Soon-to-depart New Mexico Senator John Arthur Smith gave a frank assessment of what local leaders need to do to make a success of Sierra Vista Hospital—“work together,” not only behind closed doors, but by engaging the public.
“I fought for the hospital for 32 years,” said the veteran legislator, who lost his seat in the Democratic primary in June and will step down from office on Dec. 31.
Most recently, Smith took the lead, at the request of local elected officials sitting on the Sierra Vista Hospital Joint Powers Commission, in carrying a bill during last January’s 30-day legislation session that would convert the hospital’s unwieldy ownership and governance structure to a special hospital district. The change would also give the debt-ridden institution a new taxing authority.
The hospital is currently overseen by both the Joint Powers Commission and a Governing Board, whose members approved taking on what Smith deems excessive debt.
The senator agreed to sponsor the legislation because of his firsthand observation of the management, financial and governance problems that have plagued Sierra Vista Hospital since the departure of its longtime CEO, the late Domenica “D” Rush.
“We loved D Rush,” Smith said in a Nov. 23 interview with the Sun. “She was going to see people in hell before she’d see the hospital close.”
Known to local leaders from her administrative work at the hospital from 1995 to 2003, Rush was induced to come back in 2007, Smith said, to pull the hospital out of financial difficulties. A former registered nurse, Rush brought with her extensive experience managing small rural hospitals throughout her native New Mexico, according to her Mar. 25, 2015, obituary in the Albuquerque Journal.
“Only when Dee came back did the hospital stabilize,” Smith said. “She knew so many people and was able to get the two boards to work together. I hate to say it, but even she had resolved the hospital would have to go to private ownership, the two boards were so dysfunctional.”
Rush tried to get a couple of hospitals interested in buying Sierra Vista Hospital, Smith said, “but they weren’t interested because of the infighting.”
Smith wouldn’t or couldn’t name names, but claimed: “D was pushed out by a secret element” between 2012 and 2013, when she was in her mid-70s.
A legislatively created special hospital district would pare down Sierra Vista’s two boards with 21 members to one board with five elected officials, streamlining that Smith said is essential to stabilize the hospital. “Managers have had to answer to a lot of bosses,” Smith said.
Smith and New Mexico Representative Rebecca Dow, who also carried the special hospital district legislation last January, asked for Governor Michelle Lujan Grisham’s support, since the bill would need an extra push during a short legislative session. Lujan Grisham agreed to make the bill one of her “call items,” but never called it. Someone with pull and influence, “from one of the boards,” Dow said, in an interview with the Sun last year, called the governor, making it clear local leadership was not in agreement about the need to change the hospital’s governance structure.
Dow and Diamond, again at the request of the Joint Powers Commission, are carrying the same bill in the upcoming 60-day legislative session.
PUBLIC KEPT LARGELY OUT OF THE LOOP
In the intervening year, local elected officials who sit on the JPC have done little to educate the public about the legislation or solicit public feedback.
Public statements on the issue have been brief and focused on one talking point. James Paxon, JPC member and Sierra County Commission chairperson, said during an October county commission meeting that a special hospital district was needed to reduce board members from 21 to five.
JPC Chairperson and Elephant Butte Council Mayor Pro Tem Kim Skinner said the same thing at an October Elephant Butte meeting.
Frances Luna, Sierra County commissioner, Truth or Consequences city commissioner and JPC vice chairperson, said the same in a T or C City Commission meeting in October.
Paxon and Dow held an online informational meeting on Nov. 19. The New Mexico Hospital Association gave a presentation. About 15 people attended and the meeting ended early due to lack of questions from the public, who have not been made aware by the proponents of a special hospital district that it comes with taxing authority.
The JPC did not tell the public before the last legislative session that a special hospital district can be formed either legislatively or by public vote.
This year, during the online meeting, the Hospital Association said if 10 percent of those Sierra Countians who voted in the last gubernatorial election sign a petition in favor of forming a special hospital district, the county commission would be obligated to call for an election on the question.
SHOULD THE SPECIAL HOSPITAL DISTRICT BE PUT TO A VOTE?
Smith said the JPC is “trying to bypass a public vote.”
“They know they will not get the vote because they have 21 people giving all different messages to the public. They want the legislature to do the heavy lifting,” Smith said, “but I believe the elected officials should be stepping up to the plate” by engaging the public and building consensus.
Paxon said during the Nov. 19 online meeting the JPC chose to create the district legislatively “because of the cost of the election.” If the legislation passes, an election for the five trustees must be held, he said.
Skinner, in a Nov. 10 interview with the Sun, said forming the JPC legislatively was recommended by Smith.
Both Smith and Dow, in their Sun interviews, maintained the JPC requested the special hospital district be formed legislatively.
Sierra County local leaders remaining silent in public while dissenting in private has been a pattern in his dealings with the area, Smith said, giving several examples, the following related to the hospital:
“I kept pouring capital outlay into the hospital,” Smith said. “During capital outlay hearings, I insisted local government get on the same sheet of music because there is only $2 million to $3 million for an area. I would sit a full day listening to them say: ‘We’ve got to keep the hospital open.’ But as soon as the door closed, local leaders would tell me: ‘We have another priority.’”
According to Skinner, Smith and Dow saved the hospital in 2018 by directing their capital outlay monies to finish the second floor of the new hospital wing and to refinance the 2016 new-wing construction loan. Smith put in $5 million and Dow put in $500,000.
Smith said the capital-outlay help was necessary because the hospital boards had “borrowed twice what they could afford” to build a new wing with 11 inpatient beds, surgery, pharmacy, lab, radiology, outpatient clinic with 24 exam rooms and a gift shop.
Smith brought in the Community Health Services in Deming, an affiliate of Presbyterian Health Services, which consults with hospitals and governments, and David Abbey, director of the Legislative Finance Committee, which Smith chairs. “In 2018 they identified the hospital had way overbuilt more than it could afford,” Smith said.
“The New Mexico Finance Authority never should have given them the loan,” Smith said. “But the Hospital Association said they could afford it.”
IS THE HOSPITAL’S DEBT DRIVING THE PROPOSED OWNERSHIP AND GOVERNANCE CHANGE?
The hospital took out a $30 million loan to build the new wing in 2016. Two years later the hospital was out of compliance with the terms of the NMFA loan, according to a finding in the hospital’s 2018 year-end audit. The hospital had not put aside the required reserve amount.
Smith, working with NMFA and David Abbey, helped the hospital refinance the loan to about $25 million. Nevertheless, the hospital still has financial woes, according to Smith.
“I’m gone in January,” Smith said. “I hope the hospital does well, but I have grave concerns.”
Smith is the only elected official to speak about the hospital’s need for more money to pay off the loan, which may be the underlying motivation for the JPC’s move to create a special hospital district. It would give the hospital taxing authority independent of, and in addition to, the four government owners’ taxing authorities.
According to the hospital’s 2019 year-end audit, the 2018 refinancing of the construction loan allowed the hospital to put off the first payment until May 2021. The yearly payment, through 2046, is $1.46 million a year.
JPC member Skinner, asked if property taxes and/or gross receipt taxes the four government entities currently dedicate to the hospital are enough to pay off the loan, said “yes.”
According to the hospital’s year-end audits, those taxes totaled $1.1 million in 2019, $905,300 in 2018 and $1.2 million in 2017. These amounts are insufficient to cover the $1.46-million loan payment.
Skinner was also asked if the local governments will continue to dedicate gross receipts taxes and property tax at the same rates if a special hospital district is formed. “Yes,” Skinner said, “that will not go away.”
Skinner’s statement is borne out by a November 2018 amendment to the Joint Powers Agreement, which obligates the local government bodies to dedicate the following taxes to the hospital to pay off the 2018 loan:
Sierra County: 2-mill levy (property taxes) through 2037; .25 GRT through 2046
T or C: .1875 GRT through 2046
Elephant Butte: .1875 GRT through 2046
Williamsburg: .25 GRT through 2046
Since the GRT and property taxes currently being collected are insufficient to pay off the annual installment on the 2018 loan, it is likely the formation of a special hospital district is being attempted to create another taxing authority.
The special hospital district’s five trustees will have the authority to levy and collect property taxes—up to 4.25 mills—but the levy must go to a vote the first time and every four years thereafter.
ADDITIONAL TAX COLLECTION UNLIKELY WITHOUT PUBLIC BUY-IN
Hospital Association President and CEO Jeff Dye and his predecessor Troy Clark and Hospital Association Lobbyist Dan Weaks were invited by Dow and Paxon to inform the public about the special hospital district legislation during the Nov. 19 online meeting.
Unlike Smith, none of the three Hospital Association speakers acknowledged the hospital’s financial straits. However, Dye, like Smith, said public buy-in will be necessary. “You are going to have to get more public involvement,” Dye said.
“Now is the time to do this,” Dye advised, “when you don’t have a gun to your head. You’ve put money aside and you are in good financial shape.”
Weaks took it as a given Sierra Vista’s special hospital district would use its taxing authority. He suggested the special hospital district collect GRT instead of property tax, to spread the burden to tourists and avoid a public vote. Weaks cited the example of Roosevelt County Special Hospital District, which was empowered to collect GRT through “a separate legislative act.”
That act was state law 7-20C-1. It allowed the Roosevelt County Special Hospital District to collect .50 of Roosevelt County’s GRT, which is capped at 1.45 by the state. The GRT collected was not in addition to, but part of Roosevelt County’s GRT. In other words, the county gave up .50 of its GRT to the hospital for 20 years.
The Roosevelt County Special Hospital District could only spend the GRT to pay off a 20-year bond used to build a new hospital. The enabling law was repealed in 2019, just before the bond was paid off in 2020.
Roosevelt County Special Hospital District CEO Kaye Green did not respond to the Sun’s inquiry about whether special hospital district trustees will put the question of a property tax to the voters, since they can no longer collect GRT.
It is unlikely a Sierra County special hospital district board of trustees could avoid a public vote by deciding to collect GRT instead of property tax. Put aside the question of depriving the county of a portion of its GRT. Even if it were willing, the county has little additional GRT capacity to share.
Sierra County currently collects .9375 GRT. Any proposed increase between 1.00 and the 1.45 cap that the state places on counties’ collection of GRT must go to a vote, according to New Mexico Taxation and Revenue Local Government Liaison David Monteith.
Therefore, Sierra County has the capacity to increase its GRT only by .0625 without going to a vote. The small amount of revenue such an increase would generate might not be worth the effort to get a bill passed allowing Sierra County GRT to be ceded to a special hospital district for a specific purpose.
Even if the county were willing to give over its total remaining .5125 GRT, the revenue generated would again have to be weighed against the effort of passing an enabling act, followed by winning a public vote.
It is much more likely the trustees of Sierra Vista’s special hospital district, if it were created, would seek to raise funds by levying a property tax.
The JPC may be successful in forming a special hospital district with little public knowledge in the upcoming legislative session. But failure to win public support now may render the change for naught if later the voters won’t support higher taxes for a hospital overbuilt to an extent it could not and cannot afford.