El Paso county warns of impending UMC tax hike

The county of El Paso warns a tax increase “most probably will” come due to the mounting debt the El Paso Children’s Hospital maintains against the county hospital, University Medical Center.

In a document filed Tuesday in bankruptcy court, the county explained UMC provides $33,000 per day in services to the Children’s hospital. The monthly rent is $10.3 million. The bankrupt Children’s hospital has not made a single payment to UMC for more than one year. That comes out to $123 million in rent alone, though court filings have characterized the debt only as “being more than $100 million.” Children’s argues the amount is inflated.

The county “does not expect Children’s to make the required payment for Fiscal 2016.” This belief is further emphasized by a $2.1 million operating loss the El Paso Children’s Hospital (EPCH) admitted in a report filed last week, the county said.

“The tax rate for UMC is determined by the expected revenues, from all sources, flowing to UMC during the fiscal year. In the event revenues do not materialize as expected (i.e. EPCH does not pay as required under the Facility Lease Agreement and other contracts), the Hospital District may have to raise taxes to overcome the shortfall, with approval of Commissioners Court, because the laws of the State of Texas obligate UMC to have a balanced budget each year,” the document reads.

The county of El Paso “does not believe it to be credible for the Fiscal 2016 Budget of UMC to include those projected ‘revenues’ from EPCH under the Facility Lease Agreement. Replacement of lost revenues can, and most probably will, affect the Tax Rate and/or Rollback Tax Rate EPC Commissioners Court will be setting for the Hospital District,” the county argued.

Wednesday, UMC CEO Jim Valenti is scheduled to make a presentation on the hospital’s proposed budget to county commissioners and will announce the proposed tax rate.

In the document filed Tuesday, the county also maintains it is “integral” to any reorganization of the Children’s hospital that envisions a capital infusion, changes in the lease to UMC, the sale of Children’s to a 3rd party or acquisition of a hospital. The argument comes after the county complained about the salary paid to Children’s CEO Mark Herbers and consultants AlixPartners, and Children’s responded the county had no standing to complain because it is not a creditor as is UMC.

Children’s has asked Bankruptcy Judge H. Christopher Mott to approve a flat fee of $180,000 per month to AlixPartners, which would cover Herbers’ salary and other services. The county has complained that is not the only payment that will be made to AlixPartners, as there are two more people who have been hired as “managing directors responsible for the overall engagement” who earn $1,035 per hour.

In court filings, Children’s defended the services provided by Herbers and AlixPartners, saying they have already made significant improvements to the hospital since they were hired in February. Collections and revenue have increased, and expenses have decreased under their management, according to Children’s. Retaining them is a good business decision necessary for the success of the hospital as it tries to emerge from Chapter 11 bankruptcy, Children’s has said.

The dispute over the amount being paid to AlixPartners and Herbers will be discussed during a hearing Thursday in Austin.