What is Measure N?

Measure N would allow the Pajaro Valley Health Care District to issue $116 million in bonds to buy the land at Watsonville Community Hospital and make improvements. Property owners in the district would pay $24 per $100,000 of assessed property value annually for 30 years or until the bond is paid off.

The measure will appear on ballots of voters in the Pajaro Valley Health Care District. The district spans from Aptos to Las Lomas in Monterey County, with boundaries similar to the Pajaro Valley Unified School District.

The measure needs more than two-thirds of the vote to be adopted.

A map of the Pajaro Valley Health Care District.

Pajaro Valley Health Care District’s northern border includes Rio Del Mar Boulevard, Freedom Boulevard, Browns Valley Road, Hazel Dell Road and the Santa Cruz County line. The district formed in February 2022 and includes parts of Santa Cruz and Monterey counties. (Local Agency Formation Commission)

What would Measure N do?

If Measure N is adopted, property owners in the Pajaro Valley Health Care District would pay an annual tax of $24 per $100,000 of assessed property value for about 30 years until the bonds are paid off 

The Health Care District would issue $116 million in bonds for the health care district. The money legally must be spent on facilities improvements, and it is expected to pay for the hospital property and buildings, building repairs and upgrades and new equipment. The bonds would be repaid over 30 years by the tax on property owners within the district.

Measure N ballot text: To improve the quality of healthcare at Watsonville Community Hospital; expand/renovate the emergency room; upgrade imaging systems including x-rays, MRI and CT scanners; purchase the hospital property; modernize healthcare facilities to expand services; replace roofs/plumbing; shall Pajaro Valley Health Care District’s measure authorizing $116,000,000 in bonds at legal rates, generating approximately $6,800,000 annually at an average rate of $24 per $100,000 of assessed valuation while bonds are outstanding, with citizen oversight and all funds under local control, be adopted?”

What does a “yes” vote mean?

A “yes” vote would authorize an annual property tax within the Pajaro Valley Health Care District to fund $116 million in bonds. 

What would a “no” vote mean?

A “no” vote would not authorize a new property tax or bond.

Thing to consider about Measure N

  • Background on Watsonville Community Hospital.
  • How the tax would work.
  • What the tax would fund.

In 2021, Watsonville Community Hospital faced closure after its private owners filed for bankruptcy. To keep the hospital operational, state lawmakers created the Pajaro Valley Health Care District in 2022. Health care districts are a form of local government that operate independently of city or county governments.

The state, Monterey and Santa Cruz counties and other donors gave the district $65 million to buy the hospital’s operations and begin running it as a nonprofit. The hospital’s buildings and land were sold to Alabama-based Medical Properties Trust, which now charges the district $3 million in annual rent.

After buying the hospital out of bankruptcy, the Health Care District ended 2022 with a $30 million deficit. In 2023, it was buoyed by a $8.3 million zero-interest state loan, and ended the year with a $7 million deficit. The projected budget for 2024 is “almost break-even,” said hospital spokesperson Nancy Gere. 

“It really is quite a feat to have done that and not had any layoffs,” Gere said. “We really feel like we’re on the right direction.” 

If Measure N is not adopted by voters the hospital would not face immediate closure, Gere said. But the path to long-term stability would be “much more difficult,” she said.

The tax is a General Obligation Bond, which is assessed on residential, commercial, agricultural and industrial land. The tax rate is about $24 per $100,000 of annual assessed value. The assessed value usually changes when the property is sold, and it is typically lower than the market value.

The money raised from the bonds can only be spent on the hospital’s facilities, not on salaries or other expenses, according to the measure. An independent committee appointed by the Pajaro Valley Health Care District Board would oversee expenditures.

If the bond measure is approved, a major priority for the health care district would be purchasing land and buildings of Watsonville Community Hospital, according to hospital leaders. The land is owned by Medical Properties Trust, which charges about $3 million in rent each year

“It’s like when you’re renting an apartment versus owning a home,” said Gere, the hospital spokesperson. “We can take that money and reinvest it back into patient care.”

The Pajaro Valley Health Care District has the “right of first refusal” on the property, meaning the owners must offer to sell it to the health care district before they seek a different buyer. But that right expires in December 2025, said Marcus Pimentel, a member of the campaign committee for Measure N. Pimentel spoke as a campaign committee member. He is also a member of the Pajaro Valley Health Care District Board.

Medical Properties Trust has agreed to sell the property to the district for $40 million, but could seek other buyers if the district can’t come up with the money by December 2025. To have time to collect money from the property tax, issue bonds, and buy the property, voters would need to approve the measure this March.

If voters reject Measure N, “we effectively run out of time” to have an exclusive right to buy the property, Pimentel said.

The bonds would also fund other upgrades to the hospital, such as:

  • Building improvements, including a new roof and upgraded plumbing, heating, ventilation and air conditioning.
  • Doubling the size of the 12-bed emergency department, which had 33,000 patient visits in 2023.
  • More medical equipment, including X-rays, MRI and CT scanners.

Most reimbursements from Medi-Cal, Medicare and private insurance only pay for medical care, and don’t bring in enough money to pay for upgrades, according to a statement from Watsonville hospital leaders. 

New specialized equipment could entice patients who would otherwise travel to San Jose or elsewhere for pricier surgeries or procedures to do them locally, Gere said. Private insurance reimbursements for those surgeries can help offset the low reimbursement rates of Medi-Cal and Medicare. Recently-purchased robotics equipment for hip and knee replacements have already started to pay off, Gere said. “You have to invest money to make money,” she said. 

Having better facilities and equipment would also help attract more doctors to the hospital, hospital leaders wrote. Doctors are contractors, not employees, and often prefer to work in hospitals with better equipment, Gere said. 

No arguments against Measure N were filed with the Santa Cruz or Monterey county clerks.