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story.lead_photo.caption Magnolia Regional Medical Center. - Photo by J.D. Bailey

The Magnolia City Council has tentatively scheduled a special meeting for Aug. 13 to discuss a lease agreement with Magnolia Regional Medical Center.

MRMC Chief Executive Officer Rex Jones said the City Council was not able to vote on the lease during their meeting Monday because a notice for the ordinance had to be posted publicly seven days in advance in order for a vote to be made on it. This notice has to be published in print, said Jones.

“They had the notice of what was required for the ordinance to be published, and I think there was still some discussion or question about a couple of things on the lease, that maybe the Mayor wasn’t comfortable with, so they didn’t post the notice for the ordinance,” said Jones during a MRMC board meeting Monday.

This has not been Jones’ first time speaking to the Magnolia City Council on the behalf of MRMC. Since May of 2019, MRMC has worked to gain a 501(c)(3) nonprofit status and has run into some hiccups with the City Council along the way. The Magnolia City Council agreed to move forward with lease discussions during last September; however, this fell through the following month as the City Council did not meet to go over the lease.

“There are now lease discussions, and I’ve made several attempts with the subcommittee of the City Council to ask for a meeting,” Jones said in October 2019. “I asked if he (Mayor Vann) was coming and he said, on the advice of his city attorney, none of the city council would be attending the meeting.”

During Monday’s Magnolia City Council meeting, Vann stressed his concerns over a $500,000 buffer to MRMC. The buffer is set to allow for MRMC to purchase additional furniture, fixtures and equipment for use in the hospital during the term of the agreement. This buffer was originally set for $1 million, but was brought down to $500,000 during the meeting.

The funds to pay off any expenses used by this buffer would come from the revenues of two local sales and use taxes: a 1.125% sales and use tax levied by the City of Magnolia, which was approved by voters at a special election held May 8, 2007 known as the “Bond Tax”; and a 0.25% sales and use tax levied by the City of Magnolia, which was approved by voters at a special election held Feb. 24, 2004 known the “Hospital Maintenance Tax”.

Vann said the buffer concerns him because the Operations and Maintenance account is also a co-maker on the bond that pays for the hospital. If the sales tax revenue comes short — which he noted has never happened before — then the remainder of that would have to be paid by the Operations and Maintenance account. Vann said that when he was elected Mayor, there was roughly $6 million in the Operations and Maintenance account. Currently, there is $280,000.

“I don’t want to hinder a hospital from being able to do what they need to do,” said Alderman Jamie Waller. “We do have to have some trust in the hospital administration to take care of business, so I feel like $500,000 is a reasonable number.”

“I don’t vote, you guys do,” Mayor Vann told the Council. “Whatever your vote is, you’re fixin’ to put it on our kids and our grandkids. Let’s just make sure we are doing the right thing.”

Vann also recommended that council members review items 2, 12 and 14 before they meet again.

Item 2, labeled “Consideration”, is over the rent that Magnolia Regional Medical Center will pay to the City of Magnolia, which is listed at $1 per year.

Alderman Tia Wesson turned the council’s attention over item 14, which states “the Lessee assumes all of the Lessor’s debts of ordinary trade accounts with regard to operation of the Hospital.” Further, upon the expiration of the agreement, “the Lessor agrees to assume any then-present debts of the Hospital relating to ordinary trade accounts with regard to operation of the Hospital.”

Joel Hutcheson of the City Attorney’s office suggested that for the safety of the agreement and the city’s protection that it may be best to go further and explicitly define what “ordinary trade accounts” means. As item 14 currently stands, the city attorney’s office defines it to not include payroll and long term debt, Hutcheson said.

Vann also suggested that Jones and Chief Dew enter discussions over security at the hospital. He suggests that there should be a full time, armed security officer at the hospital.

“We need to be thinking about something not only to protect the staff of the hospital, but the city’s investment too,” said Mayor Vann.

Jones said that for the lease to be approved, the hospital will be required to do a change of ownership with the state of Arkansas that will require a full 30 day notice. He said that he can’t apply for this until he has the lease in his hand with an effective date. If the lease were to be approved soon, he said it could allow for MRMC to have the entire month of August to work with the state on transferring ownership of the hospital.

If the change of ownership occurs after the end of the fiscal year, Jones said it could lead to a cost of up to $30,000 due to additional audit costs and cost report costs. During the MRMC board meeting earlier that day, Jones said that they may lose out on money they would benefit from thanks to the change to a 501(c)(3), netting a total loss of at least $100,000. He did not elaborate on why the hospital would be entitled to the additional monies.

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