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Hospital wants county to be released from standby tax

Illustration by Ben Hillyer / The Natchez Democrat

NATCHEZ — The board of trustees for Natchez Regional Medical Center is hoping to take Adams County’s taxpayers off the hook as cosigners for NRMC’s revenue bond.

Walter Brown, NRMC board of trustees attorney, said the board anticipates that it will approach the Mississippi Development Bank in the coming year to ask that the hospital be released from a requirement of a 5-mill standby and a $875,000 letter of credit backing their existing revenue bonds.

“We — and by ‘we’ I mean the board — think that our financial situation has improved to the point where that is no longer necessary,” Brown said.

In 2006, the Mississippi Development Bank required the hospital to show collateral before it would reissue the revenue bond. This was done by having the county provide a 5-mill standby tax that would not be collected unless it was needed.

Three years later, the hospital declared bankruptcy, though it never missed a payment on the bond.

“In 2006, those were very tough times economically, and right after that we had the recession in 2008,” Brown said.

Shortly after the bankruptcy was filed, the hospital took its former management company, Quorum Health Resources, to court, alleging gross mismanagement on the part of QHR resulted in the hospital’s financial woes. In December, the suit — which sought $42 million — was settled out of court. The matter was sealed, and hospitals are exempt from most public records laws. The board of trustees does not legally have to disclose the settlement terms to the county board of supervisors, the body that appoints the hospital’s trustees, Brown said.

The settlement was finalized Jan. 9, and Brown said the hospital trustees are now eager to discuss the matter with the supervisors. The supervisors’ attorney, Scott Slover, said the two bodies had a legal memoranda that says the hospital board will not spend the settlement until it is discussed with the supervisors.

Adams County Board of Supervisors President Darryl Grennell said he “would feel very good” to know that the county would not have to back the hospital’s bond any longer.

The millage backing the bond is tied to the county’s homestead exemption, Supervisor Mike Lazarus said.

“The taxpayers of this county co-signed this note, and they could lose their homestead exemption on this note,” he said. “If they defaulted on this people who have never had to pay taxes on their houses would have to start paying taxes. It would be catastrophic.”

Lazarus also said he would not attend the briefing about the settlement if he was required to sign a confidentiality agreement.

What ‘county-owned’ means

Natchez Regional Medical Center opened in 1960 under the name of Jefferson Davis Memorial Hospital. Its $2.4 million construction was funded by a county contribution of $800,000, federal and state funds under the Hill-Burton Act. For the first 14 years, it received funding from the county but has since then been self-sustaining.

“The hospital receives no tax support, nor has it asked for any; it operates on its own revenues,” Brown said.

Under Mississippi law, the hospital’s board members are appointed to three-year terms by the county board of supervisors, which also approves the medical center’s annual budget. The NRMC trustees have complete control over the budget with no direct say from the supervisors beyond an up-or-down “yea” or “nay.”

“The way the state statute is construed, the trustees basically say, ‘Here is the financial statement we are giving you for approval,’” Slover said. “The supervisors can’t line item it, but they can say, ‘This isn’t enough, and we aren’t going to approve.’ We are given what they give us, we don’t have to approve it, but we can’t change it.”

Beyond that, the supervisors’ direct involvement is in the issuance of bonds for the hospital. Brown said — aside from the current 5-mil standby requirement from which the board hopes to be freed — the hospital is responsible for its debt.

“These are revenue bonds, and expressly revenue bonds mean that the note holder’s remedy (for money owed) is to go through the revenue of the hospital,” Brown said. “If the hospital was to default and go out of existence, only the revenues would be subject to the creditors of the hospital.”

If the county wanted to sell or lease the hospital, Brown said the law dictates that the supervisors would have to hire somebody to complete a feasibility study of the sale or lease. Once the study was completed, a public hearing about the sale would have to be held, and the county would negotiate with those who had submitted proposals.

While the supervisors can sell the hospital without the trustees, the trustees have some veto power if it was to be leased, Brown said.

“You will want the trustees to be involved in whatever you do, because they’re the ones who are more familiar with what is going on there,” Brown said.

Changes and plans

On Jan. 7, the county supervisors appointed three new members to the hospital board of trustees, replacing members whose terms were expiring. Four seats on the board of trustees were expiring, but the supervisors reappointed one of them, John Serafin.

While some supervisors had previously spoken about being unhappy about not being let in on the terms of the QHR settlement, Lazarus said the new appointments should not be construed as being made out of spite.

“We didn’t replace anybody out of meanness,” Lazarus said. “I don’t think anything was personal or anybody was doing a bad job; this doesn’t have anything to do with those board members (who were replaced), they have all done a wonderful job.”

Rather than nominating new members to replace a specific member, the supervisors nominated a slate of possible new trustees and voted by secret ballot, with the four nominees who received the most votes being appointed.

Grennell said he was shocked so many new members were appointed.

Supervisor Calvin Butler said the new appointments were made at least in part because three members of the board of supervisors are new and wanted their stamp on the hospital board.

“I am not really sure how a lot of those people were appointed, but we wanted to take our own avenue, saying that during our tenure we appointed those people,” Butler said. “We didn’t have anything that drove us to putting on a different person other than wanting to have a little more input on the board itself.”

The new trustees will begin their terms Feb. 4.

The Rev. Leroy White, chairman of the NRMC board of trustees, said the board would have a retreat with the new and outgoing members, the hospital’s administrative leadership and their attorney to bring everyone up to speed on what is happening.

As for what the hospital is going to do with the settlement money, White remained mum, saying he wouldn’t discuss it publicly until he had first spoken with the county supervisors. Both Lazarus and Supervisor David Carter expressed support for using the settlement to pay down what debt the hospital has remaining.

“The (hospital board) has a plan, both long- and short-term, and we need to make that presentation to the board of supervisors. They can’t say ‘yea’ or ‘nay,’ but they need to be informed and know it is a solid plan, and the board of trustees will welcome their suggestions,” Brown said.

Members of the public who have concerns about the hospital, its future or its relationship with the county need not sit in silence, White said.

Contact the hospital trustees, he said. That’s why they’re there.

“We are the community ears for the hospital,” he said. “The community would contact us with what they would like or would have a problem with. All those who are sitting on the board, we are appointed to represent the community, especially the community of Adams County. We are looking out for them and looking to have the best medical group we can here in Adams County.”