LINCOLN – Hospital Administrative District 1 officials are one step closer to reorganizing the district into a new nonprofit corporation.

HAD 1 was created by legislation 34 years ago when 14 area towns joined to help finance the construction of Penobscot Valley Hospital in Lincoln. Last month, the governor signed a bill into law giving HAD 1 the legal authority to convert the district into a private corporation. Officials hope to make the change by Jan. 1, 2002.

Members of the HAD 1 board last week confirmed the appointments of a new 11-member board of directors for the new corporation, which will be called Penobscot Valley Hospital.

The new board is smaller than the current 29-member board, whose members are elected by voters in each of the 14 towns served by the hospital district. Five of the new board members are serving on the current board.

New board members will be: Marylin Applebee of Enfield, teacher; Allan Brown of Winn, consultant engineer; Hervey Clay of Lincoln, funeral director; Phillip Dawson Jr. of Howland, state trooper; Darrell Joiner of Lincoln, pastor; Gilberte Mayo of Lincoln, assistant town administrator; Glen McLellan of Lincoln, teacher; Barbara Russell of Lincoln, director of nurses; Douglas Walsh of Lincoln, paper company vice president; Kirby Whitney of Chester, nursing home administrator; and Frederick Woodman Jr. of Lincoln, school superintendent.

Though the length of service on the board has not yet been determined for each member, officials said there would be staggered terms of one, two and three years. At the end of each term, members would remain eligible for reappointment.

“This new board will be self-perpetuating and will be representative of a typical board in a small, private, nonprofit hospital,” said Ron Victory, the hospital’s chief executive officer.

Victory said he was pleased the new board members had volunteered to serve. He also recognized the contributions made by the many people who have given their time to serve on the board during the last 34 years.

Bonnie Deveau, the hospital spokeswoman, said officials looked for people with business and budgeting background to help provide direction for the hospital.

The appointment of a new board is only one step of many in the lengthy process of reorganizing the hospital district. Victory said the district is now working on articles of incorporation, seeking an IRS tax exempt status and arranging financing.

The hospital district, one of only two remaining in the state, operates similar to a school district. It has the authority to tax its member towns, but has never done so.

The district’s taxing authority has been a hotly debated issue in the past few years. New legislation to reorganize the district into a nonprofit corporation was introduced this spring and later was approved by lawmakers. It came after the hospital hired a professional firm to conduct a telephone survey of district residents last fall. By 2 to 1, district residents supported the hospital district becoming a nonprofit corporation.

Once the district is dissolved and reorganized into a new nonprofit corporation, it no longer will have the authority to tax its member towns. All of HAD 1’s liabilities, about $5.4 million, and its assets, of about $9.4 million will be transferred to the newly formed corporation.

All employees of the hospital district will become employees of the new nonprofit corporation.

Officials are working on conceptual plans for a major renovation to Penobscot Valley Hospital. Officials have no firm costs for the renovation project, but said preliminary estimates range from $5.5 million to $6.8 million. Officials said the renovation project also would mean the district would have to bring the entire facility up to current codes, which could be costly. Preliminary estimates for meeting new codes is more than $3 million.

Victory said once HAD 1 borrowed money for the renovations, the hospital district would be obligated to it for a long period of time. “This is probably the best time in the hospital’s history for this to take place,” he said of the reorganization. The district owes less money now than it had at any other time in its history.

Victory said before the hospital undertakes the renovation project, it will take time – perhaps a year or more – further to strengthen its financial position through the development of services, such as obstetrics and gynecology and others.

Despite the change, Victory said the hospital would continue to serve the health care needs of the communities. Officials said the only difference is it will be operated as a nonprofit corporation, like 36 other Maine hospitals, instead of as an HAD.