2008-05-01 / Front Page

Letter Resolves County's Concerns About Hospital

Commission Offers Support of Transfer
By Karen Gould

Outstanding issues between the County Commissioners and hospital representatives were resolved last week. Now the commission offers its support in the transfer of assets and liabilities from the Mackinac Straits Hospital Authority to the new private hospital corporation, Mackinac Straits Health Systems, Inc.

On May 6, voters in the four controlling units of the Authority will determine whether the transfer moves forward. The issue is on the ballot in the City of St. Ignace, and St. Ignace, Moran, and Brevort townships.

A letter of understanding was signed by the county, the Authority, and the hospital corporation clarifying property ownership at the Burdette Street site, the property lease agreement, bond obligation, and millage transfer. The agreement was signed Thursday, April 24.

The county does not directly have a part in the transfer of assets and liabilities between the two health organizations, however, there are several issues that affect county operations. The county is the landlord for the hospital. Also, the county is required to consent to the health services agreement with the hospital, which includes requesting a millage from property owners that is paid to the hospital for providing health services.

The letter of understanding was drafted by county attorney Richard McNulty of the law firm Cohl, Stoker, Toskey, and McGlinchey of Lansing, in cooperation with hospital attorney Roselyn Parmenter of Miller, Canfield, Paddock, and Stone in Ann Arbor. Mr. McNulty attended Thursday's meeting; Ms. Parmenter did not attend.

The letter of understanding puts to rest questions raised by commissioners in February and is designed to eliminate potential future litigation issues.

County ownership of the Burdette Street property is clarified in Thursday's agreement. The property was conveyed to the county in 1991 by the Authority, and the deed included real estate and buildings. Since then, the Authority has leased the property from the county.

Terms of the letter of understanding are based on the successful transfer of assets and liabilities from the Authority to the new corporation.

The lease would transfer with the assets to the new corporation, which would continue to make payments on the approximate $1.3 million bond debt until it is paid off. The bonds are estimated to be retired in approximately 2014 or earlier, if the corporation decides to prepay the debt.

"They can prepay them," said Mr. McNulty, "and leave that premises earlier if they want to avoid continued operating costs, but they have the right to stay there until 2014, if they want to, or until the bonds are paid off, whichever occurs first."

The corporation, he said, also can sublet the property, although any agreement would require the county's consent.

The bonds were refinanced in 2002, and were issued to pay for a 39-bed addition to the Long Term Care Facility. At that time, the Authority agreed to pay rent on the Burdette Street property equal to the annual bond payment, "so long as any of the bonds are outstanding."

Also in the letter of agreement, the county agrees to assign the health services agreement to the new corporation. As part of that health services agreement, the county collects 1.2 mills, or approximately $900,000, from county property owners for hospital operations. The millage expires in 2009.

Also under the health services agreement, said Mr. McNulty, the county has the right to attend an annual meeting of the corporation. The meeting would include a report to the county commission and corporate leaders would address any commission questions. The corporation is required to present copies of a tax form, which will provide a detailed financial summary that addresses profits and losses of the corporation.

The title transfer for land at the new hospital site from the tribe to the new corporation is hoped to be approved soon by the U.S. Congress, reported Fred Paquin, a corporation board member who represents the Sault Ste. Marie Tribe of Chippewa Indians.

The tribe has deeded 16.5 acres of land worth $1.2 million on State Street for the new hospital. Under an 1834 law, the transfer must be approved by the U.S. Congress.

Mr. Paquin said he is hoping the matter will be resolved soon and that several people are working to make it happen, including U.S. Congressman Bart Stupak and U.S. Senators Debbie Stabenow and Carl Levin. The matter must be addressed to allow title insurance to be issued.

"Everyone that we have met with in Congress or in Stabenaw's office, they're pretty impressed with this," said Mr. Paquin. "This is historic. There is no other tribe and entities that have done something like this in a joint venture. It's positive all the way around. It's just getting the right people to sign it and getting the paper work in."

County resident Reinette Murray, who attended the meeting, asked hospital CEO Rod Nelson who would be responsible for the loans if the new hospital fails.

There are two loans, said Mr. Nelson, a $26.8 million guaranteed United States Department of Agriculture (USDA) loan through Arbor One Financial of South Carolina, which is a certified USDA lender, and a $10.4 million direct loan with USDA Rural Development. The USDA would cover 90% of a default, he said, and the corporation would be responsible for 10%.

"My assumption is," said Mr. Nelson, "that we can work with the USDA and the government to get back on our feet, if that situation ever arises."

Annually, about $6 million is allocated for Michigan projects by the USDA. The hospital, said Mr. Nelson, was able to garner the extra loan dollars for the new hospital through networking with state legislators. Also, he said, timing played a role, with few other big projects seeking funding.

County commissioners voted unanimously to draft a resolution of support for the new hospital.

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