On Monday, September 19, 2016 a validation hearing was held in Greene County Circuit Court for a $2,750,000 bond issue for the Greene County Health System (GCHS) to be secured by the one cent sales tax that the hospital has been receiving continuously since 1977.
The hearing before Judge Eddie Hardaway was a requirement of the bond issuers to insure that the sales tax revenues would be pledged to repay the bond for a ten year period regardless of the financial status of the GCHS facilities.
No new revenues were required or pledged, just the official legal assurance that the sales tax revenues, which are already authorized by law, be committed to be paid to retire the bonds.
Attorney Frank McPhillips of Maynard, Cooper and Gale represented the Greene County Health System and District Attorney Greg Griggers represented the interest of the people of the State of Alabama at this hearing.
McPhillips called only one witness, Elmore Patterson, CEO of the Greene County Health System, which includes the Hospital, Residential Care Center (Nursing Home), Physicians Clinic and Home Health Care Center. Patterson explained the need for the bond issue and entered various resolutions and documents approved by the GCHS Board of Directors into the record.
Patterson said the GCHS had been adversely affected in 2015, when the State of Alabama Medicaid Agency audited 2012 activities (before Patterson’s tenure as CEO) and charged back $1.2 million in payments received by GCHS for services to low income and indigent people. The state agency recouped all of its funds by withholding reimbursement and disproportionate share payments during 2015 and 2016.
The recoupment of these funds coupled with a reduction in reimbursement rates and the failure to expand Medicaid to many low income working people, placed the GCHS in a financial crisis, where it could not meet all of its ongoing bills to suppliers, vendors and the state and Federal government for payroll and other taxes.
Patterson testified that he was forced to cutback staff by 25%, increase employees share of payment for health insurance, and make other efforts to reduce expenses. He also indicated that he was trying to increase the utilization of the Nursing Home from an average census of 35 when he started working in August 2013 to 55 today. He said he hoped to fill all 72 beds in the Nursing Home and increase the utilization of the Hospital and Physicians Clinic as well.The GCHS Board of Directors began working with Comer Capital, a Mississippi firm specializing in raising capital for rural hospitals and other public entities with financial problems. The GCHS Board agreed to seek a $3 million bond issue to generate immediate funds to pay off indebtedness and make other operating and maintenance improvements in the facilities.
Citizens Trust Bank of Atlanta, a Black bank with a branch in Eutaw, Alabama, agreed to finance a $2.75 million bond issue, for ten years, at 4% interest, backed by the one cent sales tax the GCHS is already receiving monthly. The sales tax currently generates about $33,000 a month in revenue to the GCHS.
The proceeds of the bonds will be used to pay off indebtedness, including back taxes, and make some improvements to the services and facilities. With the other fiscal changes and increased utilization of the Nursing Home and other facilities, Patterson said that he hopes the health facility will break-even or show a small surplus in future years.
McPhillips placed into the record information about the one cent sales tax which was legally authorized in 1977, renewed for ten years to 1987, renewed for twenty years to 2007 and renewed again for twenty years until 2027.The sales tax revenues will be adequate to service the bond repayment and interest.
DA Greg Griggers questioned Patterson about some of the figures that were presented and was concerned that payment of Federal and state taxes was delinquent. Griggers also questioned the impact of several employee lawsuits filed against GCHS. Patterson clarified that these lawsuits came from employees who were reduced because of budget cutbacks and could not comment further because these cases were still pending in litigation. Griggers said that he was concerned that the Hospital remain open to serve the health needs of people in the area and maintain the employment of its staff.
McPhillips presented the judge with a proposed motion to validate the issuance of the bonds based on the existing sales tax revenues. McPhillips said that the bonds could be issued within 14 days of his order. Judge Hardaway said he would make a decision on the matter soon after reviewing the information presented at the hearing.