State officials backed $98 million in borrowing Thursday to create the first hospital in eastern New Orleans since Hurricane Katrina.

The project calls for a 100-bed facility on the site of Pendleton Memorial Methodist Hospital at 5620 Read Blvd. The bulk of the beds will be for general medical and surgical acute services. The hospital will lease 20 beds to a long-term acute-care facility and operate an emergency department.

The state Bond Commission gave final approval to the project despite concerns expressed by state Treasurer John Kennedy that problems will arise in repaying the loan.

“It’s something that we’ve been waiting on for the last seven-and-a-half years. That hospital is so crucial to the health-care needs of the people,” state Rep. Austin Badon said later in the day.

Badon, D-New Orleans, said the hospital will serve a community of 68,000 people that is separated from the rest of the city by a canal. He said people in surrounding communities also will be able to use the hospital.

Pendleton flooded during the 2005 hurricane and never reopened. Part of the hospital now is being demolished.

New Orleans has struggled with maintaining adequate hospital bed space after Hurricane Katrina shuttered facilities. However, medical care prospects are brightening.

University Medical Center is under construction near downtown New Orleans, a project that will create more than 400 hospital beds.

At the same time, Gov. Bobby Jindal is opting Louisiana out of a health-care expansion that extends Medicaid coverage for low-income Americans while reducing dollars that pay for uninsured medical care.

Kennedy questioned whether New Orleans Mayor Mitch Landrieu will petition for a change in the governor’s decision.

New Orleans Health Care Commissioner Karen DeSalvo said she was not prepared to answer that question.

Kennedy said both University Medical and the eastern New Orleans hospital depend on the state participating in the federal Affordable Care Act. Now, he said, the governor is not participating in the Medicaid expansion portion of the act.

He said dollars for the care of the uninsured will drop.

“I worry that you’re not going to be able to pay this money back,” Kennedy said.

He compared the wisdom of building a hospital in New Orleans to investing in a new bank in Greece.

DeSalvo said she respectfully disagreed.

She said eastern New Orleans is isolated by water. During storms with high winds, ambulances cannot make it across the connecting bridges to reach residents in medical distress, she said.

An issue arose during Hurricane Isaac with a resident having trouble reaching a hospital, she said.

DeSalvo characterized the project as very needed. She said population growth will support the financial viability of the hospital.

“I hope you’re right and I’m wrong,” Kennedy told her.

Senate President John Alario, R-Westwego, said the city is confident about its health-care plan. He urged the commission to approve the project.

Kennedy was the only commission member to vote against the hospital.

Afterward, Badon said the need for an emergency room in eastern New Orleans was driven home to him recently when his brother-in-law suffered chest pains. He said they had to drive 25 minutes to reach a hospital.

“It’s a monumental feat toward the recovery of east New Orleans,” he said. “The economic impact is going to be tremendous with the jobs that it’s going to create.”