Sabetha officials “disappointed” with Brown County decision to exclude Sabetha Community Hospital from proceeds of healthcare sales tax
The Brown County Commission has denied a Sabetha Community Hospital request for a share of any sales tax revenue generated for healthcare in Brown County.
Three weeks ago, on March 11, the Brown County commissioners approved Resolution 19-07 — calling the question for a 10-year, 1/2 percent sales tax question to support healthcare services in Brown County — to an election on May 21. At that time, the stated use for the generated funds would be to first pay industrial revenue bonds obtained through the City of Hiawatha for $2 million, then subsequently be directed to Hiawatha Community Hospital as general tax support for the hospital. If approved, the sales tax would be implemented on Oct. 1.
This decision by the county commissioners came after months of meetings of a joint advisory committee that included officials from the Hiawatha hospital, as well as Brown County and the cities of Hiawatha and Horton. The committee, which did not include any City of Sabetha or Sabetha Community Hospital representatives, was formed after the urgent situation at Hiawatha’s hospital was brought to light.
After an informal request on March 18, Sabetha Community Hospital CEO Lora Key presented a formal request from the SCH Board of Directors to commissioners on March 25. This request asked the commissioners to amend the resolution to include Sabetha Community Hospital, as well.
“As the CEO of a critical access provider in a small community, I want to see Hiawatha and Horton [hospitals] be successful,” Key said. “It is my desire and the desire of my hospital board that these hospitals be successful, but we also ask that you look at those dollars that are from Sabetha retail sales.”
At that time, Brown County commissioners asked that the joint advisory committee meet again to consider new developments, including the closing and possible re-opening of Horton’s hospital, as well as Sabetha Community Hospital’s request. Commissioners asked that this committee bring back a recommendation on Friday, March 29. Commissioners agreed that Sabetha would be “invited to the table.”
This joint committee met at noon Thursday, March 28, at Hiawatha City Hall. Members of the committee include the following: Hiawatha City Administrator Mike Nichols, Hiawatha Mayor Bill Collins, Horton City Administrator John Calhoon, Horton Mayor Bryan Stirton, Brown County Attorney Kevin Hill, Brown County Commissioner Dwight Kruse, and Hiawatha Community Hospital Board of Trustees representative Jake Wisdom.
While Key was invited to the table to present the SCH request, Sabetha City Administrator Doug Allen literally was not. He was instructed to sit in the outer circle of onlookers comprised of reporters, clerks and other interested parties. Neither Key nor Allen was given voting privileges on the advisory committee.
To start the meeting, Key was again asked to present her request. She noted that Sabetha Community Hospital is asking that, after the first two years of tax go to pay down the Hiawatha hospital’s bonds, for the final eight years the commissioners distribute to Sabetha a proportion of the healthcare sales tax revenue commensurate with the proportion being provided by businesses located within Sabetha city limits on the Brown County side. All businesses east of Old Highway 75 are on the Brown County side.
According to the Kansas Hospital Association 2018 reports, Brown County patients comprised 16.8 percent of SCH’s outpatient visits, and 10.6 percent of SCH’s inpatient visits. For Nemaha County Home Health and Hospice, in 2018, Brown County patients made up more than 25 percent of the caseload. So far in 2019, Brown County patients have made up more than 13 percent of the NCHH&H caseload.
Nichols asked if Holton’s hospital receives any of the sales tax revenue from Nemaha County, since that hospital services the southeast corner of Nemaha County.
Key said it does not, but she sees a big difference in that Holton businesses do not pay into the Nemaha County tax, while numerous businesses located within Sabetha city limits will pay toward a countywide tax in Brown County.
Hill asked if Hiawatha’s hospital serves Nemaha County patients. John Broberg, interim CEO at Hiawatha Community Hospital, stated that inpatient visits have similar trade-offs between the two counties, while Hiawatha’s hospital services about 3.5 percent less Nemaha County patients than Sabetha’s hospital does Brown County patients.
“Are we looking at where people choose to go or ensuring we have healthcare here?” Nichols asked.
Collins stated that the committee was set up for Hiawatha’s hospital.
“Others come in later, and as far as I am concerned this is Hiawatha’s only,” Collins said.
Hill stated that Brown County residents use numerous facilities outside of the county, including hospitals in Atchison and St. Joseph, Mo.
“If you divvy money to facilities out of the county, then are we opening it up to patients going to other hospitals out of the county? Taxes assessed are not always used 100 percent for those paying the tax,” Hill said.
“Of those other cities, do their city businesses contribute to the taxes for your county?” Key asked, noting that the situation with Sabetha and Sabetha’s hospital is different from other out-of-county hospitals.
“I am saying that if you are using the rationale of Brown County residents using your facility, there are many more as well,” Hill said.
Stating that he did not believe there was enough of “the pie” to go around, Collins stated, “I don’t think Sabetha is strapped for cash.”
Broberg stated that the retail sales tax is expected to generate about $700,000 per year, and Hiawatha Community Hospital’s un-reimbursed care is $2.2 million. Meanwhile, he said, Sabetha Community Hospital un-reimbursed care is closer to $300,000, which is being covered by the amount they are receiving from Nemaha County for the 1/2 percent retail sales tax enacted there in 2015.
“My concern is that we have a sales tax issue that needs passed, and we need more money than has been discussed,” Calhoon said, noting that Horton hospital had outdated equipment and facilities. “If we divvy it out any more, that is less for us.”
Calhoon said the priority needs to be making the sales tax question “attractive to our residents” so that it will pass.
Collins made a motion to deny Sabetha’s request, and Calhoon seconded it. Committee members voted to approve the motion, and with it the recommendation to the Brown County Commission to deny the request.
Later in their meeting, the committee voted to recommend to the Brown County commission to amend the sales tax question to include funding for a healthcare facility located in Horton. Because the future of Horton’s hospital remains unknown, the wording purposefully would be left open, Hill said.
Additionally, the committee voted to recommend that the proceeds from the 10-year, 1/2 percent sales tax be split with 80 percent going to Hiawatha Community Hospital and 20 percent to provide healthcare in Horton. This decision came despite information presented stating that businesses within Horton’s city limits only account for 11 percent of the county’s tax base, and Horton’s hospital services less than 10 percent of Brown County patients who receive healthcare.
After the meeting, City Administrator Doug Allen told The Herald that statistics from 2015 through 2017 indicate that a 1/2 percent sales tax would have generated approximately $80,000 within Sabetha’s city limits on the Brown County side — roughly 12 percent of what Brown County generates as a whole. Two of the three years, Allen said, this portion of Sabetha generated more sales tax revenue than the entire city of Horton.
After the meeting, Allen stated: “I was a little disappointed that we didn’t have a seat at the table to discuss the hospital situation. I thought it was implied [by the county commissioners] that we would. We are the second largest municipal sales tax generator in the county, and we probably should have been at the table at the beginning of this whole thing. I have a hard time grasping any reasoning and fairness to this, that sales tax generated in the city limits of Sabetha will be going to support hospitals in Hiawatha and Horton.”
After the meeting, Key stated: “I understand both communities are facing difficult healthcare situations. Statistics were brought up today which indicated other hospitals also serve Brown County residents. While this is true, the key element which was not taken into consideration by the joint committee is the retail sales dollar contribution by Sabetha to Brown County, whereas these other facilities do not [contribute to the sales tax]. Today’s decision was very disappointing.”
At the Brown County Commission meeting on Friday, March 29, commissioners heard from representatives Nichols, Calhoon and Wisdom of the advisory committee, as well as Broberg.
Commissioners approved an amendment that reads as follows: “A resolution amending and supplementing resolution No. 19-07 of the county which authorized and provided for the calling of an election in Brown County, Kansas, for the purpose of submitting to the electors of the county the question of imposing a one-half percent (0.50 percent) countywide retailers’ sales tax for the purpose of financing the provision of health care services in the county. Resolution 19-07a amendment.”
It was understood that — if approved by voters — 80 percent of the sales tax collected would be directed to Hiawatha Community Hospital and 20 percent will be directed to an entity providing hospital services in the city of Horton.
Over the 10 years of sales tax, it is estimated that $700,000 would be collected annually by the 1/2 percent increase, totaling $7 million. Of this total, Hiawatha Community Hospital would collect $5.6 million, while an entity providing healthcare services in Horton would receive $1.4 million.
A special election is set for Tuesday, May 21, at normal polling locations in Brown County.
The question will read:
“Shall Brown County, Kansas be authorized to impose a one-half percent (0.50 percent) retailers’ sales tax (the “Sales Tax”) for the purpose of financing the provision of health care services in the County by Hiawatha Community Hospital, or its successors, and by an entity providing hospital services in the city of Horton, including hospital expenses and any payments with respect to bonds issued for hospital and health care purposes, collection of such Sales Tax to commence on October 1, 2019, and expire 10 years after its commencement; all pursuant to K.S.A. 12-187 et sez, as amended.”