Show Low approves $45 million Summit Healthcare expansion, 105 jobs, non-recourse bonds
SHOW LOW, ARIZONA — October 4, 2017

Show Low approves $45 million Summit Healthcare expansion, 105 jobs, non-recourse bonds

City Council approved a major $45 million Summit Healthcare expansion project, modernized city park playground equipment, joined a broadband consortium, and heard urgent school capital facility needs.

City Council Approves $45 Million Summit Healthcare Complex; Parks, Broadband, and School Bond Round Out October Agenda

On October 4, 2017, the Show Low City Council unanimously approved a $45 million revenue-bond issuance to finance a major hospital-campus expansion—the largest economic-development project to enter the city's Industrial Development Authority pipeline in recent memory. The non-recourse debt carries zero obligation to the city and is expected to create more than 100 jobs and bring modern behavioral-medicine services to the mountain community. Alongside this cornerstone decision, council approved a $158,462.64 playground modernization contract, joined a regional broadband consortium tapping federal e-rate dollars, and voted on a Circle K beer-and-wine liquor license. School Superintendent Chad Holloway made an urgent appeal for community support of a June-approved bond election addressing a self-described "grave" infrastructure crisis, with ballots mailing by early the following week.

Summit Healthcare Revenue Bond: The Main Event

The evening's centerpiece was the presentation and approval of Resolution 2017-29, authorizing the Industrial Development Authority of the City of Show Low to issue one or more series of revenue bonds not to exceed $45 million on behalf of Summit Healthcare Association. The project will finance construction of three interconnected buildings on the former Pine Shadows mobile home and RV park property, acquired by the hospital three years prior.

Project Scope

The development consists of:

Hospital representatives indicated the project will create approximately 100 new permanent jobs and employ 100–150 construction workers during the 16-month build-out. Closing was set for October 12, with groundbreaking anticipated within two weeks. Site preparation to commence immediately upon closing; vertical construction expected to begin in March 2018; occupancy targeted for first quarter 2019.

Bond Mechanics and Non-Recourse Structure

Bond Counsel Michael Caffee So of Greenberg Traurig was present to answer detailed questions about the debt structure. He stressed one critical procedural point: the resolution as drafted included an emergency clause, which would normally accelerate the approval process. However, an Arizona statute requires either a unanimous vote or at least six of seven council members to invoke the emergency clause. With only five council members present (two excused), the emergency clause could not legally be invoked. Accordingly, the motion was modified to proceed without the emergency clause—a move Caffee So confirmed would not materially delay the project.

On the substance of the debt, Caffee So was emphatic: the bonds are "completely non-recourse against the city of Show Low and the Industrial Development Authority." The investors in the debt acknowledge that "the only entity they can look to for repayment is the hospital," relying on "the hospital in the underlying real estate [and] the revenues of the hospital" as the sole security for the investment. In the event of non-payment, investors have no claim against the city, the IDA, or the city's budget.

Council Member Brandt Clark raised a prescient historical concern:

"I had a situation previously where we got ready to borrow some money when we had too many of these out in a fiscal year and we had to wait." — Councilmember Brandt Clark

Caffee So acknowledged that a federal tax-code quirk can, under certain circumstances, reduce the city's ability to claim a federal income-tax exemption on its own future borrowing if too much IDA debt is outstanding simultaneously. However, he noted that in the current market and given current debt levels, no such conflict was anticipated:

"It's not going to happen this year because we're not in that same situation that occurred because the city was borrowing at the same time the Industrial Development Authority borrowed." — Michael Caffee So, Bond Counsel, Greenberg Traurig

Regarding interest-rate savings, Caffee So indicated the non-recourse, tax-exempt structure saves "the differential" between taxable and tax-exempt borrowing rates—potentially 1.5 to 2 percent or more depending on market conditions. City staff later offered a specific figure: approximately $7.5 million in interest savings over the life of the bonds compared to taxable financing.

Council Member Connie Kakavas asked the hospital representative, in effect, to pitch the project's community benefit. The hospital official responded with a comprehensive vision:

"We envision three buildings going up on the property… we'll be hiring 100 new employees so a job opportunity growth." — Summit Healthcare Representative

He also noted that the hospital plans to maintain clinic operations in Pinetop, Snowflake, Holbrook, eager, and Nutrioso while consolidating most medical-office and outpatient functions into the new mountain campus to provide "economies of scale" and "a one-stop shop for all outpatient services."

The Vote

Council Brandt Clark moved to adopt Resolution 2017-29 "approving the issuance of revenue bonds Summit Healthcare Association project in one or more series of the Industrial Development Authority of the city of Show Low Arizona." Council Member Jon Adams seconded. The council voted 5-0 to approve (with the understanding that the emergency clause would not be included). The three absent or excused members did not participate.

Playground Equipment Modernization: From Concept to Construction

The council also voted 5-0 to award a contract to XR-Play Inc. for the replacement of dated playground equipment at the Little League baseball field in City Park. The total contract price, including installation, was $158,462.64, funded through cooperative purchasing and drawing on carryover budgets from fiscal years 2016, 2017, and 2018 ($60,000 + $50,000 + $49,000 = $159,000 in total budgeted capacity).

Design and Features

City staff presented a detailed site plan and feature breakdown. The redesigned playground incorporates age-stratified play areas:

The design leaves negative space for future expansion and carefully addresses drainage and site engineering in coordination with city engineers. Installation is scheduled for spring 2018 with a six- to eight-week completion timeline.

Liability and Equipment Removal

Council Member Marty Kelly raised a valid concern about liability and supervision, noting the zip line and other new features' safety profile. Staff confirmed that the city's recreational-immunity doctrine (available when property is posted for public use at visitors' own risk) and the city's insurance coverage protect against liability, provided standard warning signs are posted. The old equipment will be removed and cannot be reused elsewhere because it predates current safety regulations and does not meet current code.

The Vote

Council Connie Kakavas moved to award the contract to XR-Play Inc. "in an amount not to exceed one hundred fifty eight thousand four hundred sixty two dollars and 64 cents" for purchase and installation. Council Member Kelly seconded. The council voted 5-0 to approve.

Broadband Consortium: Seizing a Federal Funding Window

Council voted 5-0 to adopt Resolution 2017-27, authorizing the city to join the Navajo-Gila County Information Technology Educational Consortium—an intergovernmental agreement designed to capture the final year of federal e-rate grant funding for broadband infrastructure construction serving libraries and school districts across both counties.

The Opportunity and Timeline Pressure

City staff explained that the federal government has made e-rate funds (80% cost coverage) available for only one more fiscal year to subsidize broadband construction. The state is offering an additional 10% match, leaving consortiums and municipalities to cover the remaining 10% match. The e-rate mechanism requires a formal consortium of public libraries and school districts to apply for the funds. Eighteen entities in Navajo and Gila counties have been invited; 16 approved the IGA as of the October 4 meeting.

The Navajo County Superintendent of Schools is designated as the fiscal agent and will coordinate consortium actions. A request for proposals was issued to solicit vendors willing to design, construct, and operate the broadband infrastructure. Once the infrastructure is complete, the e-rate funds pay for construction, and consortium members incur ongoing monthly service fees to the vendor.

Cost and Opt-Out Provisions

A council member asked for anticipated project cost. City staff acknowledged that no binding estimate exists because the RFP process is ongoing and 12 different vendors have expressed interest in bidding. Staff emphasized that the consortium's premise is "to have cost less than what we currently have" and that "if we don't get those cost less than what they currently have I'm sure everybody's going to opt out and not participate." The city retains an annual opt-out right, exercisable each March during the budget cycle for the following fiscal year. In other words, should monthly service fees prove prohibitive or the benefit questionable, Show Low can withdraw at the annual review point with no binding obligation.

A staff representative explained the broader purpose in plain terms:

"This option is [the last year that] e-rate funds, which is only available for schools and libraries, will pay a hundred percent of construction cost so this gives us an opportunity to put together a wide range of anchor institutions… if a vendor comes in and says ok I want to do this for you guys and connect all these locations they can put in a fiber infrastructure and the feds in the state will pay for that… the hope is that they will not just put in the two or three strands of fiber that is needed by the school or the library but actually put in more so that businesses and other areas that they can expand their services here… so that will hopefully increase economic development and increase access to faster broadband services." — Unidentified City Staff, Broadband Presentation

The Vote

Vice Mayor Connie Kakavas moved to adopt Resolution 2017-27 "approving and authorizing the execution of an intergovernmental agreement to join the Navajo Gila County information technology education consortium." Council Member Connie Kakavas seconded. The council voted 5-0 to approve.

Circle K Beer and Wine License: Routine Approval with One Dissent

The council voted 4-1 to recommend approval to the Arizona Department of Liquor Licenses and Control for a number-10 beer-and-wine store license on behalf of Circle K store #9526 at 5404 South White Mountain Road.

The application was submitted by Kenneth Kawaiski on behalf of Circle K. District Manager Ben Metcalf represented the applicant (Kenneth Kawaiski was unavailable to attend). Show Low Police Department conducted a background investigation and "found nothing amiss." The state liquor board will conduct its own investigation before rendering a final decision; city council's vote is merely a recommendation.

A council member asked whether the Circle K would indeed be opening in Show Low and was assured it would "pretty soon." The application proceeded to a motion by Council Member Brandt Clark for approval, seconded by Connie Kakavas council voted 4-1 to recommend approval to the state (individual votes were not stated in the transcript). The one dissenting vote indicated some council opposition, though no stated reason was recorded.

School District Capital Facilities: Superintendent's Crisis Testimony

Superintendent Chad Holloway appeared during the Call to the Public segment to address an urgent matter outside the formal agenda: the school district's bond election and the underlying crisis in school infrastructure funding.

The Fiscal Squeeze

Holloway presented a stark picture of state budget reductions:

"The state of Arizona over the last 10 years [has] reduced capital budgets for schools over 85% meaning that we have approximately 15% capacity in our capital expenditures from about 1.1 million to just under $160,000 to take care of needs like busses and buildings and roof systems and air conditioning." — Superintendent Chad Holloway

This 85% reduction—from $1.1 million to $160,000—has forced school districts statewide to defer major infrastructure repairs and capital investments. The Show Low district, like others, is now facing a backlog of deferred maintenance and safety issues that cannot be addressed from the shrinking state capital allocation.

Specific Safety Crises

Holloway highlighted two concrete incidents and broader safety concerns:

  1. Roof Collapse: "Just this summer for instance we had a roof inside of a classroom collapse. Fortunately [it] was during the summer because it fell right on the teacher's desk." Had this occurred during the school year, it would have endangered students and staff.

  2. Failing Security Systems: "We have moving systems that are failing and security issues around the campus that caused us some grave concerns."

  3. Transportation: Transportation systems are aging and in need of replacement.

Community Response and Bond Election

In response, the school board called a bond election for June. A community capital review committee was formed to vet the district's infrastructure needs. Superintendent Holloway expressed commitment to partnership with the city and requested council support:

"[We] feel at the Xolos schools that a strong partnership with the city strong schools lead to strong cities and vice versa and it is our goal and our desire to have strong schools for the city of Xolo." — Superintendent Chad Holloway

The council responded positively. Vice Mayor Connie Kakavas and other members indicated they are serving on the bond committee and encouraged citizens to pay attention to the materials (by-mail ballots beginning the following week). The bond election would proceed by mail-in ballot, with materials to go out in the coming week.

The council voted 5-0 to approve a consent calendar consisting of:

In a special moment, newly appointed Navajo County Manager Glyn Kephart introduced himself to the council and expressed his commitment to strengthening city-county partnerships. Kephart noted that he has been a Show Low resident for the past year and a half and expressed appreciation for the city's governance. He conveyed regards from "Jimmy," a reference that council members seemed to understand, though the transcript does not clarify the context.

Opening and Closing Remarks

Mayor John Leech Jr.. opened the meeting with a moment of silence and reflection following recent mass-casualty events in Nevada and the Las Vegas shooting:

"We're all saddened by the recent tragedies that have taken place in our neighboring state as well as throughout the United States… our heart goes out to those citizens those people who are grieving… we know that we do have a living God who loves us who cares for us and that hopefully that they can find peace and their solace." — John Leech Jr..

The council observed 59 seconds of silence "for each of those seconds of life" lost in recent tragedies and affirmed the values of unity, bravery, and kindness as a response.

Other Business and Announcements

Fishing Program and Recreation

City Manager Jim Moeller (referred to as "Mr. Meter" in transcript) announced the launch of a community fishing program on Show Low Creek and Cholla Creek in areas owned by the city. The Arizona Game and Fish Department provided signage and assistance. Parking is available at the Shale Bluff trailhead on White Mountain Road. Catch limits and species restrictions are posted on site.

The Recreation Department announced fall play days for ages 5–11 coinciding with fall break (October 9–12, 8 a.m.–noon, $35 for all four days; registration via 928-532-4142). A free movie in the park is scheduled for October 13 at 7 p.m. at Ponderosa Field at City Park.

Public Works Projects

Ongoing city improvements include:

The city manager urged residents to be patient during construction.

Hospital Announcement

A hospital representative announced a new cash-based pricing program for outpatient services, positioning the hospital to compete with valley providers on price while retaining patient volume locally. This program was described as a response to community demand and loss of patients to lower-cost valley alternatives.

Upcoming Council Retreat

Connie Kakavas reminded council members of an upcoming retreat scheduled for Thursday, October 5 at 9 a.m. at the Public Safety Building, running until conclusion of business.

Vote Breakdown

ItemMotion/ResolutionVoteOutcome
Consent Calendar (Hazard Mitigation Plan & Minutes)—5-0Approved
Circle K Beer & Wine LicenseRecommend to State Liquor Board4-1Approved (for recommendation)
Broadband Consortium IGAResolution 2017-275-0Approved
Playground EquipmentXR-Play Inc. Contract5-0Approved
Summit Healthcare Revenue BondsResolution 2017-29 (without emergency clause)5-0Approved

Meeting Duration and Attendance

The full meeting ran approximately two hours. Five of seven council members were present; two were excused (the transcript does not name them, but the brief analysis indicates two members—likely Councilmembers Leach and Allsop based on the mayor's opening remarks—were absent).

Project Details

Summit Healthcare Medical Complex

City Park Playground

Navajo-Gila County Broadband Consortium

Circle K Beer & Wine License

Controversies and Context

State Budget Cuts and School Funding Crisis

Superintendent Holloway's testimony underscores a statewide crisis: Arizona has reduced school capital budgets by 85% over the past decade. This is the result of budget cuts following the 2008 financial crisis that were never restored. As a consequence, districts statewide face deferred maintenance, aging transportation fleets, failing security systems, and deteriorating facilities. Show Low's school district is not unique in this struggle but is responding proactively with a community bond election.

Industrial Development Authority and Non-Recourse Debt Structure

While the $45 million Summit Healthcare project is a significant economic win for Show Low, the non-recourse debt structure is notable for what it does not obligate the city to do: provide budget funds, assume liability, or risk the city's bond rating (barring the narrow, currently non-applicable federal tax-exemption issue). This is a classic "conduit financing" arrangement in which the IDA acts as a facilitator for tax-exempt borrowing without putting city finances at risk. Brandt Clark historical reference to a past conflict (where too much simultaneous IDA and city debt affected the city's borrowing capacity) shows the council is appropriately cautious, though bond counsel confirmed no such issue exists in this case.

Federal E-Rate Funding Window

The broadband consortium decision capitalizes on a narrow federal funding window—the final year of e-rate grants at current levels. The city's decision to join is a calculated bet that broadband infrastructure will drive regional economic development and educational access. The annual opt-out provision provides an escape hatch if costs become prohibitive, balancing opportunity against fiscal risk.

Notable Items Beyond the Top Tier

School District Bond Election

While not voted on during this meeting, Superintendent Holloway's testimony on the June-approved bond election warrants note. The by-mail ballot would begin circulation in the coming week, and several council members are serving on the bond committee. The referendum addresses genuine safety and infrastructure crises (roof collapse, failing security systems, aging transportation) in response to statewide school-funding cuts.

New Navajo County Manager

Glyn Kephart's introduction signals continuity and an emphasis on city-county collaboration under new leadership. His comment that he is himself a Show Low resident of 18 months suggests alignment with local interests.

Hospital's New Cash-Based Pricing Program

The hospital's announcement of a competitive cash-based pricing program for outpatient services reflects market pressures and a strategy to retain patients within the mountain community rather than losing them to valley providers. This complements the capital expansion project by addressing access and cost barriers.

Fishing Program Launch

The community fishing program on Show Low and Cholla creeks (in partnership with Arizona Game and Fish) represents a modest but symbolic use of public lands for recreation and community engagement.

Duration