As expected, SMH board proposes tax increase

David Gulliver - brief posted 4:40 pm Monday, July 20; updated 11:45 pm Friday, July 20

By a 7-2 vote, the Sarasota Memorial Hospital Board moved another step closer to increasing the hospital’s property tax rate.

The nine members voted the same on Monday as they did in the board’s finance committee meeting July 7. They propose setting the hospital’s millage at the “rolled-back” rate, the level that would bring in as much money next year as it did this year.

On average, that also means that homeowners and businesses would pay the same amount in hospital tax next year, though some will see increases while others see decreases. But because property values have fallen steeply, keeping revenue steady means a higher tax rate.

The county has yet to set the final valuation levels, but hospital officials estimate the rate would be 1.08 mills, or $1.08 per $1,000 of taxable value. The current tax rate is 0.941 mills.

The vote sends the proposed rate to a pair of public hearings, Sept. 8 and Sept. 21, where board members can lower, but not increase, the proposed rate.

There was no public comment on the tax proposal at Monday’s meeting, and board members approved the measure with no debate. But board members Gerry Phillips and Dr. Thomas Kelly opposed the measure, saying in interviews that they could not support a tax increase during the economic recession, and while the hospital’s finances appear robust.

In Monday’s meeting, hospital officials presented strong financial reports on the first nine months of the year.

Hospital President Gwen MacKenzie said the hospital’s operating margin to date is about 4.4 percent, and Chief Financial Officer David Verinder said that the hospital was running a surplus of about $36 million after tax and investment income. Both figures were slightly better than projected in the annual budget.

The millage increase would make up a projected $6.5 million decline in tax revenues, hospital documents show.

But it would follow a $15 million tax income decline over the past two years, and the administration fears that trend might spook Wall Street credit rating firms as the hospital plans to issue $100 million in bonds this fall to finance its new bed tower, and may issue another $80 million to refinance existing debt.

A weakened credit rating could drive up its interest costs on both bond issues. Past credit rating reports have praised the hospital board’s willingness to increase the millage to counter years of operating losses. The board raised the millage four times from 2003 to 2006, from 0.5 mills to 1 mill, but has let it fall since then.

Hospital officials also point to $6 million in expected losses from a new North Port emergency room and state-mandated cuts in Medicaid payments, as well potential cuts to Medicare -- its biggest source of revenue -- as a result of healthcare reform.