Commissioners Split at Tense Meeting on Additional Help for Evans Memorial

The Evans County Board of Commissioners voted 3-2 to endorse the decision by Evans County Memorial to utilize excess funds in the debt service account to pay down the $1.3 million Accounts Payable (AP) balance.

Evans Memorial is requesting $700,000 because the 2006 bonds on the hospital require that the reserve fund equal $484,600 on December 31, 2018. Currently, the balance is at $1.3 million with almost $600,000 of the money over 120 days outstanding. In the letter provided to Commissioners at the June meeting, it was said that the hospital would pay the funds back over a five-year period using money collected from the rural hospital state income tax credit. The hospital estimates a minimum of $150,000 each year in repayments. The bonds held by the county are a secured debt while the accounts payable debt is an ‘unsecured debt,’ and the rural hospital credit does not allow for the usage of funds on unsecured debts.

Though it was previously believed that the hospital needed the approval of the Board of Commissioners to move the money, County Attorney Jay Swindell told Commissioners Tuesday evening that Evans Memorial was only required to provide notice in writing 10 days prior to withdrawal of the funds. But that was not entirely clear until twenty-five minutes into the discussion.  

Mayor Terry Branch of Claxton, who is also on the Hospital Board, spoke on behalf of the hospital. “We may need to use some of the funds that were in the reserves for the bond to be able to pay down payables to get out from under some of the interest rates we’re paying. So that’s why we’re here tonight, to see if you have any questions and to ask that you would take action on that and possibly endorse it,” Branch told Commissioners.

Commissioner Del Beasley asked if the state income tax credit for rural hospitals would be used to pay back the debt to the reserve account. “The state income tax money that’s been given to the hospital should be able to put this money back

Branch said the intent would be to repay the money back to the reserves. “That would not be done immediately, but that is the intent of the hospital board.”

Beasley asked if it was possible for the hospital to use the $700,000 from the reserve accounts and then pay the annual $488,000 bond payment each year and remove the 2 mills from the property taxes for the county. In essence, return the bond payments back to the responsibility of the hospital, instead of Evans County taxpayers. “It’s the hospital’s bond anyway,” Beasley said.

Branch told Commissioners, “Not at this time. The purpose of the tax credit is to supplement the hospital, to get the hospital healthy again, and at that point in time, the conversation could be to, down the road, possibly, hopefully the hospital would get back healthy enough that they could start participating in the repayment of the bond.”

The agreement for the hospital bond currently reads that, so long as the hospital says it is unable to make payments on the bond, the county is responsible for the bond payments. This allows the hospital to use additional funds, like money from the rural hospital tax credit, to be used on other things like equipment and upgrades, instead of paying down the bond debt.

Commissioner Brian Croft asked where the $700,000 in reserves originated from, which hospital officials say came from the Glenvue Nursing Home sale. Croft asked if there was an agreement that the money had to stay in the reserve account, which Commissioner Beasley replied, “to be there to help pay the bond payment in case the hospital couldn’t pay it. Instead, we stepped in and started paying it.”

The hospital has not made a bond payment in four years as the county has been underwriting the payment on the bond.

Croft asked hospitals officials how many employees signed up to give their income tax funds to Evans Memorial. Evans Memorial CEO Nikki NeSmith and CFO John Wiggins were also present, along with two other hospital officials and hospital board member and Commissioner-elect Tony Lewis. NeSmith said she did not know the number of employees who signed up, but that $34,000 received so far was from employees.

County Administrator Casey Burkhalter told Commissioners that the hospital bond debt is costing the county considerable money. The $488,000 annual payment has forced cutbacks and to balance the budget for the upcoming year, the county may see up to another 2 mills of increase on their property tax bill. “We’re worried about the tax base here because we’ve cut back services. Something’s gotta give,” Burkhalter said.

“We understand that fully,” Branch said. “And we understand that the county has made 2 mills to go toward paying the bond payment, so I see what you’re talking about. Like I said, we were just planning about the fact that it might be feasible to use the reserve money to reduce the AP and get out from under the interest rates that we’re paying right now.”

Beasley told Branch he felt that made sense. “When is the money going to be put back in for the $700,000? That’s what I understood, that when we started getting the tax money, the money would go back in immediately toward paying that. So you’re saying now, ‘sometime in the future.’”

NeSmith said the hospital finance committee discussed with the county that the money for 2018 has already been dispersed and no more money will be issued from the state until 2019. “The money that we get starting January 1, we would then pay that back,” NeSmith said.

Beasley wanted to know if the hospital would have enough money to pay the bond payment if the county stopped collecting the two mills to pay it. CFO John Wiggins said there would not be enough. NeSmith said operations cannot fund the payment without the county  millage rate because the tax credit funds have been allocated for other expenditures instead of the bond.

Beasley then asked if the $700,000 could be taken to pay down the AP accounts and the county could stop collecting the mills on taxpayers in January 2019. NeSmith told Commissioners that hospital officials did not come to the meeting expecting to negotiate taking over the bond.  Beasley said, “If you can pay the $700,000 back, you can make the bond payments.”

Tony Lewis, who serves on the hospital board, said the problem with the tax credit is that the amount varies each year. Only $60 million is available across the state and while each hospital can receive up to $4 million, 58 hospitals are eligible to receive a piece of the $60 million pie. Tax credits are dispersed on a first come, first serve basis. “If we could max out the tax credit, we could pay the bond off but we don’t expect to receive the full $4 million.” Additionally, the hospital can use the tax credit money on other things so long as the county pays the bond payment.

Branch told Commissioners again that that the purpose of the tax credit is “to make the hospital healthy.” He also said, “We were under the impression that the county had already designated 2 mills.”

Burkhalter said the 2 mills is on an annual basis. Commissioner Beasley reiterated, “We have to adopt it by resolution.”

Branch said, “Basically we are here tonight is that we had sent the letter asking the county to endorse us in utilizing part of the reserve fund. That would be the only question.”

Commissioner Croft asked hospital officials what would be done to “survive” if the county stopped collecting the two mills for the hospital bond payment. Branch told Croft that the county guaranteed the bonds, so it has to be paid and County Attorney Jay Swindell told Commissioners, “You already pledged to make the payments.”

Croft asked again what actions had been taken to make the hospital survive so it can work toward making the payments. Branch said it wasn’t something to get into at this time, but instead one-on-one with the CEO of the hospital. Croft said the hospital has an economic value but there “has to be a point where you start to survive too without tax money.”

Hospital officials said they’ve provided $3 million in free care each year, mostly to Evans County residents. The word “free” meaning care that was not paid for by people who were billed. NeSmith said much is out of their control, too. Medicare and Medicaid reimbursements have hurt the hospital’s bottom line as well.

Croft said he is a business owner and when things get tough, he is the one to take a pay cut. “If I lose enough business, someone loses their job,” he said. Branch said 100 employees had been cut in the last year and NeSmith said she was doing the job of five employees. “There have been many cuts from the top down,” NeSmith told Croft.

It was at that time that Swindell told Commissioners that the enabling resolution for the bond payments only required the hospital to notify the Commissioners if money was going to be withdrawn. The Commissioners did not need to, nor could they legally, offer permission to do so.

Branch said “In the spirit of working with the county, we wanted to bring it to the county and ask for the county’s endorsement.”

Commissioner Gary Bell made the motion to endorse the decision to withdraw funds. Commissioner Jill Griffin seconded. Croft said, “So we’re going to do with no contract?” Burkhalter told Croft it was not the Commissioner’s money to contract.

Chairman Shela Holland told hospital officials ahead of the vote, “I understand y’all take care of a lot of people, but right now, our small county, we’re struggling. We’re gonna have to end up doing another two mills increase and I want you to know this: Do better with your business. I know the government doesn’t cover a lot of stuff, I heard about all that stuff, but y’all need to help us too, because we can’t keep doing this and doing this. What’s going to happen is the county’s gonna file for bankruptcy. We end up keeping putting money in and money in and y’all not trying to help us get some of this money back. I’m just saying what I feel.”

Branch said, “With all due respect, can we say what we feel? The county maybe could do better with their business.”

“Sure we could do better,” Holland said. “If we keep our money. We’ll take care of our obligation, because we contracted that we sign. But all this additional stuff y’all asking for. See if y’all can help yourself out a little more.”

NeSmith said the hospital is trying to help itself. “We’ve added on additional services in our operating room, we had a six month return on our investment, we opened a new unit in October that we are still building, we are taking actions. We had a positive year last fiscal year for the first year since we sold the nursing home. Everyone has many, many hats.”

Croft asked how many employees at the hospital earned more than $75,000 annually. “Not many,” NeSmith replied.

Ultimately, the vote was 3-2 by commissioners with Croft and Burney opposing the endorsement to use the funds. Beasley voted with Bell and Griffin. Chairman Shela Holland does not vote.

AllOnGeorgia spoke with Nikki NeSmith and John Wiggins after the vote by Commissioners. NeSmith said that while no formal agreement was in place, the hospital would make every effort to replace the money to the reserve account as soon as it is feasible.