Council passes 30-year lease with city, nonprofit hospital after Mayor vetos previous deal : KZHE News Blog
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Council passes 30-year lease with city, nonprofit hospital after Mayor vetos previous deal

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. 

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