Hospital budget climbs by $40 million

New tally includes items that were originally deferred

BURLINGAME — Costs for a new Peninsula Medical Center, the groundbreaking for which will finally take place Wednesday, have jumped by $40 million after parent company Sutter Health approved the boost in the project budget.

Sutter Health affiliate Mills-Peninsula, at its own expense, plans to build a new hospital to replace the current one located at 1783 El Camino Real in order to meet state seismic standards for acute-care hospitals that must be in place by 2013.

The hospital project, previously capped at $488 million, is now expected to cost a maximum of $528 million, allowing Mills-Peninsula Health Services to include several items that were going to be deferred to keep the project within budget.

Contractors and subcontractors will be held to their estimates of what the maximum cost would be for them to complete the project under the form of bidding used by Mills-Peninsula, hospital project manager Oren Reinbolt said. If the actual cost exceeds the contractors’ estimates, they would be forced to make up the difference themselves.

“We expect to spend the full 528 (million),” Reinbolt said.

District board member Dan Ullyot said after seeing the totaled list of bids, Sutter chose approximately a month ago to increase the budget rather than scale the project back. Sutter representatives could not be reached for comment.

Some items remain on the deferred list, including a Helipad, new furniture and a technology dock. If the cost of the hospital appears to fall below $528 million, those items — or parts of them — will be written back into the budget, Reinbolt said.

Ullyot said the cost increase would not affect the district’s ability to purchase the hospital, as allowed under the terms of the contract with Mills-Peninsula when the lease expires, because thebuilding will have depreciated greatly by then.

“When these plans were proposed, the budget was $350 million,” Ullyot said. “We haven’t quite doubled that, but the more time goes on, we find ourselves exceeding that figure. We were thankfully ahead of the game on this one.” With reserves standing at $23 million and the expected annual rent — which will be adjusted for inflation — Ullyot said the district expects it will be able to purchase the hospital 15 years into the lease agreement, if any fiscal or physical catastrophes arise.

After at least six years of public meetings and lawsuits — one of which continues — voters overwhelmingly approved the new hospital in an August mail-in election, the last step needed before construction on the massive project could begin. The project is scheduled to finish in 2010.

tramroop@examiner.com

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