Newman Regional Health and Lyon County Officials had lots of questions for each other during a joint meeting regarding the formation of a Public Building Commission to re-finance the hospital’s bonds and possibly save the hospital approximately $3 million in interest. However, the county’s concern is the shift in liability from the hospital to the county.
Hospital officials presented commissioners with an informational slide presentation regarding the formation of the PBC. Hospital Chief Executive Officer Robert Driewer, led the conversation. He said the hospital board is separate from the Board of County Commissioners by statute and the management of the hospital is vested by the county to the board of trustees. The hospital also has an administrative contract with QHR.
“QHR simply has a management contract,” Driewer said. “The hospital is not owned or operated by QHR. It is a community-based hospital.”
The hospital has $15,780,000 in bonds issued, said Chief Financial Officer Holly French. Series A Bonds were issued in 2001 in the amount of $4,135,000 and in the same year Series B Bonds were issued in the amount of $4,605,000. In 2002, the hospital issued Series A Bonds in the amount of $7,040,000. The hospital’s net worth and equipment is $31,500,000. French said this amount is well above the hospital’s bond debt. Refinancing those bonds with a PBC would cost the hospital about $3,041,800 in interest. If the hospital were to do nothing, the current rate of 5.54 percent on the bonds would cost the hospital $6,376,551 in interest. A PBC rate would be about 4.06 percent. The hospital could re-fund bonds itself for a rate of 4.73 percent, which would cost the $4,405.020 in interest.
A public building commission may be created by ordinance or resolution by governing bodies and would have three to nine members. The public building commission has the ability to issue debt and does not have the authority to levy taxes. The public building commission, not the governing body, would hold the title to the hospital. The public building commission would then lease the hospital to the county and the county would sub-lease the property to the Newman.
Newman would remain in control of operations with its own board of trustees, and bond payments would be made to the bond trustee.
Lyon County Controller Dan Slater expressed concern about the move. He said the move would shift ultimate responsibility to the county for the bonds. Under the hospital’s current bonds, the county has no responsibility for paying those. In the case of a PBC, in a worst-case scenario, the county would be responsible for going to the taxpayers to pay off the bonds. This statement met some opposition from hospital officials who say they will re-pay the debt. Assistant County Counselor Michael Halleran responded.
“The county as to assume the worse case scenario,” he said.
Slater said this move comes close to putting the county in a banker position and he commented on the hospital’s $1.6 million loss for 2008.
“We’re almost in the position where we are a bank because we’d be loaning money to a business that hasn’t shown profits,” Slater said.
The formation of a PBC was brought up in light of the hospitals’ financial difficulties. The hospital recently made cuts including shutting down Recovery Road and the May 1 shutdown of Newman Home Health. Driewer said the hospital is likely to have to make more adjustments to meet challenging financial times.
As part of the restructuring plan, the hospital opted to complete the third-floor remodel as soon as possible and would consolidate to four nursing units instead of five. That would leave a unit in acute rehabilitation, OB/GYN, ICU, and telemetry/medical/surgery units.
Other options besides the PBC would be for the hospital to use its authority to ask for two to six mills in mill levy funding. The hospital hasn’t had to go to the taxpayers in this manner before but discussions have come up in regards to the option.
“Doing nothing is not the right answer,” Driewer said.
Driewer said Newman does more than provide hospital services to the community, it also facilitates a wide variety of other services.
Driewer said local control of the hospital is critical.
“You folks are talking about your community hospital,” Driewer said. “I think you have got something very precious and unique and I think you should keep it local. This is our community hospital. This is where the discussion happens.”
No decisions were made during Wednesday’s work session and the issue will undergo further study by both governmental entities.
“PBC’s to me opens up a whole new avenue of funding...where we’ve lost a little bit of control over by having to appoint a board,” County Commissioner Scott Briggs said.
admireed (anonymous) says...
No Public Building Commission! If let NRH refinance the bonds at quoted 4.73%. Rather pay a mill levy to support the hospital. Lyon County taxpayers do not need this additional bond burden.
Municipalities in the western US are going broke. Let us not follow the same path.
April 8, 2009 at 2:58 p.m. ( permalink | suggest removal )
justaflushaway (anonymous) says...
Maybe Driewer should agree to return his salary to help the county hospital, and maybe they could go for a couple of years without spending so damn much money on the building, I realize that some things need to kept up in good order. but what the hell do I know.......
April 8, 2009 at 9:14 p.m. ( permalink | suggest removal )
Joe_Strummer (anonymous) says...
Driewer is trying to clean up the mess left by a past administration.....including remodeling projects that were begun well before he was hired. From everything I read and hear, the man is trying to maintain Newman as a viable community hospital. All options must be explored.
April 9, 2009 at 8:24 a.m. ( permalink | suggest removal )