Sarasota Health News

Wary SMH plans tax rate increase

David Gulliver - posted 9:15 p.m. Tuesday, July 14

The Sarasota Memorial Hospital board is likely to vote to increase its property tax rate, with hospital officials warning of looming costs and the fragility of the hospital’s new profitability.

The board’s finance committee voted 7-2 last week to adopt the “rolled-back” rate, the tax rate that would keep the hospital’s revenues the same as the year before.

But because the value of the county’s real estate has fallen -- some $20 billion in the past year -- the rolled-back rate would actually increase the hospital’s millage.

The county has yet to calculate the final numbers for real estate value. But working with the county’s preliminary numbers, hospital administrators estimate that the rolled-back rate would be about 1.08 mills, up from 0.941 mills this year.

Holding the millage at the current rate would cost the hospital about $6.5 million in tax revenues next year, administrators project, on top of the $10 million decline they saw by holding the rate steady this year.

Last week’s finance committee vote sends the decision to the full board, which has the same nine voting members, at its July 20 meeting.

When the administration proposed the higher rate to the finance committee, officials noted that one “con” to the idea was the “perception of rate increase” and prepared a explanation defending the decision.

Officials note that by definition, adopting a rolled-back rate means the average taxpayer will pay no more than last year.

They also emphasize the hospital’s costly provision of safety-net care to the uninsured, the need to replace buildings, some more than 50 years old, the announced cuts of $2.5 million in Medicaid payments and anticipated cuts from Medicare, the hospital’s biggest revenue source.

They also point to the soon-to-open North Port emergency care center, which they expect to run a $3 million loss its first year.

And they also say they need to maintain a stable budget as they go to Wall Street to seek $100 million in bonds to finance a new bed tower, for which work will begin in October. The hospital also plans to spend $86.6 million of its reserves on the project.

The dissenting board members acknowledge the hospital has needs, but said that this year, even holding taxes flat is too much.

“People will note that the value of their homes have declined, but the taxes haven’t,” said Gerry Phillips, a retired real estate appraiser. “The economy is pretty tight right now, and people are struggling to keep their homes. I just think it’s a bad time to be raising taxes.”

“I think at this time it’s very hard for people to come up with more money, when homes are going into foreclosure and people are losing their jobs,” said Dr. Thomas Kelly, a heart surgeon.

“I’ve always said I’m very much in support of the hospital, and when they’re in financial difficulty I’m going to be the first one at the door to help. But management has done a great job, they’ve had a good year and they’re in a good position. I just don’t think we need to raise the millage.”

When its books close in September, the hospital expects a profit margin of about $55 million, after including tax revenue and investment income, Chief Financial Officer David Verinder said. It has cut losses on its operations alone from $23 million in 2006 to $9.6 million.

Board Chairman Dr. Marguerite Malone said that performance merited support for a millage increase. “We have put emphasis on having the best practices, the best technology, the finest staff. Look at how well they did in the Hospital Compare results. (see related story.) At the same time, we have achieved real fiscal restraint.”

“After taking these kinds of hits the last couple of years, the onion has been peeled back as far as it can go,” said Malone, a former college professor and healthcare consultant.

MacKenzie said another decline in tax revenues would wipe out the hospital’s profits, and the hospital would go to another round of cost-cutting.

The hospital would reduce employees’ merit increase and benefits, cut nurse positions or hours to allow a higher nurse-patient ratio, and reduce support of its Community Medical Clinic and community groups that provide low-cost health care, she said.

That prompted board member Teresa Carafelli, a retired nurse, to vote for the millage increase.

"I agree with Gerry and Tom, but when I saw what was going to happen....” she said. "I think everyone in the county has to step up, because it's going to be the employees and community groups that suffer."

The hospital also has some $578 million in cash reserves, but expects to spend $86.6 million on the bed tower. And the reserves counterbalance its $470 million in debt, some of which has short-term options attached.

Verinder said declining revenues and a millage cut would jeopardize the hospital’s turnaround and its reputation on Wall Street, where ratings firms want to see significant reserves as they effectively determine what interest rate the hospital will pay on its borrowing.

“If we were where we were five years ago, we wouldn’t be talking about a new bed tower or energy center,” he said. “The confidence we’ve built over the last few years will erode very quickly.”

If the board accepts the Finance Committee’s recommendation, the proposed rate goes on to two public hearings in September. At those meetings, the board can lower, but not raise, the preliminary rate. It votes to adopt the millage and hospital budget at the second hearing, set for Sept. 21.





	Wary SMH plans tax rate increase David Gulliver - posted 9:15 p.m. Tuesday, July 14 The Sarasota Memorial Hospital board is likely to vote to increase its property tax rate, with hospital officials warning of looming costs and the fragility of the hospital’s new profitability. The board’s finance committee voted 7-2 last week to adopt the “rolled-back” rate, the tax rate that would keep the hospital’s revenues the same as the year before. But because the value of the county’s real estate has fallen -- some $20 billion in the past year -- the rolled-back rate would actually increase the hospital’s millage. The county has yet to calculate the final numbers for real estate value. But working with the county’s preliminary numbers, hospital administrators estimate that the rolled-back rate would be about 1.08 mills, up from 0.941 mills this year. Holding the millage at the current rate would cost the hospital about $6.5 million in tax revenues next year, administrators project, on top of the $10 million decline they saw by holding the rate steady this year. Last week’s finance committee vote sends the decision to the full board, which has the same nine voting members, at its July 20 meeting. When the administration proposed the higher rate to the finance committee, officials noted that one “con” to the idea was the “perception of rate increase” and prepared a explanation defending the decision. Officials note that by definition, adopting a rolled-back rate means the average taxpayer will pay no more than last year. They also emphasize the hospital’s costly provision of safety-net care to the uninsured, the need to replace buildings, some more than 50 years old, the announced cuts of $2.5 million in Medicaid payments and anticipated cuts from Medicare, the hospital’s biggest revenue source. They also point to the soon-to-open North Port emergency care center, which they expect to run a $3 million loss its first year. And they also say they need to maintain a stable budget as they go to Wall Street to seek $100 million in bonds to finance a new bed tower, for which work will begin in October. The hospital also plans to spend $86.6 million of its reserves on the project. The dissenting board members acknowledge the hospital has needs, but said that this year, even holding taxes flat is too much. “People will note that the value of their homes have declined, but the taxes haven’t,” said Gerry Phillips, a retired real estate appraiser. “The economy is pretty tight right now, and people are struggling to keep their homes. I just think it’s a bad time to be raising taxes.” “I think at this time it’s very hard for people to come up with more money, when homes are going into foreclosure and people are losing their jobs,” said Dr. Thomas Kelly, a heart surgeon. “I’ve always said I’m very much in support of the hospital, and when they’re in financial difficulty I’m going to be the first one at the door to help. But management has done a great job, they’ve had a good year and they’re in a good position. I just don’t think we need to raise the millage.” When its books close in September, the hospital expects a profit margin of about $55 million, after including tax revenue and investment income, Chief Financial Officer David Verinder said. It has cut losses on its operations alone from $23 million in 2006 to $9.6 million. Board Chairman Dr. Marguerite Malone said that performance merited support for a millage increase. “We have put emphasis on having the best practices, the best technology, the finest staff. Look at how well they did in the Hospital Compare results. (see related story.) At the same time, we have achieved real fiscal restraint.” “After taking these kinds of hits the last couple of years, the onion has been peeled back as far as it can go,” said Malone, a former college professor and healthcare consultant. MacKenzie said another decline in tax revenues would wipe out the hospital’s profits, and the hospital would go to another round of cost-cutting. The hospital would reduce employees’ merit increase and benefits, cut nurse positions or hours to allow a higher nurse-patient ratio, and reduce support of its Community Medical Clinic and community groups that provide low-cost health care, she said. That prompted board member Teresa Carafelli, a retired nurse, to vote for the millage increase. "I agree with Gerry and Tom, but when I saw what was going to happen....” she said. "I think everyone in the county has to step up, because it's going to be the employees and community groups that suffer." The hospital also has some $578 million in cash reserves, but expects to spend $86.6 million on the bed tower. And the reserves counterbalance its $470 million in debt, some of which has short-term options attached. Verinder said declining revenues and a millage cut would jeopardize the hospital’s turnaround and its reputation on Wall Street, where ratings firms want to see significant reserves as they effectively determine what interest rate the hospital will pay on its borrowing. “If we were where we were five years ago, we wouldn’t be talking about a new bed tower or energy center,” he said. “The confidence we’ve built over the last few years will erode very quickly.” If the board accepts the Finance Committee’s recommendation, the proposed rate goes on to two public hearings in September. At those meetings, the board can lower, but not raise, the preliminary rate. It votes to adopt the millage and hospital budget at the second hearing, set for Sept. 21.