? Despite opposition from local physician, city takes first step toward $1.275 million bond
Despite strong opposition from a local physician and his spouse and former office manager, the Hillsboro City Council approved at its Aug. 4 meeting a development agreement with HMC/CAH Consolidated Inc. to support the construction of a new $11.4 million facility for Hills?boro Com?munity Hos?pital.
The agreement would have the city initiating a bond issue not to exceed $1.275 million to pay the up-front costs of putting in electric, water, sewer and parking lot.
The agreement obligates HMC/CAH, which owns the hospital, to repay the bond over 23 years, the length of the USDA loan issued through Bank of Hays.
?The key for us as a city is that we are not doing any of the work,? City Admini?strator Larry Paine said as he introduced the issue. ?The hospital contractor will do that, and part of the agreement calls for a third-party inspector who will be reviewing construction so that the project is built properly and according to plans.
?It also states in this phase that we…are not responsible for any possible construction defects that will occur over that period of time.?
Because the bond issue will be carried by the city?s Public Building Commis?sion, action was required by both the council and the PBC board, which is comprised of council members. In each case, the recommendation to accept passed without a dissenting vote.
Councilor Shelby Dirks, an employee of HCH, abstained from voting.
Action was preceded by a lively 40-minute discussion regarding numerous concerns raised by Michael Reeh and Cindy Reeh.
Michael Reeh operates an independent medical office in Hillsboro. He also is the chief medical officer at HCH with admission privileges. Cindy Reeh is employed in the county health department.
Among the issues the Reehs identified:
? The city should not be helping a for-profit entity build a new facility when the present facility ?is suitable for what is needed.? A private company should find its funding from the private market, they said.
Paine said the public-private partnership was a requirement for the company?s USDA construction loan, and was not initiated by the city.
But he added, ?Putting the city and the hospital together makes a lot of sense in terms of the plan that was put together six or seven years ago about what (HMC/CAH) wanted to do in terms of building a hospital in the first place.?
? HMC/CAH filing Chap?ter 11 bankruptcy in 2011 for reorganization calls into question the company?s financial competence for the future.
?If you don?t learn from your mistakes in the past you are going to make them again,? Cindy Reeh said.
Paine said the city?s understanding of the situation is that the company filed for Chapter 11 because some key investors reneged on their commitments and a contractor called in a loan prematurely.
?Their immediate action was to file the bankruptcy in order to save the corporation,? Paine said.
? HMC/CAH has not been paying rent for using the city-owned facility it has been using for several years.
Paine said the company is current on its rent and utility payments, although he recalled at least one payment that came in late.
? By participating with HMC/CAH, the city is essentially supporting a medical monopoly in the community, giving it leverage to demand additional funding down the road.
Councilor Bob Watson said he was serving on the hospital board when the hospital was owned by the city.
?We didn?t have anybody beating down our door wanting to take over our hospital or buy it,? Watson said. ?We struggled for years, and we were happy when somebody came by and bought the hospital.
?I think we all know that rural hospitals are struggling pretty hard,? he added. ?This is my personal opinion: I see this as Hillsboro?s only chance to have a new hospital. And if we don?t get a new hospital, we will not have any hospital at some point.?
? Has the city considered other partners, such as St. Luke Hospital in Marion or Newton Medical Center, to meet the community?s primary medical need: emergency care?
?That?s the wave of the future,? Michael Reeh said of stand-alone emergency centers. ?It isn?t every place having their own little hospital. They won?t survive…. It?s just unfair that we have to be under a monopoly that we have no control over.?
? What happens to the city?s investment if HMC/CAH decides not to build the new facility after all?
Mayor Delores Dalke responded: ?What do you think we?re going to do, just dish out the bills to them? We?re not going to do that. We?re going to wait until the electric, the water and the sewer go in. We?re not handing them $1.275 million. We won?t do that.?
Dalke added that city generally is not reimbursed by a for-profit businesses when it provides utilities to their location, citing Hillsboro Heights as an example.
Recent court case
To illustrate their mistrust of HMC/CAH, the Reehs cited a recent case in Yadkin County, N.C., where the company closed one of its hospitals ?because the county refused to keep funding it? to the tune of $300,000 per year.
?The court documents say (HMC/CAH) walked out of the building, they shut down the hospital in violation of a court order to keep it open and they were cited for contempt of court,? Michael Reeh said.
Paine responded, ?At this point, the facts that I know are contrary to that. The county was looking to change the contract the hospital was under, and the hospital was asking the county to honor the contract they were under. The county was moving away from it, not the hospital.?
Michael Reeh responded: ?You need to make sure those facts are settled before you make a decision to give this money to a private business.?
Paine said, ?The action that is to be addressed (today) by the city council and the Public Building Commission does not give anybody money.?
Paine said by approving the development plan, the mayor is authorized to sign the appropriate documents when they arrive.
?It does nothing to get the hospital closed on its loan,? he said later.
Only first step
Approving the development plan was only the first in a series of required legal procedures the city and its agents must complete before the $1.275 million bond issue is finalized.
The council was to meet in special session at 4 p.m. Aug. 11 to consider the next step in the process: to consider a change in the PBC charter ordinance that would allow it to authorize the bond issue.
He said the ordinance change will gives the city authorization to work at a particular location.
?Right now, it says we can help a public hospital owned and maintained by the city of Hillsboro,? he said. ?The language will change to say that we are not the owner of the hospital, we?re not maintaining the hospital. We?re just creating this so this incentive program can work.?
Paine said if authorization to change the charter ordinance is approved, the public will have a 60-day period to protest the change.
Paine distributed to council members a tentative financing schedule indicating the various steps the city and its agents must complete before the taxable revenue bonds are in place. Final closing is projected for Dec. 17.
Paine said the projected schedule for the city doesn?t necessarily mean the hospital cannot begin construction in October, as HMC/CAH CEO?Larry Arthur indicated in an earlier interview.
?It?s going to be their choice, and it?s going to be something that they work out with the Bank of Hays. The Bank of Hays needs to see us making progress, particularly in that October timeframe, after the protest period is finished, moving toward the financing decision points.
?If they?re comfortable with us making those things happen, they could say, ?Let?s close it and let?s go on.??
In other business, the council:
? approved a request from the Chamber of Com?merce Retail Committee to close off two blocks of downtown Main Street from 5-9 p.m. Sept. 22, the Tuesday after the Arts & Crafts Fair, for local business promotion.
? approved two pay estimates from Circle C Paving of Goddard to pay for recent seal projects: $90,961.81 for the airport project with 10 percent retainage for final tasks; and $87,455.75 for the slurry seal applied to several local streets, with 10 percent retainage to complete striping procedures downtown.
The city will be reimbursed 90 percent of the airport project expense through the Kansas Depart?ment of Transportation.
? approved paying $19,539.55 to EBH & Associ?ates for construction and inspection services provided for the Circle C projects. Of that amount, $14,539.65 is eligible for KDOT reimbursement.
? delayed action on a lease agreement to acquire a new forklift for the water department. Councilor Dirks asked that the city pursue more than one bid.
? approved the mayor?s appointment of Joyce Kyle to the board of directors of Salem Home.
? heard from Paine that the public hearing for the 2016 city budget will occur at the council?s Aug. 11 meeting.