HomeMy WebLinkAbout11122024 Reierson Laydown 2 Sales Tax Hospital Use Only11/7/24 Laydown Letter for 1% Sales Tax-Hospital Use Only
This letter is being written to Seward City Council in opposition of using 50% of the 1% Hospital Sales
Tax for General Fund Spending.
Legislative History seems to indicate this 1% Sales Tax may have started in 1982 and was
directed to be used for the sole purpose of running the then City Owned and Operated Hospital on
behalf of the citizens of Seward and the surrounding area.
In the mid-1990’s the new Acute Medical Center aka Hospital was constructed to replace the old City
Hospital, at which time the 1% Sales Tax revenues were pledged and used to pay off the new
Hospital Bonds. Further, the City entered into a Management Agreement with Providence, who after a
few years of operations were successful in getting the City and its taxpayers to be 100% liable for all
costs and any liabilities incurred by Providence, which still stands to this day.
In 2009 Wesley Nursing Home was replaced with Mt Haven Long Term Care Center and this too was
added to the Management Agreement and operated by Providence.
Together the Hospital and Mt Haven result in a complimentary business unit that combined have the
potential of generating a positive cash flow when they enjoy strong hospital encounters and near-full
long term patient levels.
Positive cash flows have not always been the case, as in the past 6 years the City owed Providence
over $7mm mainly as a result of low Mt Haven Census. This is just one example of how quickly
things could change in the medical world. In fact, Prov-SWD’s Medicaid Cost Reimbursement Rate
Re-Basing occurs every 2-3 years and will be adjusted again based on 2025 numbers. This means
that the Medicaid Reimbursement Rates for the Hospital and Mt Haven will be changing again in
2026 and could potentially result in lower rates that can affect cash flow at these facilities.
I ask Council once again to memorialize the use of this 1% once again for Hospital/Health use only, or
at least until the City successfully sells our City hospital assets to a medical provider that can assure
citizens that healthcare service will remain at the premier level that Providence has provided us since
1998.
In order to support this request, I am herein providing a Major City GF Revenue History Report that
indicates the 1% Sales Tax generates upwards of $1.9mm to the Hospital Fund. While these funds
were also pledged as security to pay off the $27mm+ in Mt Haven Bonds, which the City has secured
ample funds to payoff these Bonds in 2026, the City is still responsible for replacing the $12mm+ in
equipment used at these two facilities, which have cost in excess of $1mm in prior years to replace.
In addition to this, the City is still paying off the Old Hospital PERS for $100,000 per year, as well as
transferring $150,000 per year to the Bond Reserve Fund, which combined is about $1.25mm.
It is also worth noting that our City has made a past practice of having some Fund Balances carry
comfortable reserves to help pay for large ticket items and avoid Bond Financing, which saves
Interest Expense, such as for the $1.3mm CAT Scanner. Strong reserves also helps avoid increased
property taxes like Homer, Kenai and Soldotna pay to help support their hospital services.
So again, until these Hospital Assets are sold and no longer pose a liability to the Taxpayers of
Seward, I am recommending that the 1% Sales Tax for Hospitals remain intact and untouched by the
City for any other use than Hospital and Mt Haven operations and maintenance.
11/5/24 Seward - Major GF Revenue History Report for 25/26 Budget Discussion
Sales Tax Sales Tax Sales Tax Addt'l Sales Tax Addt'l Sales Tax
Actual Budget Addt'l 3% GF 1% Hospital
2021 6,861,114$ 5,602,000$ 1,259,114$ 944,336$ 314,779$
2022 7,635,648$ 6,000,000$ 1,635,648$ 1,226,736$ 408,912$
2023 7,856,783$ 6,500,000$ 1,356,783$ 1,017,587$ 339,196$
AVG 21'&23'1,062,886$
(estimate)(1) & (2)
2024 7,600,000$ 6,500,000$ 1,100,000$ 825,000$ 275,000$
2025 7,400,000$ 7,020,000$ 380,000$ 285,000$ 95,000$
** Addt'l Sales Tax over Budget, are to go into Capital Acquisition Fund, which can be
referrd to as the General Funds MRRF-Fund for Major capital Repairs and Expenditures.
Bed Tax Bed Tax Bed Tax
Actual Budget Addt'l
2021 713,633$ 673,175$ 40,458$
2022 804,511$ 675,000$ 129,511$
2023 840,428$ 725,000$ 115,428$
AVG 21'&23'786,191$
2025 50% to
GF 786,191$ $ 694,533
(estimate)
2024 725,000$
2025 1,389,066$
1% Sales Tax 1% Sales Tax 1% Sales Tax
Hospital-Actual Hospital-Budget Hospital-Addt'l
2021 1,715,279$ 1,400,500$ 314,779$
2022 1,908,912$ 1,500,000$ 408,912$
2023 1,964,196$ 1,625,000$ 339,196$
AVG 21'&23'1,862,795$ (3)
2025 50% to
GF 931,398$
(estimate)
2024 1,900,000$ 1,625,000$ 275,000$
2025 812,500$
Total Additional Revenues for Expenditures
Proposed by City Administration in 25/26 Budgets
Sales Tax 24' vs 25 Increase 520,000$
Bed Tax 21'-23' Avg 786,191$
50% of 1% Sales
Tax for Hospital 21'-23' Avg 931,398$
Total Addt'l Revenue for G.F.: (4)2,237,588$