made up of the 20-member RDOS board of directors.

Kathrina Ernst, manager of financial operations for the RDOS and Noelle Evans-MacEwan, chief financial officer, made their annual presentation on the five-year financial plan late last month.

The provincial government has again asked that the OSRHD provide funding for healthcare facilities across the regional district relating to equipment digital health and facility construction and renovations, said Ernst.

“The RDOS understands the importance of financial stability for our clients and we pledge to keep our service costs affordable, ensuring that any increases will not materially affect the client’s budget from year to year,” said Ernst.

The 2025-26 funding request letter from Interior Health is for a 40 per cent funding request for $3.984 million. The original request was $6.146 million.

However, the board decided last year to reduce the funding from 40 to 30 per cent, said Ernst.

“We’ve effectively reduced the ask by $1.5 million,” she said.

Interior Health removed a gas outlet project at Penticton Regional Hospital as a result, saving an additional $145,000, with the updated revised request at $3.84 million, she said.

The 2020 Care Tower loan to pay the regional district’s portion of the new Penticton Regional Hospital was $68.19 million five years ago with a 25-year mortgage at 1.99 per cent interest. However, the current interest rate is to be reset in early 2025 at a rate of 4.4 per cent, said Ernst.

Oliver Mayor Martin Johansen, the chair of the OSRHD committee, said the board decided not to add any money to reserves for several years and is now paying for that decision.

“We need to make sure we continue to build our reserves,” said Johansen. “I would just note to the board, one of the reasons we’ve got ourselves into this sort of pickle in 2021 and 2022, we had a zero per cent increase. In 2019, we had a one per cent increase. We basically made our bed and now we’re in it. This is what happens when you don’t keep up with at least CPI (Consumer Price Index). You pay me now or you pay me later and basically that’s where we’re at today.”

CAO Jim Zaffino said the board had no choice but to borrow the $68 million to pay its share of the new PRH Tower and repaying that debt is part of having a regional hospital district board to make spending and debt repayment decisions.

Johansen said the decision by the board to provide 30 per cent funding instead of 40 per cent was done as an economic reality as costs and debt repayment figures skyrocket.

“It’s not a win for us to fund 30 per cent,” Johansen said. “It’s a reality… that’s what we can afford looking at our financial situation.

“One thing we didn’t do last year, that I think we need to do this year, is we need to add to this recommendation, is that a formal request go to the Ministry of Health to fund the shortfall. The work isn’t going away and the Ministry knows that 40 per cent is unsustainable... I think going forward, we’re not going to fund the 40 per cent as we don’t have it in our financials to do that. We need to make that request for the additional (10 per cent) money, because the work isn’t going away.

Keremeos Mayor Jason Wiebe said, in his opinion, that the problem isn’t with Interior Health, which he described as being a “contractor for the province”, but with the provincial government’s lack of funding.

“IH is trying to make due with what they’ve being given, which is severely underfunded,” said Wiebe. “We’re talking now about a five-year plan where we’re planning to stay at 30 per cent and I’m looking at the numbers and the numbers are difficult at 30 per cent, but four or five years from now, there will be another election and other people inheriting these decisions.

“I just want to express that we’re experiencing constant underfunding.”

A large interest rate increase like the board is about to experience just ends up costing taxpayers more money over the long term, he said.

Zaffino said the proposed tax increases over the next four years are all about building up reserves to the point the board can perhaps pay cash for certain healthcare project upgrades and not burden taxpayers with further debt.

“The future is unknown and to go into the unknown without the proper reserves, that puts us in a bad spot,” Zaffino said.

Princeton Mayor Spencer Coyne criticized Interior Health for their lack of asset management, often leading to the regional hospital board being asked to pay for things they shouldn’t have to.

He also criticized their lack of transparency on financial matters.

The provincial government simply doesn’t provide enough funding, Coyne said.

“If we do have to replace something in Princeton or Oliver or even Summerland, we don’t have the funding,” he said. “With the debt load we already have, not having healthy reserves is going to hurt us drastically.

“Even if we want to try to pay down our debt load, we don’t have the abilities to do so.”

The board unanimously supported the staff recommendation to keep the IHA funding of capital projects at 30 per cent, which includes a 14.75 per cent increase for ratepayers for 2025 and three years after that.

The annual debt servicing cost for the PRH tower is currently $3.48 million, with $2.12 million going to principal and $1.35 million going to interest, leaving the outstanding debt at the end of 2024 at $59.4 million, said Ernst.

The board has already approved borrowing $11 million for other long-term debt to finance Interior Health capital requests approved in prior budgets and annual debt servicing costs start in 2026, she said.

The estimated reserve balance as of the end of 2024 is $8.58 million.

Debt servicing costs on the tower loan after interest rate increases after 2025 will be $4.66 million annually, she said.

“That (increased interest rate) will have a big impact on the budget this year and going forward,” she said.

The $68 million loan won’t be paid off until 2045, she said.

The $11 million that will be needed through future long-term borrowing will pay for relocation of the oncology department at PRH ($3.2 million), establishing a Primary Care Network at the Princeton Health Cen-tre ($800,000), establishing a primary care centre at the South Similkameen Health Centre in Keremeos ($520,000) and $6.46 million toward the PRH Patient Care Tower project, she said.

Those projects will be repaid between 14.75 and 20 years.

To pay all these costs, the tax requisition request from RDOS ratepayers is a 15 per cent increase annually for the next four years, she said.

An average taxpayer with a house assessed at $660,000 will see an increase of $14.09 annually from $123 per year to $138.

This article originally appeared in the Penticton Herald and is shared via the Local Journalism Initiative