HERMANN – Faced with a sharp increase in the interest rate on bonds approved in 2016 that is projected to cost about $250,000 a year, Hermann Area District Hospital Administrator Bill Hellebusch is looking into ways to save some of those badly needed dollars through a refinancing of the bonds.

At last week’s HADH Board of Directors session, it was noted that the five-year interest rate reset was set to kick in this week, raising the interest from 5.1 percent to about 8 percent. That would amount to an extra $20,000 a month in payments, or about $250,000 for a year, for the next five years, according to Chief Financial Officer Cindi Engemann.

According to Dr. Michael Rothermich, chief of the medical staff, that amount is about equal to what the hospital is projected to receive in Medicaid payment for the year.

The board heard a proposal from one financial firm, Northland Public Finance, an investment bank headquartered in Minneapolis, for steps in cutting the interest rate back close to where it was before the reset and work on the bond covenants — conditions that must be met by the hospital during the repayment period.

The directors went into closed session to consider Northland’s offer, but emerged with no decision being made. Rather, Hellebusch will continue his efforts to find a way to save on the interest rate payments. He said the board asked him to do further due diligence into Northland’s proposal — and proposals of other similar firms.

“They’re just one group that does that,” Hellebusch told the Gasconade County Republican, adding that the book isn’t closed on contracting with Northland for the service. He said while the company’s proposal was positively received by the board, it’s a question “of are they the right people to do this?”

What Northland’s Bill Wilson laid out was a preliminary plan in which the firm would seek private investors to purchase the bonds at an interest rate more manageable for the hospital district and its taxpayers. Should that attempt fail, he explained, the district could go to the voters for what, in effect,would be permission to refinance the bonds as tax-exempt instruments and rework the bond covenants.

“I’m hoping we don’t have to go that route,” Hellebusch said, referring to asking voters to approve a no-tax-increase refinancing of the $8.3 million that remains to be paid off.

Because the voters approved the bonds as general obligation bonds — meaning they are retired with general fund dollars, unlike revenue bonds — a proposed refinancing would be handled as a general obligation bond vote. That makes passage subject to a higher majority vote for approval. Approval would require a four-sevenths majority, or 54.13 percent.

In other matters, the HADH board heard that May was a profitable month — albeit by a small margin. The hospital posted a $17,000 profit by month’s end. However, for the year so far, the hospital is down $167,288. But, according to Engemann, that’s $67,000 better than at this time last year.

The directors also heard Mercy Washington’s Alan Smith talk about that hospitals expansion plans. Following up on comments made last month by Mercy Washington President Marie Moore, Smith said the number of Emergency Room beds would be increased and many of the current double occupancy rooms would be converted to private rooms.

And then there’s parking, he said.

“We are going to have to expand parking,” he said, although it’s not been decided exactly how. “That was a highly debated topic,” he said, referring to a recent discussion on the expansion effort.

Mercy Washington officials are considering options that would see construction taking place from five and a half years to eight years.

“We’re probably looking at next year” before construction begins, Smith said.