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The Honolulu Advertiser
Posted on: Wednesday, March 21, 2001

UH medical school on a treasure hunt

By Walter Wright and Kevin Dayton
Advertiser Staff Writers

The University of Hawai'i medical school would have to find $70 million in private donations and finance another $70 million worth of revenue bonds to move to Kaka'ako under the budget bill moving through the state House.

But the project has been kept alive at the Legislature with approval of $10 million in state money allotted yesterday for planning.

Gov. Ben Cayetano had proposed $141 million in public money for the new medical school that he wants to see built in Kaka'ako. The move by legislators shifts the lion's share of the financial burden to the university, but the medical school's dean, Dr. Edwin Cadman, was optimistic yesterday about the new financing proposal.

"All we have to do is figure out a creative way to finance the new construction, and I believe we will find a way to do this," Cadman said. "If we can become a mature research institution we can bring dollars into the state and create jobs and contribute to the tax base."

The ideal mix of money would include more direct state support, and such support would help attract the private investment that can make a new school a moneymaker, he said. "There needs to be a combination of all three sources. It is, after all, a public institution, and the state has some responsibility."

Cadman said the school could bring in an estimated $60 million to $80 million in research activity per year, creating 400 to 500 academic and research jobs, plus 600 to 700 construction jobs during development, and hundreds of other "infrastructure" jobs to operate the facility.

The first $10 million would be used to develop architectural and construction plans, Cadman said. "I have always considered this to be state-private partnership, and we are still working on the overall financing plan," he said.

He and members of both the House and the Senate are continuing discussions, he said.

The House budget at first authorized only the $10 million for planning. The authorization to use $70 million in revenue bonds and for another $70 million that would be raised privately was added yesterday.

Revenue bonds in effect would require that the medical school -and not the state general treasury — pay the interest and principal on the $70 million.

"At this time there are so many needs that we want to help provide for, and therefore we want to be resourceful in terms of looking at different approaches and saying what will work, where you can have partnershiping — sort of combined efforts," said Dwight Takamine, chairman of the House Budget Committee.

"At the same time, it is a very worthy project that we wanted to ensure was part of the budget discussions," said Takamine, D-1st (Hamakua, N. Kohala).

The school's ability to pay for revenue bond financing depends in part on negotiations with the federal government for support — negotiations that can begin only after the state has committed to the project, Cadman said.

As for private capital, he said no single entity is ready to come up with $70 million, but private investors and pharmaceutical companies could enter negotiations for a piece of the project in return for, for example, rights of first refusal to research performed in facilities they pay for.

"Nobody will ask for the first dance, and it has to come together almost simultaneously. But at some point someone says 'You put your money on the table and I'll put mine on the table,' and an agreement can come together in a matter of days," Cadman said.

The quickest way to proceed would be to figure out the financing package this session, but approval of $10 million for plans "would give us ample time to consider how we are going to raise the other $140 million," Cadman said.

Takamine said legislators believe the $10 million is crucial to getting the project off the ground.

"As we look at it ... there needs to be the location and the space that the new buildings would occupy... the entities that are currently there (still would need to be) moved to new locations. I guess part of it might provide for that kind of phasing in of the work," Takamine said.

"We clearly see that as a worthy project, worthy of priority consideration, and we want to see how that can be worked into the budget discussions," he said.

Cadman has been trying to restore the health of the medical school since he came to Hawai'i in November. That means putting the school on a business-like footing, boosting the flow of research dollars, and building a new facility to replace the aging 29-year-old medical school building on the Manoa campus.

He proposes to build the new school, combining a biotechnology complex and other facilities, on a parcel of state land near the harbor front in Kaka'ako. The school would be part of a larger complex of facilities envisioned by Cayetano.

Only months before Cadman arrived, officials were talking openly about shutting down the medical school entirely.

Cadman met with Hawai'i's congressional delegation and to the governor, patients, medical school students, doctors and faculty. He also visited Honolulu's major hospitals and spoke on the service club luncheon circuit.

His message: The John A. Burns School of Medicine is a crucial part of Hawai'i's economy and the health of its people.

There is $100 billion worth of private and federal research money out there, Cadman said, and Hawai'i can get its share and turn the school into a medical and economic engine capable of spinning off new industries like biotechnology companies.

He also proposed to hire more world-class researchers — paid for through federal grants, not state dollars. Each researcher would generate $500,000 to $1 million in research money for Hawai'i, he said.