Effingham County commissioners and Effingham Health System officials have agreed on a plan that will ensure the hospital’s funding and enables both bodies to track the payments to the hospital.
Commissioners approved unanimously a memorandum of understanding, contingent upon a letter from the Department of Housing and Urban Development approving the agreement.
“This is something we have long hoped to receive,” Effingham Health System CEO Norma Jean Morgan said to commissioners, “and we thank you for your generosity.”
County finance director Joanna Wright said there were several issues to work out. The disbursements of property tax proceeds crossed fiscal years and calendar years, and there was also discussion on how to account for tax receipts in previous years.
The contract between the county and the hospital calls for disbursements of $300,000 a month, but the revenue exceeded the target amount in some months, Wright said.
Under the original pact between the hospital and the county, there was no mechanism regarding collection and disbursement of property taxes from the tax commissioner. There also was not a way to account for underpayments or overpayments. Property tax receipts had been sent directly to the hospital.
“That current levy is disbursed directly to the hospital from the tax commissioner’s office. As a result, some of the reconciliation process that has to take place can be quite cumbersome,” Wright said.
The recent agreement calls for separate accounts to be established, with the hospital’s portion of property tax revenue held in an account and the hospital receiving $300,000 a month from that account. Representatives from the county and the hospital will meet quarterly to reconcile the payments and receipts.
“The timing and mechanisms had to be worked out,” Wright said. “We tried to address the three major issues we had.”
The county and the hospital originally entered into an agreement that provided the hospital $3.2 million in property tax proceeds as part of the hospital’s modernization and expansion. The modernization was backed by $30 million in Build America bonds from HUD.
Hospital officials said the county was short on its payments by $1 million, and the county disagreed.
The total the county owes the hospital for the 2014 calendar year is $2.95 million.
“We still have receipts coming in,” Wright said. “We believe we can fill that.”
The memorandum of understanding also calls for the county to convey to the hospital 23.67 acres, currently the home of the Gateway Services building, which is next to the hospital. The hospital has been seeking land to accommodate parking.
“Everything seems to be agreed upon by both parties,” said Commissioner Vera Jones.
The hospital authority also has the right to ask for more than the guaranteed $3.6 million, and the county can ask to reimbursed for some of its indigent care costs.
Rusty Ross, who has been providing legal counsel for the hospital on its expansion and modernization, said a HUD representative indicated to him that the agency has no problem with the memorandum of understanding reached between the hospital authority and the county.
“I might also add that even in the original agreement, if it is an amendment, we only have to get HUD’s approval if it adversely affects us,” Ross said. “Given the clarification language in this memorandum of understanding, it doesn’t prejudice HUD; it puts us back on track.”