UH can't afford $8M-a-year mortgage on Cancer Center - Hawaii News Now - KGMB and KHNL

UH can't afford $8M-a-year mortgage on Cancer Center

University of Hawaii Cancer Center University of Hawaii Cancer Center
KAKAAKO, OAHU (HawaiiNewsNow) -

University of Hawaii officials said the relatively new Cancer Center can't afford its multi-million dollar mortgage and must develop a new business model to survive.

They asked state lawmakers for help Thursday, just a month after Dr. Michele Carbone, the center's controversial director, stepped down.

The first major problem: UH is spending $8 million a year paying off the mortgage or the "debt service" on its beautiful new Cancer Center complex in Kakaako.

Those payments will continue for 25 years, until 2040.

"They have a building that it is gorgeous that unfortunately they can't afford. It's reality," Vassilis Syrmos, UH's vice president for research and innovation told members of the State House higher education committee Thursday.

The Cancer Center relies on millions of dollars a year from the state's cigarette tax to pay its bills.

But because more people are quitting smoking and others are switching to e-cigarettes that are not taxed, cigarette tax revenue is falling by 7 percent a year.

The Cancer Center's share of the tax has fallen from $20 million a year in 2010 to a little more than $14 million in the last year, Syrmos said.

"The cigarette tax fund is a very important source of revenue for the cancer center, but it's not a stable source of revenue," Syrmos added.

The Cancer Center has been spending $1 million a year to rent mostly unused portions of the former Gold Bond building. The facility, just a couple blocks away from the center, used to house some of its employees. UH's lease in the building, 677 Ala Moana, will be canceled early next year, a UH spokesman said Friday.

That all adds up to a $9.5 million deficit at the Cancer Center in 2014, Syrmos told lawmakers.

"There's not enough revenue to support the costs that are directly attributable to the Cancer Center. So we have to find a way to do that, to fix that problem," said Chip Ellis, UH Cancer Center's fiscal director.

UH is asking state lawmakers to pay for some or all of the mortgage on the new building, perhaps using money from the state's Tobacco Settlement Special Fund.

The Cancer Center is also looking at consolidating administrative functions with the medical school next door as one way of saving money.

"We all believe that the Cancer Center is a good thing, that the state of Hawaii needs to have that Cancer Center and it will have an important function,” said Robert Bley-Vroman, the UH Manoa chancellor who oversees the center. “So it really is a question of how to make it viable."

While the Cancer Center has mostly lab researchers now, it's looking at hiring more medical and clinical faculty, who could work in conjunction with local hospitals like Queens and Straub and develop more clinical trials, bringing in more revenue.

There are 100 clinical trials enrolling about 1,000 adults and children with cancer at the center, but officials admitted that's an “embryonic” clinical research effort that needs to grow.

They're even considering a drastic and unlikely option: selling the Cancer Center to another entity.

"We're not looking at those seriously right now, but they're on the table and we do have to consider them all," Ellis, the center's fiscal director, told lawmakers.

UH officials plan to make more detailed recommendations to lawmakers by the end of January and are working on a new business plan that should be completed in about six months.

State Rep. Isaac Choy, who chairs the State House Higher Education Committee, said it's urgent to come up with a plan soon.

"The morale of the Cancer Center and the researchers is something we should all be cognizant about. Hopefully we can come up with something as soon as we can," Choy said.

UH officials forced Carbone, the former director, to step down last month, sources said. Carbone returned to a tenured research position at the center, and his pay is decreasing by 25 percent to $309,000, UH officials said.

A search is underway for his replacement.

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