Monterey County delays design work on $172M MHRC campus after supervisors press for more outreach and fiscal review

Monterey County health officials on Oct. 28 presented a status update on Phase 1 of the County Health Services campus — a proposal to build six 16‑bed mental health rehabilitation centers (MHRCs), an emergency support building and campus infrastructure at 1443 Constitution Boulevard in Salinas.

The department said the option most recently developed would deliver 96 secure, 24‑hour residential treatment beds for adults under LPS conservatorship and described the project as a way to return residents now placed out of county to local care. "This project creates local placement options for Monterey County residents and their families," Behavioral Health Bureau Chief Melanie Rose told the board.

Staff told supervisors the project has secured roughly $54.2 million in state grants but that a professional estimate completed as the team moved from program to schematic design raised the total Phase 1 budget to about $172,500,000. Fabricio Chombo, who presented financing scenarios, said the county has identified roughly $54.2 million in secured revenue and faces a remaining funding gap of about $118 million; under assumptions used in the pro forma a 30‑year debt issuance at the illustrative rate would raise annual debt service to roughly $7.4 million and increase total financing costs markedly.

Nick Cronkite, the behavioral health finance manager, summarized the operating and revenue model staff used to assess debt capacity. He said the county anticipates annual MHRC costs (including debt service, operator payments and depreciation) of roughly $16.5 million and projected MHRC revenue and savings of about $8.5 million, with the remainder to be covered by an increase in countywide billable Medi‑Cal direct services. "If we are able to increase direct service time rendered to the community by 10.5 percent, we would be able to generate approximately $28 million" in present‑value terms over the planning horizon, Cronkite said, and the board heard that a 10.5 percent net increase in billable time is a critical assumption to reach modest positive margins in the pro forma.

Supervisors pressed staff on several fronts: whether Medi‑Cal revenue assumptions are stable, how the 10.5 percent direct‑service increase would be achieved, how the county would cover debt service if assumptions fall short, and whether construction delivery alternatives could reduce cost. Supervisor Daniels asked for detailed scenarios that show downside risk if productivity gains or revenue shortfalls occur; Supervisor Church called the current margin "thin" and requested contingency plans. Supervisor Alejo raised outreach and equity concerns and asked for a review of whether existing county jail space (originally considered for the project) remains available — noting reuse of existing county buildings could materially reduce capital need.

Public commenters from nearby neighborhoods voiced concerns about inadequate outreach, potential impacts on traffic, wildlife and fire risk, and the campus being sited next to existing residential areas. Health department staff said the county mailed notices within 300 feet of the site and will add both virtual and multiple in‑person community meetings.

After extended discussion the board directed staff to expand community engagement (virtual and in‑person), provide the CAO and finance staff a refreshed readiness review of the project assumptions and financial scenarios, and pause further consultant design and construction‑document work pending those steps. County staff understood the direction to mean stopping further design meetings with consultants (though invoices for work already performed remain payable) to avoid additional expenditures while outreach and financial verification proceed.

Next steps identified by staff include completing a second professional engineers' estimate, finishing permit‑level documents only if further directed, and returning to the board with clarified on‑ramps and off‑ramps, the CAO's review of fiscal risk, and community meeting outcomes. The department said securing state capital awards — two B‑CHIP awards that total about $54.2 million — remains essential to closing the remaining gap.

The project team emphasized the clinical and system benefits of local MHRC placements but acknowledged the fiscal and operational risks if reimbursement or productivity assumptions change. The board did not vote to commit to construction; rather, supervisors asked staff to pause discretionary design spending and return with more detailed community engagement and financial scenarios.