CHARLESTON, W.Va. -- Highland Hospital's expansion plans in Kanawha City appear back on track after a nearly two-year delay, after the Municipal Planning Commission approved an alley closing Wednesday.

Highland announced the $38 million project -- with a four-story building at the corner of MacCorkle Avenue and 56th Street, two other buildings and two parking lots -- in July 2008.

But it put the three-phase plan on hold several months later, citing rising interest rates on the bonds it hoped to buy to finance the project.

"The rates shot up, beyond our acceptable range," Highland CEO Dave McWatters said Wednesday. "Interest rates are back down within our budget now."

The new 80-bed patient facility is a tight fit on its lot, said Mike Casdorph, the owner's representative for Highland. Two years ago the hospital obtained size and height variances from the city zoning board for what was then described as a 72,500-square-foot building.

Even so, designers determined the building wouldn't fit unless it could extend into the alley that runs between it and the old hospital facing Noyes Avenue. So they asked the city to close the section of the alley closest to 56th Street.

In order to minimize the impact on patrons and trucks that serve neighboring businesses along MacCorkle -- the Gold Dome Bar and Grill, a pizza restaurant and a new rental center -- Highland proposes to build a turnaround at the end of the remaining section of the alley.

Hospital official officials met with neighbors in recent weeks, lawyer Molly White told planning commission members. "We didn't hear any negative comments."

And the city's Planning Department did not receive any objections until Wednesday, when Gold Dome owner Gorli Harish wrote a letter saying he "vehemently object(s)."

"Closing of the alley will restrict access to our patrons and suppliers. This will severely hurt our business," Harish wrote.

But McWatters said the hospital expansion would not cause any hardship for its neighbors. A city engineer said the turnaround and alley meet city design standards and will be able to handle traffic.

Planning commission members approved the closing, along with a related request to merge 10 hospital-owned lots into two. The alley-closing plan now goes to City Council's Planning Committee. Council members have final say on the issue.

Assuming they approve, construction could start in late May and last 12 to 14 months, McWatters said. "We're combining phases one and two, doing both phases at once. That includes the connector building that will connect the old three-story building to the new one."

Construction costs will be about $26 million, he said. "We're working with two financial institutions. We hope to wrap it up in the next few weeks." The hospital hopes to issue bonds for 25 to 30 years, he said.

The 80-bed facility will serve psychiatric patients of all ages -- children, adolescents and adults, he said. "It will have an assessment center so patients and police officers can come in 24 hours a day, instead of going to Saint Francis or Thomas. There will be an ambulance entrance off 56th Street." 

Reach Jim Balow at ba...@wvgazette.com or 304-348-5102.