Don’t lease — buy.
The Santa Clara County Board of Supervisors adopted that maxim with a unanimous vote Tuesday, opting to purchase the property where the county’s new 10-story Valley Health Center campus is set to open this year on Bascom Avenue in San Jose.
The health center will expand California’s second largest public hospital system with adult medicine, urgent care, OB-GYN services and more for tens of thousands of residents. Officials say the $340 million land purchase — financed through a 30-year revenue bond — will save $112 million in the county’s already-strained budget over the next three decades. The county expects to pay off the bond with $20 million per year, compared to the $25.5 million officials would have paid per year under prior plans to enter into a 30-year lease-to-rent property agreement.
Officials said they also secured a $13.8 million reduction in the purchase price by buying the site prior to the lease commencement date.
“By purchasing this location, we are making a smart investment that will allow us to relocate and expand longstanding essential outpatient services, including pediatrics, women’s health, internal medicine, family medicine and urgent care, to state-of-the-art facilities that will serve our patients and the community for years to come,” Santa Clara Valley Healthcare CEO Paul Lorenz told San José Spotlight.
The vote happened with little discussion among supervisors, though some speakers during public comment questioned what the actual savings are when factoring in the loss of property tax revenue for the site.
The county faces losses of $1 billion per year after President Donald Trump’s July signing of H.R. 1, or the “One Big Beautiful Bill,” that depletes federal Medicaid reimbursements, known as Medi-Cal in California, keeping the region’s four public hospitals afloat. County officials have warned these cuts spell an existential threat to the hospital system that can only be buffered by service cuts. Voters last year approved an 11th-hour, five-eighths cent sales tax increase that will also buffer H.R. 1’s impacts with $330 million in extra revenue per year.
Otto Lee, president of the board of supervisors who represents District 3, said the purchase ensures the sustainability of the county’s health care services.
“Given the financial challenges ahead, acting now to reduce monthly costs and secure a critical health care asset is both prudent and forward-thinking,” Lee said in a statement. “This is a true win-win for our county.”
County officials in 2022 entered into an agreement with an LLC known as HSRE-PMB San Jose, which owns the property, for the construction and use of the site located near VTA’s Bascom Light Rail Station. The agreement followed a facility needs assessment that warned of major costs to renovate existing-yet-outdated clinical spaces around the county’s flagship public hospital, Santa Clara Valley Medical Center.
The facility will include a 600-space parking structure. Its clinical floors will coalesce a variety of medical services spread out across Valley Medical Center’s campus. Workers finished constructing the shell and core of the site in October. Officials expect to bring services online within the first few months of this year.
“As stewards of taxpayer dollars, it is critical that we continue to optimize county operations to deliver the greatest value at the most efficient cost,” County Executive James Williams said in a statement. “We will continue to pursue every action we can to responsibly reduce costs, increase revenues and deliver effective and efficient services during this time of unprecedented withdrawal of federal funding.”
Contact Brandon Pho at [email protected] or @brandonphooo on X.