Wrangell Hospital Project Closes Contracts, Starts Fresh

The City and Borough of Wrangell and the Wrangell Medical Center closed a settlement this month with a company formerly contracted to help finance a new hospital building. After the hospital project stalled in 2012 with more than a million dollars spent on contracts, city and hospital officials are hoping for a fresh start.

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Wrangell Borough Assembly and Wrangell Medical Center board members approved the settlement with InnoVative Capital at a special executive session, a closed-door meeting.

Wrangell Borough Manager Jeff Jabusch said the settlement allowed both parties to walk away from the agreement.

“The monies that we had already paid to InnoVative Capital, they were allowed to keep those. But we didn’t have to pay any additional funds, or there was no money that changed hands at all with the settlement,” Jabusch said. “So that was important to us.”

Jabusch said InnoVative Capital was paid about $900,000 to help finance the hospital project. The company secured a $24 million loan from the U.S. Department of Agriculture for hospital construction due to start in 2011. But the loan was not used, and it is no longer valid.

Jabusch said about $600,000 was paid to American Health Facilities Development for bid coordination services. That brought the total spent on contracts for the original hospital project to at least $1.5 million.

“And there were two construction contracts that we just basically received letters, and if we didn’t take any action there was nothing really we paid them. The only ones we paid were [American Health Facilities Development] and InnoVative Capital,” Jabusch said.

Jabusch said the work done under those two contracts is probably not applicable to the current hospital project. But he said some of the work done by InnoVative Capital to get the USDA loan could speed up the intense process of applying for a new loan in the future.

The contracts for $1.5 million were a source of controversy in 2012. Petitioners cited the contracts as one of three reasons for a hospital board recall election that year. They alleged the board violated Wrangell’s municipal code by authorizing the former hospital CEO to enter two contracts for a borough-owned building.

Wrangell officials declined to comment on the legitimacy of those contracts because of a settlement with the former CEO.

Wrangell Medical Center CEO Marla Sanger said the settlement with InnoVative Capital allows more flexibility in decision-making for the hospital project.

“It just seemed like it was time to start fresh and think about what kinds of financial services would we need now going forward, because things have changed, and it might be something completely different. So now we have that option,” Sanger said.

Sanger said she is trying to secure pre-development help for the hospital project.

Federal stimulus money made the old USDA loan possible. Sanger said even though those funds are no longer available, the USDA regional director has shown support for the project.

“We’ve had a site visit from him as well as the state engineer, and they seem very favorable toward what we’re trying to do,” Sanger said. “It will depend on whether we can show that we’re financially ready to make a loan application like that.”

Alaska Director for USDA-Rural Development Jim Nordlund confirmed the USDA’s support for the project and encouraged Wrangell to submit a new loan application.

The Borough Assembly listed the hospital project fourth in its capital budget requests to the governor and legislature this year.

A project team was formed early this year that includes Jabusch, Sanger, and others from the borough, hospital and Alaska Island Community Services.

The team has been working on a conceptual design that would join the new hospital building to the existing AICS clinic.