Sunday focus: Hospital deal depends on MDA approval
“In this case, the city and county are applying to MDA to have the hospital declared a project for the purchaser so they can pay their taxes in advance,” he said. “It allows the city to commit its tax revenue in order to pay the bond issue off and in order to be able to pay those who money is owed to (in the hospital’s bankruptcy.”
The Natchez Board of Aldermen approved a resolution supporting the tax proposal in late April.
The hospital holds approximately $14.52 million in bonds that will need to be paid off in the sale, Brown said.
“What you are doing is getting $8 million from CHS, and you are in effect going to pay it back (to them) in the form of a credit each year for ‘x’ number of years until it is all gone,” he said. “We don’t have to do a bond issue to achieve these things.”
The $8 million figure includes the city’s participation in the REDA process.
“Obviously, if the city was not able to participate, then you would have to lower your sights on the form of the $8 million,” Brown said.
“If the city was not able to participate, we would probably have to restructure the deal in some form or fashion, which would be difficult.”
The hospital has paid the bonds since they were taken out, but the Mississippi Development Bank has required the county to back them with a 5-mill standby tax that would be collected in the event the hospital was unable to pay the bonds. To date, the bank has not missed a bond payment.
If the county was not able to pay off the debt in the sale, however, the county might have to avail itself of the standby tax.
“(The REDA application) is going to help the county tremendously in respect to that 5 mills that is hanging out there, so we won’t have to put that burden on the taxpayers,” Adams County Supervisors President Darryl Grennell said. “To have those pre-paid taxes will help tremendously with the sale of the hospital.”
The county has previously asked the attorney general’s office for an opinion on whether or not the REDA process can be used for the sale, and in a response dated May 14, Special Assistant Attorney General Avery Mounger Lee said the determination lies with the MDA.
If it is approved, however, the attorney general’s office has issued previous opinions about the pre-payment of taxes.
“Our office (has) affirmed our previous opinions that stated acceptance of early payments of estimated future taxes was limited by the requirement that any amounts so collected should be held in a specially dedicated account and would not be subject to expenditure by the county,” Lee wrote. “Please note, however, that sale proceeds, including the prepayment of ad valorem taxes, may be utilized to retire the bond indebtedness if approved and ordered by the bankruptcy court.”
Brown said the hospital is operating on the position that the MDA will approve the final application.
“If it falters in any respect, we will have to go back and come up with another plan, and I don’t know what that would be,” he said.