Is crippling new debt the future for Sebastopol’s public hospital district? Yes, unless taxpayers in the Palm Drive Health Care District come to board meetings and speak out now.
Taxpayers are already on the hook for district debts of $28 million. If the board majority gets its way, taxpayers could be liable for almost $900,000 more, each month.
What’s happening is that a majority of board members favors putting the twice-bankrupt district back in charge of financially failing Sonoma West Medical Center, formerly Palm Drive Hospital. This would make district taxpayers liable for all future losses of the 25-bed hospital and could extend parcel tax payments for years, even decades, to come.
How bad might future losses be? Substantial. Operating losses totaled a staggering $19.3 million as of August, the last month for which we have final figures. That’s a whopping $877,272 average monthly loss since the hospital reopened in October 2015.
The board majority appeared ready to approve the takeover at its Oct. 30 special meeting, despite lacking up-to-date information about hospital income and losses. The district board is elected by voters and oversees the hospital and its current manager, SWMC Inc.
Disaster was delayed when several members of the public, including a former board member, spoke out, saying the board was acting without adequate public notice and without adequate financial information. Speakers also reminded board members they had a fiduciary responsibility to the public and could be sued unless they exercised reasonable care in decision-making. The board then postponed action until Dec. 4, asking the hospital CEO for updated financials.
Because this is a public health care district, there is little county or state oversight. We, the voting public, are expected to hold our elected officials accountable. If members of the public don’t show up at meetings and state their concerns, the board acts on its own.
The hospital was failing in 2000 when west county residents voted to make it a public health care district, and it has operated in the red ever since. Although some proponents still insist the hospital is about to turn the corner financially, losses continue to mount.
Remember, too, the district is in its second bankruptcy, declared in April 2014. It owes roughly $28 million in secured and unsecured debt, with no plan to resolve the bankruptcy. Taxpayers face decades of paying for debt already incurred by the district.
Why even consider taking on liability for future hospital debts?
Well, the agreement 2½ years ago between the district and SWMC Inc. to reopen the hospital violated IRS rules for bonds. Unfortunately, time has run out for the district to cure this violation, so the district must take action soon to avoid IRS penalties of more than $40,000 per month.
Several options have been mentioned, but the only one discussed at length by the board is for the district to take over operating the hospital directly. Why aren’t these options discussed openly? Can the district even pay hospital expenses? No. Parcel taxes bring in less than $4 million annually. More than half goes directly to debt service on outstanding bonds. The district can’t absorb even one month of hospital operating losses.
Do taxpayers want to pay for future hospital losses? We don’t think so. But unless people speak up, that could happen. As elected officials, district board members’ fiduciary responsibility is to act in the public interest, exercise due diligence and reasonable care and not take on unnecessary risk.