The South Central Kansas Medical Center (SCKMC) Board of Trustees voted unanimously Thursday morning to recommend a half-cent sales tax to the City Commission of Arkansas City for a vote next week.
This half-cent sales tax would take the place of the current half-cent tax that will sunset next April.
Prior to the meeting, City Manager Nick Hernandez contacted Gilmore & Bell, counsel for the SCKMC construction bonds, to discuss the possibility of refinancing those bonds, of which more than $20 million remains to be repaid.
The possibility of refinancing the bonds in 2019 has been a goal that city leaders and hospital personnel have worked toward for several years.
With the recent bond rating downgrade by Moody’s, though, it is unclear if this still will be an option.
However, the language for a new sales tax question that was presented to the SCKMC board was approved by Gilmore & Bell. It states:
“Shall the City of Arkansas City, Kansas be authorized to: (1) impose a one-half percent (1/2%) citywide retailers general-purpose tax (the “Hospital Sales Tax”), the proceeds of which will be applied to the costs of financing payment of debt service previously incurred to construct the Medical Center, including costs associated with redemption of existing debt to obtain a more favorable interest rate; purchasing and repairing equipment for the Medical Center; (and) compensating the Medical Center for operational expense and supplies incurred in delivering uncompensated medical care to the community.”
Tax would not sunset
Several board members expressed concern about the language used in the proposal.
Some thought the term “uncompensated medical care” is too broad and could be manipulated.
SCKMC attorney Otis Morrow stated he would like to see the wording changed.
This proposal also does not include a sunset for the half-cent tax, should it be put to a vote and passed as currently worded.
The lack of a sunset means the tax potentially could be permanent, unless the City Commission decides to discontinue it later.
“You can revoke any sales tax at any time,” Hernandez said.
Commissioner Kanyon Gingher said she thinks the hospital is a quality-of-life issue, like access to police, fire and EMS services.
“I think the whole mission here is to get the city paid and to get the bonds paid,” said SCKMC board member JoLynn Foster.
“I agree,” Hernandez said. “Get the debt paid and get hospital operations where they’re stable.”
The board questioned if the passage of this tax will help to refinance the bonds.
“What’s the prospect of that?” asked board member Hap McLeod.
“High, very high. Because if you pass a half-cent general (tax), they will see that as 20 years of (stability),” Hernandez said.
If they were to refinance only $6 million of the debt, they could potentially save $1.6 million, according to Hernandez.
He said it was possible to cut the interest rate of one bond from 7 percent to 4 percent.
The question will be presented to the City Commission during its May 1 meeting.
New committee proposed
McLeod shared a proposal with the board that would create a brand-new committee, established as a “special hospital steering” committee.
“We haven’t communicated in the past,” he said. “We can’t do a lot of this, as you all know, in public meetings. That, in my opinion, is a big part of the problem.
“If we can’t tell the whole story, the commissioners can’t get the whole story, the public can’t get the whole story. There’s certain things that we have to go into executive session.”
SCKMC Marketing Director Clayton Pappan said that the presence of the media sometimes can stifle conversation between board members, but emphasized SCKMC has nothing to hide.
“It’s not the same thing,” Gingher said when McLeod mentioned executive sessions.
“I’m just saying there’s certain stuff…” McLeod began. “And the press recognizes that,” Gingher said.
“To get to an idea or a presentation from the board, we want to be together,” said SCKMC board chair Carol Hearne.
“In order to make that statement, you have to have an open and honest discussion, which if you’re doing your open and honest and bickering back and forth in (front of) the press, half of the things that you don’t want, that you may not end up with in your final determination, might be the things that people pick up on.”
Other SCKMC committees
The hospital conducts many committee meetings throughout the month, a practice that has been in place for many years.
Since the building of the new hospital, however, some of those committees became defunct.
When the committees still met regularly, their recommendations would go before the board and be passed.
“I often wondered why the public even came, because there never was … everything was pretty much determined — what you were going to buy — during the committee meetings and the board just approved what all the committees had done,” Hearne said.
Overall, the true work was done at the committee level.
The board ultimately chose to recommend to the City Commission the creation of this new steering committee, which would include four SCKMC trustees, two city commissioners, and various management officials, consultants and other individuals “as necessary.”
Because a quorum of neither the City Commission nor the SCKMC Board of Trustees would be present, its meetings would not be open to the public. But the steering also would not be able to take any actions — it could only make recommendations.
In other business, the trustees:
- approved the March meeting minutes.
- heard BKD Director Matt Morris report on the 2017 audit.
- heard financial and quality performance reports from staff.
- heard a management report from SCKMC Chief Executive Officer Virgil Watson.
SCKMC trustees Dr. Nick Rogers, Dr. Robert Yoachim and Karen Zeller were absent from the meeting.
Dr. Jerry Old attended the first hour of the meeting, but was not present during the vote for either item mentioned in this story.