Minutes August 21, 1987CITY OF DENTON CITY COUNCIL MINUTES
August 21, 1987
The Council convened into an Emergency Meeting at 5:15 p.m. in
the City Manager's Conference Room.
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PRESENT:
Mayor Stephens; Mayor Pro Tem McAdams; Council
Members Ayer, Boyd, Gorton and Hopkins.
ABSENT:
Council Member Alexander
1. The Council convened into Executive Session to discuss
legal matters (settlement negotiations in the County of Denton
vs. the City of Denton and the offer of sale and sale or
lease/purchase of Flow Memorial Hospital as set forth in the
County's letter of 8-17-87), ' real estate, personnel and board
appointments. No official action was taken.
The Council then convened into open session in the Council
Chambers.
2. The Council held a discussion regarding various
options available in response to the County's letter of 8-17-87
with respect to Flow Memorial Hospital.
Mayor Stephens recognized Council Member Gorton.
Council Member Gorton stated that he realized that certain
individuals would use any means to bring about the demise of
Flow Memorial Hospital and with a firm belief that his fellow
Council Members would deliberate with all diligence regarding
Flow Memorial, he recognized that a potential conflict of
interest question might surface and he did not wish to
jeopardize the decisions of the Council in any way. Therefore
he excused himself from the meeting.
Lloyd Harrell, City Manager, presented several options
available to the City in regards to the Flow Hospital situation.
Option I: Accept the Hospital Board's request for two
cents tax levy on the part of the City which would generate
approximately $400,000 and challenge the County to make a levy
decision of their own that would be put immediately to
financially assist Flow Memorial Hospital. The payment of the
$400,000 would be similar to the $200,000 given earlier with
the contingency that if the Court found the City responsible
for indigent health care, the $4000,000 would help fulfill that
obligation.
Advantages of Option I: (1) The risks were too large
for the City to assume full responsibility of the Hospital.
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City of Denton City Council Minutes
August 21, 1987
Page 2
The option would allow the City to clearly state to the
community that it had done all it could reasonably and
responsibly to provide support for the public hospital. It
would also challenge the County to join the City to see that a
public hospital continued in the community. (2) The level of
subsidy might allow the Hospital to continue to operate for a
substantial period of time. (3) The option, without taking
ownership interest, would allow the City not to assume more
financial obligations for the Hospital. The allocation of
$400,000 to Flow Hospital would allow for an offset of future'
financial obligations of the City if it were found responsible
for a portion of the indigent health care costs. (4) Timing
still would make it possible for the City to increase the tax
rate for the next fiscal year by $.02 and make that $.02
allocation to Flow Hospital. That action would require the
City Council to start in motion at the next meeting the
intention to levy a tax rate of up to a $.61/$100 evaluation as
opposed to up to $.59 which the City currently had. .Enough
time would be allow to include the public hearings and notice
to adopt that tax rate. Harrell stated that if the Council
felt that an allocation of tax funds should be made to Flow
Hospital, the administration would strongly recommend that the
additional tax rate be taken rather than trying to go into
departmental budgets to find the money.
Disadvantages of Option I: (1) No permanent solution
would be made to the Flow Hospital problem. Over $800,000 of
accounts payable outstanding would remain. The medical staff
and hospital staff or any of the creditors might become
impatient at not seeing concrete action taken that would
permanently solve the Flow problem and independent action on
their part might force the closing of the Hospital irrespective
of City action. (2) The option had the possibility of
prolonged litigation between the City and the County if the
County refused to make a tax allocation to Flow Hospital as
they had earlier indicated. The possibility of such litigation
might have an effect on other joint programs with the County
such as the library, the health unit, civil defense funding and
emergency medical services. (3) The option would allow the
instability of Flow Hospital to continue.
Option II: Join with the County in partnership in
pursuing the sale or lease/purchase of the Hospital to a third
party.
Advantages of Option II: (1) If successful, the City
would remove itself from the hospital business, reduce or
substantially eliminate associated liabilities, and have an
opportunity to get a portion of the indigent health care
obligation, if any, funded by a potential buyer.
City of Denton City Council Minutes
August 21, 1987
Page 3
(2) The City and County would work in partnership and
relationships between the two entities would be positively
affected. (3) Soliciting offers for the sale or purchase of
the Hospital, even if at the same time the City was pursuing
the possibility of ownership, might help the City in seeing if
there were interest in the Hospital and to get a better insight
into what the Hospital was actually worth. (4) If a buyer
would be found and the Hospital were transferred to the buyer,
the economic advantages to the community as far as jobs and
economic benefits, would still be retained.
Disadvantages of Option II: (1) The community would
lose the fee and service advantages associated with a
not-for-profit hospital. (2) The option would provide for a
widening gap for the "medically indigent". (3) Title problems
with the Hospital might prevent a rapid sale or lease/purchase
of the Hospital.
Option III: Enter into serious negotiations with the
County in an attempt to assume ownership with the Hospital.
Advantages of Option III: (1) The stability of Flow
Hospital would be restored. (2) The option may be the only
viable way that a public hospital would be guaranteed to
continue in the community at that point in time and with the
County's current stance.
Disadvantages of Option III: (1) The City would be
assuming very substantial risks. According to the Flow
Hospital budget, a subsidy next year by both parties of
$2,000,000. would be needed, $1.2 million for indigent health
care costs and ~800,000 for a general subsidy. The City might
be responsible for a minimum yearly payment of $1.4 million if
found responsible for indigent health care. That would be the
equivalent of a tax rate increase of $.07. (2) The hospital
industry was very unstable and if the City did assume ownership
and ran it for a while, and despite the City's best efforts,
the Hospital was forced to close, the City would be faced with
liabilities of approximately $4 million plus unemployment
compensation. (3) If the City took on the ownership of the
Hospital, there might be pressure by a Hospital Board or
others, to make necessary capital improvements and fund those
improvements with a bond issue.
Option IV: Not do anything.
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City of Denton City Council Minutes
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The option that stood above the others was to reject the
County's latest offer because of the immense financial burden
it would place on the City because of the City's relatively
small tax base. At the same time, showing the City's good
faith effort and the City's desire to do whatever it could to
keep the Hospital going by allocating a $.02 tax for Flow
Hospital and challenging the County to also allocate tax
funds. On the other hand, the option was available either
separately or together to do a sale/purchase together with the
County or to enter into negotiations with the County for
ownership.
Mayor Stephens expressed appreciation to the members of the
Commissioners Court who were present for their attitude of
trying to find an equitable solution to the problem in a
minimum amount of time.
Council Member Boyd asked Mr. Harrell if the dollar amount
noted for indigent care included the liability which might be
forthcoming to Flow for indigent care treated at Parkland and
John Peter Smith Hospitals.
Harrell replied that the Hospital acknowledged that the $1.2
million was "guess-estimate" as to what the obligation might be
next year. The Hospital acknowledged that to date, although
the Hospital knew people were being treated at Parkland and
John Peter Smith, no bill had been received for indigent health
care.
Mayor Pro Tem McAdams stated that she felt it was quite clear
that the County Commissioners had determined that it was not in
the best interest to continue to participate in a public
hospital. She felt that the City's first responsibility was to
the tax paying public. It was needed to determine if the City
wanted to save Flow and if so, determine how best to keep it
going. The Hospital was an economic asset to the City with a
significant employment base which the City would be faced with
loosing if the Hospital closed. A lawsuit had been filed to
attempt to determine what responsibility the City had for
indigent care. Senate Bill 1 seemed to suggest that the City
was responsible for indigent car~. Some money had to be put in
the budget to take care of the possibility of the outcome of
the lawsuit if it were not in the City's favor. Some provision
had to be made for the possibility of paying for indigent care
because if it were not, serious consequences might arise in the
budget with cutbacks, lay offs, etc. just to pay the bill.
That would be irresponsible. She was not suggesting that the
citizens of the City be responsible for indigent care for those
citizens who were outside the City. If the City owned the
public hospital, what would be the responsibility to others
outside the City for indigent care. The City would not be able
to pay for all the cost for indigent care in the entire County.
City of Denton City Council Minutes
August 21, 1987
Page 5
Her feeling was to enter negotiations with the County to take
over ownership of the Hospital if legally possible to do that
without having the financial responsibility of county-wide
indigent care.
Council Member Hopkins stated that she did not want to close
Flow. The City needed to be fiscally responsible with regards
to Flow. She would be comfortable with the $.02 tax increase
to be earmarked for Flow. She would have a problem if the
money would only keep Flow going for 30-60 more days, for that
would not be a wise decision. If the City were to take on full
ownership of Flow Hospital, it would take on all the financial
liabilities it had and might bankrupt the City if Flow were to
later close. For the City to take over the sole responsibility
of Flow Hospital was fiscally irresponsible. She could not, at
that point in time, vote for the City to solely take over Flow
Hospital.
Council Member Ayer asked Mr. Harrell to explain an advantage
he stated to Option II that all or most of the City's indigent
care might be taken care of by a buyer.
Harrell replied that a possible sale arrangement might be to
include the buyer assuming a portion of the indigent health
care responsibility.
Ayer stated that emotions needed to be kept out of the decision
process and to face realities. Emotionally, he wanted to take
the Hospital and run it. Realistically, that was not a viable
option and the City was not ready to support the Hospital at
that time. The financial obligation was too great for the City
at the present tax base to assume unless it had assurances on a
number of points with regard to the financial burden. He was
opposed to health care solely for profit. He would endorse a
$.02 tax increase and challenged the County to reassess the
situation.
Council Member Boyd stated that the primary responsibility of
the Hospital rested with the County. The issue before them
boiled down to did they want to keep the valuable public
institution of Flow Hospital as a viable institution in the
community. He felt that the City should work with the
Commissioners to keep the hospital viable. He did not have a
whole lot of hope that the City would be able to do that. It
would take an admission that there was a benefit to that public
institution and that it was worth paying for. He felt that all
involved felt that there was a benefit but not all public
officials involved were willing to pay for those benefits.
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City of Denton City Council Minutes
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Mayor Stephens stated that for the sake of the community and
its citizens, the City needed to find the best way to solve the
problem of Flow Hospital. The county-wide tax base would be
the best approach with the County Commissioners Court being a
viable institute to manage Flow. However, that idea did not
seem to be one of the options available. He felt that the $.02
tax increase would give some time to provide money for indigent
care. He would like to explore the possibility of keeping
within the 8% ($.59) if possible even with the $.02 for Flow.
He suggested a study session item to see if the adjustments
could be made to allow for the increase within the $.59. The
problem would be what services would have to be trimmed, other
services that people would expect and would be willing to pay
taxes for, might not be possible. That would be a challenge
for the City to keep that idea in mind.
With no further business, the meeting was adjourned.
C~Y SECR~.TARY
CITY OF DENTON, TEXAS
2734C