The South Central Kansas Medical Center Board of Trustees held its first town hall meeting June 28 not only to provide general information about the upcoming Health Care Sales Tax vote, but also to answer any questions attendees had about the tax or SCKMC operations.
Dan Jurkovich, board chair and mayor of Arkansas City, presented to the nearly 30 individuals who attended the meeting at the Senior Citizens Center, though not before asking them to write down any questions they had coming into the meeting.
“We’d like to know what the questions are before the presentation so that we know what the questions are,” he said.
“We want to do a question-and-answer page (online).”
This sales tax question will be voted on via mail-in ballot.
Ballots will be mailed to all registered Ark City voters on or around Aug. 17, and must be returned and postmarked no later than noon Sept 6.
Sales tax proposal
The first half of Jurkovich’s presentation outlined the four obstacles facing the city regarding the repayment of the construction bonds for SCKMC, which were issued in 2009. The second half examined the options that are available to the hospital.
The construction bonds originally were issued for $23 million, but due to their high interest rates, which average nearly 7 percent, they have only been paid down to $21 million in principal in the last 10 years.
Each year, there are two scheduled payments to the bonds, which total nearly $1.9 million annually.
The sales tax currently being collected in Arkansas City for this repayment totals 1.5 percent.
There is a half-cent sales tax that will drop off in April 2019 and a 1-percent sales tax that will sunset in 2026.
However, the new sales tax question being presented to the public would eliminate the two sales taxes currently being collected and replace them with a brand-new general sales tax pledged to the hospital bonds, while also reducing the sales tax rate to only 1 percent.
This sales tax will be non-sunsetting, but the City Commission has passed a resolution stating that the intent is to terminate the tax once the bonds are paid in full.
If this tax is implemented, there is a good possibility that the bonds can be refinanced to a lower percentage rate, according to Ranson Financial Group, an independent financial company that consulted for the board last month regarding the feasibility of refinancing the bonds.
The bonds are set to be paid off in 2038, but without the new sales tax, there will not be enough money coming in to pay for them after 2026.
‘Full faith and credit’
When the bonds were issued, the city pledged its full faith and credit to repay them — which essentially is like co-signing on a loan for an person who has no credit. Because of this, the city is ultimately responsible for making sure that the bonds are paid off.
If the Health Care Sales Tax isn’t approved, the city might have to either increase property taxes by 5.5 mills or raise every household’s utility bill by an average of $8 per month to cover the shortfall.
“In 2026, when the one-cent tax expires, we’ll have zero (dollars) coming in and we’ll still have to pay the $1.9 million per year all the way to 2038,” Jurkovich said. At that point, property taxes would have to be raised by 50 percent to cover that payment.
SCKMC, whose finances have been in the red for several years for a myriad of reasons, likely will not ever be able to pay the bonds on its own.
The trustees also pledged to fix SCKMC’s finances by fixing the budget to align with the funds the hospital actually brings in each year.
Jurkovich emphasized that the board would look at all of the options available, including selling the hospital or partnering with another organization, if the money to be gained was enough to make it worth doing.
He did caution, however, that any loss of local control could result in the closure of the hospital.
If that were to happen, the doctors at the Ark City Clinic likely would be the only primary care physicians left in Ark City, Jurkovich said.
That staff already has a full schedule, with long wait times reported by many. Indeed, Ark City itself does not have enough doctors currently.
Also, even in those scenarios, Jurkovich said people who want to see the city sell SCKMC or close it still should vote for the Health Care Sales Tax, because the debt will not go away even if the building is closed and empty. The only other alternative at that point would be property taxes.
The SCKMC Board of Trustees have scheduled meetings every Thursday until the ballots are due. So far, the following locations are confirmed:
- 7 p.m. July 5 at the Northwest Community Center, located at 615 W. Birch Ave.
- 7 p.m. July 19 at the Water Treatment Facility, located at 400 W. Madison Ave.
- 7 p.m. Aug. 9 at Veterans of Foreign Wars Post 1254, located at 3212 N. Summit St.
Future locations will be announced once they have been confirmed. The city is working on setting meetings at all of the local public schools.
Citizens are encouraged to attend as many of the meetings as they would like.
Questions and concerns will be addressed during the meetings by board members as best as they can, but if additional research is needed, the answers will appear online later.