HomeMy WebLinkAboutRes2008-095Sponsored by: Oates
CITY OF SEWARD, ALASKA
RESOLUTION 2008-095
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SEWARD,
ALASKA, APPROPRIATING $500,000 TO THE HOSPITAL OPERATIONS
RESERVE ACCOUNT, TO COVER ANTICIPATED CASH FLOW LOSSES
OF THE CO-LOCATED HOSPITAL AND LONG-TERM CARE FACILITIES
WHEREAS, the City of Seward owns a hospital and is in the process of constructing a long-
term care facility, both of which are to be managed and operated by Providence Health & Services
under agreement with the City; and
WHEREAS, because long-term care operations are currently being conducted in a facility
that has reached the end of its useful life, significantly reducing the capital cost reimbursements
previously depended onto maintain positive cash flow at the co-located hospital and long-term care
facility; and
WHEREAS, these short-term losses were predicted in the pro forma financial statements
presented to the public and to the Seward City Council prior to making the decision to enter the long-
term care business, with total losses projected to be nearly $1 million per year; and
WHEREAS, despite a nearly two-year delay in construction of the facility, financial losses in
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the 18 months since rate rebasing have resulted in cash flow losses of less than $1 million through
December 31, 2008; and
WHEREAS, the Seward City Council approved Resolution 2008-088 on September 8, 2008,
authorizing the depletion of former reserves available to cover short-term financial losses, and the
newly authorized contract with Providence requires that the City be able to cover cash flow
shortages, necessitating a reservation of fund balance for that purpose; and
WHEREAS, this resolution will enable the administration to reimburse Providence for cash
flow shortages which they are currently covering, for shortfalls occurring through the end. of 2008.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY
OF SEWARD, ALASKA that:
Section 1. The amount of $500,000 is hereby appropriated from undesignated fund balance
account no. 101-0000-3050 to the Designated for Hospital Operations account no. 101-0000-3042-
0003.
Section 2. The City Manager is hereby authorized to spend up to $500,000 from the
Designated for Hospital Operations account, to the Hospital pass-through account no. 101-1191-
5998, to reimburse Providence for cash flow losses.
CITY OF SEWARD, ALASKA
RESOLUTION 2008-095
Section 3. This resolution shall take affect immediately upon its adoption.
PASSED AND APPROVED by the City Council of the city of Seward, Alaska, September 22,
2008.
THE CITY OF SEWARD, ALASKA
Clark Corbridge, Mayor
AYES:
NOES:
ABSENT:
ABSTAIN
ATTEST:
Dunham, Valdatta, Bardarson, Amberg, Kellar, Corbridge
None
Smith
None
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Je Lewis, C
Ci y Clerk
(City Seal)
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Council Agenda Statement
Meeting Date: September 22, 2008
Through: Phillip Oates, City Manage~~,,.~f
From: Kristin Erchinger, Finance Director
Agenda Item: Designation of reserves for hospital losses
BACKGROUND & JUSTIFICATION:
The City is currently constructing a new long-term care facility to replace the existing privately-
owned facility. Because the current long-term care facility has reached the end of its useful life, the
reimbursement rates from Medicaid have been significantly reduced. This is a short-term financial
problem which was clearly understood by the City Council and the community prior to the City's
decision to enter the business of providing long-term care services.
In the long-term, the co-located hospital and long-term care facility is expected to operate in a
positive cash position. However, in the short-term, the City anticipates operating losses less than
$600,000 per year beginning in January, 2007, until the facility opens its doors. This equates to
approximately 50% of the original estimated losses, and is due to cost containment by the Providence
management team, as well as to the renegotiation of management fees in the recently-approved
management agreement.
Since January, 2007, the hospital has experienced operating losses totaling approximately $650,000.
The City Council appropriated $500,000 to cover these losses on September 8, 2008. This resolution
replenishes the operating loss account, and allows the city manager to draw from this account to
cover operating losses between now and the end of the year, as required by the new management
contract with Providence.
CONSISTENCY CHECKLIST:
Where applicable, this resolution/ordinance is consistent with the Seward City Code, Charter,
Comprehensive Plans, Land Use Plans, Strategic Plan and City Council Rules of Procedures.
Other:
FISCAL NOTE:
This appropriation reduces the City's undesignated fund balance to approximately $500,000, well
below the City Council's goal of maintaining thr e to six months' of operating reserves in
undesignated fund balance. Finance Department:
RECOMMENDATION:
City Council approve Resolution 2008 authorizing the appropriation of funds to cover hospital
operating shortfalls pending completion of the new long-term care facility.
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