NRMC Board approves $1.5 million hospital levy

by Tim Hennagir
ECM Sun Newspapers

The New River Medical Center Board of Directors certified a $1.5 million 2013 hospital district tax levy Sept. 13 with limited regular meeting agenda discussion.

Hospital board members also approved a budget for the next fiscal year that contains a huge shortfall.

Last week, district officials estimated 2013 operating losses at $11.3 million, with a total loss of $11.7 million.

The higher figure includes non-operating income, expenses, gains and losses from current joint ventures.

The tax levy and 2013 budget were originally discussed during an early morning district finance committee meeting Wednesday, Sept. 12.

Both items appeared on the board’s consent items after being moved from the action items section of the agenda.

The board elected to follow CFO Nancy Friesen’s recommendation to approve the $1.5 million levy, which matches a previous peak set in 2007.

The annual levy rose and remained at $870,000 for the tax years 1994 to 2002, then was raised to $1 million for 2003 to 2006. The levy reached a peak $1.5 million in 2007.

The hospital board reduced the levy by increments of $200,000 each year from 2009 to 2012, but the finance committee suggested the 2013 levy increase because the district needs to cover its outstanding bond obligations.

In a memo to the committee and the board, Friesen said New River Medical Center is required by 2009 bond covenants to maintain debt service coverage of 125 percent.

Friesen recommended the board approve a preliminary 2013 levy of $1.5 million, increasing the hospital district’s debt service coverage to 130 percent.

Friesen reminded the board last week that the tax levy could be lowered prior to Dec. 31 and amended if year-end financial reports end with positive results.

The proposed levy increase didn’t sit well with Otsego city representatives.

Mayor Jessica Stockamp spoke first during the public forum portion of the meeting.

“The city is very concerned about the potential increase in the levy,” she said. “It remains the position of the city of Otsego that our residents do not utilize the hospital’s medical services in proportion to our population.” She added the currently proposed property tax levy represented an unjustified burden on residents.

City Attorney Andrew MacArthur read a copy of a three-page letter submitted on the city’s behalf stating its strong opposition to the levy increase.

MacArthur said the city would consider a second petition for detachment from the district if the board approved “an unreasonable” property tax levy increase.

“The city still strongly believes its property owners should be paying no property tax levy to the district, although in recent years, the district board has maintained the property tax levy at a more reasonable amount,” MacArthur said, adding in 2009 the city asserted its detachment position, still maintaining today funding a district hospital via property taxes is “an anachronism that does not fit contemporary circumstances.”

MacArthur closed by urging the board to reject the tax increase. Dr. Kristine Kuper, a Monticello Clinic physician, directed her public forum comments at New River Medical Center CEO Marshall Smith.

Kuper addressed the hospital board as a Silver Creek Township resident. She questioned the board’s direction and was directly critical of Smith’s leadership.

“I’m speaking on behalf of myself, and not representing the clinic. There are lots and lots of issues here,” she said. “You didn’t take our suggestions about hiring staff for the Level II nursery. You are forcing your mistakes onto the public. That’s wrong.”

When it came time for the board to review the consent agenda, which contained the levy and budget recommendations, Board Member Richard Helms, who represents Big Lake Township, asked Board Chairman Ervin Danielowski if the board was going to further discuss the 2013 tax levy and fiscal year 2013 budget.

“Are you going to read off these things without any discussion?” Helms asked. Danielowski replied: “You can take anything you want to off the agenda.” Smith commented on the budget and staff-imposed cost-savings measures.

“We’ve presented a budget that represents the facts,” Smith said. “We’ve also done many salary, non-salary and capital expenditure reductions, initiatives to adjust salaries and worked with our staffing matrix. We’ve looked at the cause and effect of how various services affect each other; we’ve made many salary adjustments. We’ve reduced non-salary based on expense and  reduced or eliminated contracts that don’t benefit New River Medical Center,” Smith added.

Smith reiterated the tax levy was a requirement of the district’s bond debt. “It’s not a choice,” he said. “It’s a requirement to meet the covenants of the bonds.”

Board Member Rob VanDenBerg said the levy should be adjusted and removed from the consent agenda. Danielowski replied: “We’ve pretty well done that.”

Helms agreed the hospital board couldn’t change the 2013 tax levy because of the bond covenants that were in place. “We have to look at the 2013 budget.”

Newly sworn-in Board Member Sheldon Johnson asked Friesen about bond financing. According to Freisen, the earliest one series of bonds could be refunded would be 2016. One bond series could be refunded this fall, but with the hospital’s current financial condition, Friesen said such a course wasn’t advisable.