Eureka Springs council debates hospital contract, budget; fills vacancy
EUREKA SPRINGS -- It took three and a half hours on Monday night for the Eureka Springs City Council to wade through an agenda that included heated discussion of the legality of the city's lease with the hospital management firm, as well as 15 other agenda items.
When it was all over, the city had a new alderwoman, a budget resolution and some hard feelings.
The meeting began with debate on the Eureka Springs Hospital that included discussion of the possibility of a new hospital coming to the city. Alderman Ken Pownall asked about the status of a letter of intent to build the hospital by Allegiance Health Management Inc., operators of the current facility.
Pam Crockett said that the process was on hold for the moment since talk so far had been on Allegiance building the hospital, then having the Eureka Springs Hospital Commission help pay the mortgage. Since the hospital commission is a non-profit organization, they are not allowed, under state law, to pay money to a for-profit entity like Allegiance.
Alderwoman Lany Ballance raised the question of whether the city's contract with Allegiance Health Management is even legal, reading aloud Arkansas Code § 14-264-104 (c), which says that the commissioners (i.e. of a Hospital Commission formed by the City Council), "by and with the consent of the city council, shall have the authority and power to lease the hospital to a nonprofit or benevolent organization upon such terms that no profit or dividend shall ever be paid to any person, firm, or corporation... ."
Ballance argued that since Allegiance Health is a for-profit corporation, the lease of the city hospital's management to Allegiance "flew in the face of the statute" and said the management contract should be considered void since "the city is not allowed to lease the hospital to a for-profit organization."
Crockett replied that in the spring of 2005, the hospital was on the brink of closure when the commission hired an outside management company, which kept the hospital open and stabilized it, but couldn't keep up with the hospital's operating costs. Allegiance came into the picture later offering to operate the hospital, which she says is the only reason the hospital is still open.
Ballance responded: "So because you were almost out of money, that gave you the authority..."
"The (city) council gave us the authority, you were here for it," interrupted Crockett.
She alluded to City Resolution 544 that authorized the contract with Allegiance.
Alderman James DeVito responded with a reading from Arkansas Code § 14-265-103, which had been addressed in an attorney's opinion on the situation: "Any municipality and any county is authorized to acquire, own, construct, reconstruct, extend, equip, improve, maintain, operate, sell, lease, contract concerning, or otherwise deal in or dispose of any land, buildings, improvements, or facilities of any and every nature whatever that can be used for hospitals, nursing homes, rest homes, or related facilities within or near the municipality or county."
DeVito argued that this statute clearly stated that a lease was allowed. He argued that the first statute quoted merely clarified a city's right to lease to non-profits, provided that the non-profit didn't pay profits or dividends to people, corporations or firms. He challenged anyone to find law in the books that specifically stated that entering a lease with a for-profit was not allowed.
Ballance repeated the text of § 14-264-104 (c) again, finding that exclusion to be clearly implied in its preclusion of non-profits paying out profits or dividends to anyone.
Lawyers in attendance Monday evening refused to comment or share their judgments on the issue without a chance to research it, they said.
Alderman Butch Berry said he was sure that everyone involved wanted to be sure that what was done was legal, and he looked forward to more official opinions on the matter from attorneys.
"I think we need our hospital here," said Berry. "I am still not sure what we are trying to find here -- if we are trying to find illegalities, trying to make sure everything is copacetic, if we are trying to shut down the hospital? It appears we have at least one attorney who believes that what we have done is legal."
Ballance asked what it would take to hire an outside attorney to get another opinion on the matter, and City Attorney Tim Weaver replied that there was already one opinion, but that he was willing to look into it and provide an opinion. Weaver advised that hiring an outside attorney to provide another opinion was a waste of city funds.
DeVito passionately defended the city hospital contracted, telling Ballance: "We have a functioning hospital in the city. It's not costing the city any money. The opinion of an attorney is it's perfectly legal. Now, why would anybody want to take that apart? I don't understand. If you can give me a reason, a motivation behind why you want to question a working hospital in Eureka Springs, because you have this suspicion that's not founded in any legal opinions. I will not be party to it. I will do everything I can to stop you from using city resources to potentially cause the loss of the city hospital. Because that is the path I believe you are headed down and I will not be a party to it."
Ballance responded that her goal was to make sure the city was following the law, and added she had no personal vendetta against the people at the hospital or anyone else involved. She just wants to be in compliance with the law, she said.
The discussion concluded with Weaver agreeing to look into the matter for Ballance.
The next focus of the meeting was the 2011 year-end budget resolution. Two budget proposals had been prepared. One was modeled on the 2010 document and the other was written to take into account agreements reached in the May 11 workshop. The Council voted 4 to 1 to choose the workshop model with Ballance voting no.
The City Council had planned to hold a mid-year budget adjustment meeting in August 2011, but after many delays, it never happened, and subsequent reschedules were postponed, until it was too late.
Brought to the table now, debate that started last year continued with Aldermen Lany Ballance and Ken Pownall protesting over whether department heads are required to bring special expenses to the council for approval. Ballance argued that anyone voting to approve the resolution was "giving the mayor their approval to overspend."
After much debate, the budget resolution was approved 3-2, with Pownall and Ballance voting not to pass it.
In the mayor's comments at the end of the meeting, he agreed that there had been expenses over their budgeted expenditures in 2011, but he wanted to let the record show what those were for. He read from a list, which included expenses due to a landslide, a lightning strike, fuel cost increases, overtime for ambulance calls, training for replacement of lost personnel -- and the list went on through all the departments.
"Yes, indeed, we did go over budget, but that was to keep the city up and running," said Pate. "If we had a crystal ball and knew any of this stuff was going to happen, we could stay within budget, but it doesn't work that way in city government. We have to go with what we've got. If we do not, we have to shut the doors, and we will not do that to our citizens."
Although the city did go over its budget, it never engaged in deficit spending, officials said -- doing so would be illegal according to state statutes. Eureka Springs Financial Director Lonnie Clark explained that although the city did spend more than was budgeted in 2011, Eureka Springs ended the year in the black, with a surplus of $103,677.
According to Clark, this year's budget calls for the city to spend $8.1 million for operating and other expenses, down from the 2011 budgeted amount of $9.09 million, a 9.8 percent decrease from last year.
New council member
Then there was the vacancy debate.
Several weeks ago, Alderman Dean Kirkpatrick moved out of his district, and he then submitted a letter of resignation dated May 3. The council decided that moving out of the district disqualified Kirkpatrick from serving, so there was no need to vote on accepting his resignation. Aldermen instead voted unanimously to declare the position vacant.
City Attorney Weaver stated that procedure in this case is normally that a vacancy is declared at a meeting, then at the next regular meeting the position is filled -- but that has not been the way Eureka Springs has handled it in the past.
They didn't this time either.
DeVito requested the council stick to procedure and allow the people of Ward 1 District 1 to provide input for the selection of their representation, but Ballance and Pownall said that the vacancy didn't just occur when the council declared it. They argued that the position became vacant when the resignation was tendered or the alderman moved out of his district, and that the selection needed to be made minutes after the vacancy was declared by the council.
Three people from the district had declared their willingness to serve during citizen comments at the beginning of the meeting, and DeVito had asked that all three of their names be entered for nomination.
But only one of them was nominated. Alderman Parker Rafael nominated former Alderwoman Karen Linblad, and Ballance seconded it. Despite no votes from DeVito and Berry, the three votes of Raphael, Ballance and Pownall confirmed Linblad as a returning member of the council.