KZHE News Blog
by J.D. Bailey on 08/24/20
After a veto late last week from Magnolia Mayor Parnell Vann, the Magnolia City Council on Monday once again approved a multi-year lease agreement between the city and Magnolia Regional Health System Inc. to occupy Magnolia’s hospital. This time, though, the lease was revised slightly and the mayor was on board with a new 30-year agreement between the two parties.
Magnolia Regional Health System, Inc. is the recently-created nonprofit corporation also known as Magnolia Regional Medical Center. The hospital was formerly a city-owned entity, but MRMC recently separated and gained 501(c)(3) nonprofit status in an attempt to generate an additional $1.2 million annually in federal insurance reimbursement payments. The payments are not available to government-tied facilities.
The new lease ordinance was passed unanimously Monday night by present City Council members Jeff White, Larry Talley, Tia Wesson, Jamie Waller, Steve Crowell, Steve Nipper, and James Jefferson. Alderman Kelli Souter was not able to attend the meeting but stated via the mayor that she was “on board” with the council’s decision.
“We have a 30-year lease with the hospital,” said Vann Monday night ahead of the council’s vote. “That’s the life of the depreciation left on the building.”
The new ordinance is nearly identical to the lease passed last week, but it revises the term of years in the agreement. The vetoed lease could have stretched up to 75 years. It contained a provision for a 25-year agreement with two auto-renewing terms of the same length.
The lease ordinance that was passed Aug. 17 essentially died after Thursday’s veto. It contained out clauses for both the city and MRMC, but the Mayor last week said he did not support a lease that could last up to 75 years.
His opposition to the auto-renewal clause was the basis for his veto order, according to an Aug. 20 letter addressed to the Magnolia City Council, the citizens of Magnolia, and the board members of Magnolia Health System Inc.
“I am compelled to veto this ordinance due to Provision #19 “Option to Renew” of the lease,” said Vann in the letter. “… I understand having a perpetual or auto-renewal lease is attractive to tenants, but this lease involves more than two entities. It involves Magnolia Regional Health System, Inc., the City of Magnolia, and the taxpayers of the City.”
He continued: “No proof has been provided to show that a perpetual lease is necessary or even beneficial to both the hospital and the City. Although I accept that 25 years may be a reasonable term for this lease, and beneficial to the depreciation plan of the Magnolia Regional Health System, I do not agree that the city council should enter a contract with an automatic renewal provision that I believe impacts future growth of the City.
“I urge the Council to reconsider its approval of the referenced lease. I also respectfully request that the Magnolia Regional Health System, Inc. Board of Directors craft a lease with a term that is less prohibitive to the city.”
The new 30-year lease was signed by the mayor Monday night and will take effect Tuesday morning.
“In 30 years from in the morning, the new council, the new hospital board, the new CEO, and the new mayor can make the new deal for the future,” said Vann on Monday. “...Healthcare is a must in our city. We can’t grow without healthcare. Without it, we can’t bring jobs, we can’t bring industry.”
MRMC’s tenant term will span the remaining “usable life” of the hospital’s physical property in Magnolia. By stretching the lease over three decades instead of a quarter-century with auto-renewal provisions, depreciation on the building will remain unchanged from its current rate.
On Monday, the new lease discussions were brief among the mayor and the council. The revised terms were presented that eliminated the 25-year auto-renewal clause and added the 30-year term. The new lease ordinance was read three times, then an emergency clause was passed to immediately activate the agreement.
“I think this is a fair deal for both parties involved,” said Waller during the discussion. “I appreciate everyone coming together and having a good discussion and being honest with each other on where we stand. Everyone had relevant points, and I think we really came together – the hospital board, the city council, the community – to make this work. I’m really proud that we were able to do that.”
The mayor last week had expressed interest in a 14-year lease between the city and the hospital but noted Monday that a 30-year agreement was a good compromise and a good deal for the citizens of Magnolia.
“I don’t have to be happy, but I’m happy,” he said. “This is a fair deal for the taxpayer, and we’ll let the future worry about it in 30 years.”
In other City Council News:
• With the school year beginning Monday, Magnolia Police have been advised by the mayor to have "zero tolerance" for drivers speeding through school zones, as well as talking and texting on cell phones.
• U.S. Census enumerators are currently going door-to-door to any household that has not submitted a census count. There are 37 days left, as of Monday, until the count expires. Residents can respond to the Census by going to www.2020census.gov, by calling 1-844-330-2020, or by mailing your paper application.
by J.D. Bailey on 08/18/20
After months of planning and negotiating, a building lease agreement between the city of Magnolia and Magnolia Regional Health System Inc., the nonprofit corporation also known as Magnolia Regional Medical Center, has been passed by the Magnolia City Council. The lease ordinance was voted upon Monday at a specially-called city council gathering.
There were technically two items voted on at the meeting: the lease ordinance itself, which passed by a 5-3 council vote, and an emergency clause to immediately enact the lease. That vote passed by a 7-1 margin.
Those voting in favor of the lease ordinance were Alderman Jamie Waller, Kelli Souter, Jeff White, Steve Crowell, and Steve Nipper. Those opposing the lease ordinance were Aldermen Larry Talley, Tia Wesson, and James Jefferson. Wesson was the only “no” vote for the ordinance’s emergency clause.
MRMC has already been approved for 501(c)(3) nonprofit status. The hospital was formerly a city-owned entity. The move to nonprofit status was made to generate an additional $1.2 million in annual hospital revenues, according to Rex Jones, chief operating officer at MRMC.
“That’s what our auditors have estimated,” he said Monday while addressing the council.
The extra funds will be generated through additional federal insurance reimbursement payments that weren’t previously available under MRMC’s government-owned status. The extra monies should greatly increase the financial health of the hospital.
Since the city still owns the hospital’s physical property in Magnolia, and MRMC is now a separate nonprofit corporation, a lease agreement was required between the two parties for MRMC to remain at the same hospital facility it has occupied since 2010.
Some of the terms and provisions in the lease include the following:
- Initial 25-year lease between the city and the hospital that auto-renews twice, totaling up to 75 years.
- Lease amount – $1 per year to use the facility
- $500,000 buffer limit on hospital expenditures -- anything over that must be approved by the city council
- The city of Magnolia can opt-out of the lease during the term if there is gross mismanagement or misuse of the hospital. This includes MRMC failing to provide certain medical services vital to the community, such as Emergency Room care.
- MRMC can opt-out of the lease if they desire.
The amount of tax paid the taxpayers to fund for the hospital’s construction bonds and maintenance fund will remain the same.
The hospital was approved for construction in May 2007 via a special election by the citizens of Magnolia. The vote included a 1.125-cent sales and use tax to fund the construction bonds, as well as a 0.25-cent tax used for upkeep and maintenance of the facility. The latter tax funds cannot be used to pay for hospital payroll expenses.
The bond tax will sunset when the building is paid off -- which is on track now for the mid-2030s. The quarter-cent maintenance tax is permanent.
The city of Magnolia held a public hearing Friday, Aug. 14, to address any concerns by citizens over the lease agreement. It was stated at the meeting that a vote on the lease ordinance would likely take place Monday. Attendees at the hearing included five city council members, Mayor Parnell Vann, and MRMC executives and board members.
On Monday, all eight city council members, the mayor, and numerous MRMC executives and board members attended the specially-called meeting. Ahead of the lease vote, discussions were held among the council and MRMC executives for nearly an hour. The topics included some of the same issues talked about at previous meetings, as well as specific lease terms.
Among the dissenting voters, Talley said he did not feel comfortable with the length of the lease.
Jones and MRMC Chief Financial Officer Roxanne Stewart both stated Monday that auditors view the lease as 25 years since it contains opt-out provisions every quarter-century. They also emphasized that the length of the lease is needed to prevent astronomical depreciation figures on MRMC’s annual financials.
Stewart noted that a 25-year lease will add $144,000 per year in depreciation. The hospital is considered to have a “useful life” of 40 years. There are currently 30 years left to pay, but the lease will compound the depreciation by five years.
A 14-year lease, which the mayor was in favor of, would have been even worse, according to the CFO. She calculated that such a term would mean upwards of $722,000 per year in added depreciation.
“By shortening the term of the lease, all of that depreciation has to be accelerated,” said Jones.
Depreciation is a “non-cash item,” according to Stewart, but it affects the appearance of the hospital’s profitability. In turn, poor profitability can affect the hospital’s ability to lease equipment.
Wesson, one of the three “no” votes for the lease ordinance, asked Jones about his own spending limit for purchases at the hospital. The CEO told her that any purchase over $50,000 must be approved by the MRMC Board of Commissioners. The board, though, can only approve matters up to the $500,000 buffer limit. Any purchase over that amount must go to the city council for a vote.
“If you read the lease, everything that we buy or put into the building -- even at the end of 25 years, or we say, ‘we’re walking away, we can’t continue,’ that’s [the city’s],” he said. “Anything that’s added or anything that is purchased, that becomes the property of the city of Magnolia. We deal in some big-ticket items, but my limit is much, much less than [$500,000].”
Vann, who did not have a vote in the lease ordinance, has been vocally opposed to some terms in the lease agreement. He said Monday that he felt a 14-year lease would better protect the citizens and that it could help Magnolia the road with infrastructure.
“That gets [the 1.125-cent] tax off the books and that lets the future city council decide if they want to create a recreation center, a park, or a superhighway,” he said. “The 0.25-cent [maintenance] tax will always be there.”
In response, Waller and White both noted that, no matter what the length of the lease, once the building bonds are paid off, the 1.125-cent sales and use tax will cease.
Among others opposed to the lease ordinance, Wesson said she felt MRMC’s customer service and ER care were not sufficient, stating that she had concern over stories of patients waiting long hours -- up to eight, according to the alderman -- for care.
“It concerns me how the citizens are being treated when they come here for services,” she said.
Jones addressed Wesson’s concerns, saying that he disagreed with her assessment of MRMC’s care. He noted that the hospital is constantly fighting a perception battle and has even made recent changes to its ER physician staff. He said that the facility has some of the highest ratings in the state for customer service and care and that ER wait times are in line with every surrounding facility -- averaging two hours from entrance-to-exit at the hospital.
The CEO did say, though, that there will always be times when waits are longer because, due to the low number of ER visits in the area, there is only one doctor on duty.
“If there’s two things bad going on, the person that comes in with a low-level acuity is going to have to wait a while,” he said. “…It isn’t something that we’re not aware of, and it isn’t something that we’re not working on.”
Waller, who was one of the five “yes” votes to approve the lease, noted that, if the longer the council delays the matter, it costs MRMC an additional $85,000 per month.
“The relatively small items that we’re getting hung up on do not hurt the city in any way, but they could potentially help save the hospital and keep it going, which actually helps the city,” he said. “I think if you look big picture and get past some of these little details and look at the opportunity that we have to help this hospital and to build a relationship with the hospital moving forward, it far outweighs taking the lease from 25 years to 14 years. Anything we can do to give this hospital a chance to survive, I think we strongly need to do that.”
He added: “We’ve got wats to get out of the lease if there’s a real reason. ...I feel this is a fair lease. I feel this what we originally agreed to, and I feel now, at the 11th hour, we’re getting bogged down in the details, that, worst-case scenario, it helps the hospital. That’s a win. That’s a win for the city.”
Crowell was also strongly in favor of the lease ordinance, stating that a worst-case scenario was going to bad for everyone – the city and the hospital.
“Quite frankly, it doesn’t matter if it’s a 14-year lease or a 25-year lease, if doomsday comes, which is kind of what we’ve been leaning towards, everybody’s in trouble. So why would we handcuff them and possibly make it where [the hospital] can’t do what they need to do.”
Jones in his final statements Monday prior to the vote asked if anyone opposed to the deal had another plan that could generate an additional $1.2 million per year for the hospital.
“If we don’t have this lease, then what’s the plan,” he said. “We’ve been operating the way we operating for 80 years and we are where we are now. Here’s an opportunity to move forward and be progressive, to take advantage of something to capture what we can, so that we can move forward with extra money and maybe make a couple hundred thousand dollars a year if we can.”
by J.D. Bailey on 08/14/20
Numerous local officials gathered Friday morning at the Magnolia City Council chambers for what was brief, yet required public hearing to formally address any public concerns or questions regarding Magnolia Regional Center’s new building lease with the city. The meeting was mandated to take place ahead of a special Magnolia City Council meeting set to take place Monday, Aug. 17, where a council vote and subsequent passage of an ordinance finalizing the lease agreement could take place.
The lease between the city, which owns the hospital building, and the newly-formed Magnolia Regional Medical Systems Inc. (aka Magnolia Regional Medical Center) is the final step in the hospital’s conversion from city-owned status into a separate nonprofit company. MRMC converted to 501(c)(3) nonprofit status in an attempt to generate an additional $750,000 per year in federal insurance reimbursements. The nonprofit status has already been granted, but the lease agreement has yet to be passed by the city council. The MRMC separation process has been underway since May 2019.
The hearing was conducted Friday by Magnolia City Attorney Mike Boyd. Officials in attendance included Magnolia Mayor Parnell Vann, as well as Magnolia City Councilmen Larry Talley, Steve Crowell, Steve Nipper, Jamie Waller, and Jeff White.
MRMC board members and staff were the only public attendees. They included Dr. John E. Alexander Jr., chairman of the MRMC board, and Rex Jones, chief executive officer of MRMC, and others.
A brief discussion between Boyd, Alexander, and Jones took place over the steps to finalize the lease place between the city and MRMC. The city attorney stated that no formal vote on the lease could take place Friday, but anticipated a vote would occur at Monday’s special city council meeting. There, an ordinance will be ready to be voted upon and, if passed, read three times to be made official. If the ordinance passes, the lease agreement will be in place, according to Boyd.
“In essence, the ordinance is set up to do that,” he said.
Any final lease discussions among the council will take place Monday. The mayor had previously brought up concerns over a $500,000 spending buffer for MRMC. The issue was briefly discussed Friday, with Boyd stating that any MRMC purchases over that amount would have to be approved by the Magnolia City Council. Anything under that amount, though, would not be subject to city oversight. The buffer allows for the purchase of equipment and other furnishings for the hospital.
Waller also brought up the buffer issue Friday, stating that he felt fine with the number and did not think any large expenses could be approved without MRMC board passage anyway.
“The hospital board has a level of authority to approve a certain amount with them, but the $500,000 was tied to [the council],” said Waller.
The fact was confirmed by Jones, who added that any purchases over $500,000 would be subject to city council approval. He also said that he was fine with the CEO being limited to a $100,000 purchase limit, but that issue was not part of the lease.
Monday’s meeting is set to take place at 5 p.m.