Kodiak Daily Mirror
Article published on Friday, Feb 16th, 2007
By SCOTT CHRISTIANSEN
Mirror Writer
The Kodiak Island Borough Assembly approved a 10-year extension of its lease agreement with Alaska’s largest private hospital operator Thursday night, but not before a protracted debate that shed more heat than light on the relationship between this small local government and the state’s largest private sector employer.
Two leases were on the table. Together they cost Providence Health Systems Alaska about $760,000 annually. Hospital officials say the leases are paid with money generated by providing services in Kodiak.
Both leases provide borough-owned facilities to Providence until 2017. One is for the Providence Kodiak Island Medical Center on Rezanof Drive, the only local hospital for this community of 13,000 people. The other is for Providence Kodiak Island Counseling Center, a remodeled building near Kodiak High School.
Under the leases, both of which passed 4 votes to 1, Providence will pay $762,000 per year to lease the hospital and $10 per year for the counseling center.
The minority opinion is that the leases give too much to Providence, haven’t kept up with inflation and might violate a borough code that requires a formula using the assessed value of a property before leasing it to a nonprofit corporation. Mel Stephens, a local attorney and former assemblyman, took the podium during public comments to express the minority opinion. Stephens said the borough is getting a bad financial deal and alleged the leases are illegal.
“I would urge you to defeat both of these leases, which I believe violate at least two provisions of the borough code,” Stephens said.
He stopped short of citing the code, and said the price was the more important matter. The lease has only inched up $3,500 per month over the 1997 agreement. Stephens used an Anchorage consumer price index for inflation to show how the 1997 lease compares to 2007 dollars.
“You are falling behind that by $11,000 per month, $132,000 per year (or) $1.32 million dollars over a 10-year period,” he said.
“Folks, these numbers are just too high to ignore. We don’t really need to go on with this. I urge you to defeat these resolutions, deal with the legal issues and the financial issues that are raised by them and bring them back at another time,” Stephens said.
Citizens are limited to three minutes of comments in assembly meetings. Just as a beeper signaled Stephens’ time was up, he said he had no qualms with how the hospital was run and respected Providence’s management.
“You can’t simply hunker down and say, ‘Oh Providence is doing a fine job. I think it’s a partnership. Let’s pass this.’ I don’t think it will go away that easily,” Stephens said.
The majority opinion, supported by Borough Manager Rick Gifford, is that the lease is a partnership, the borough has an enterprise fund to subsidize it rather than a general-fund subsidy, and the borough is getting a better deal than many small communities.
“I’m convinced that it’s a partnership and the community is always going to make a contribution,” Gifford said.
He also credited borough staff for negotiating a good deal that keeps the subsidy down.
“I believe we asked the tough questions,” Gifford said.
Assemblymen Tom Abell and Reed Oswalt were both absent from the meeting. Assemblywoman Barbara Williams was the sole dissenting vote. Williams and Jerrol Friend led a discussion to postpone the lease decision. Abell called on the assembly to delay the decision in an e-mail read at the meeting.
When a vote was taken to postpone, Friend voted “nay.” Williams cast the sole “yay.”
The current lease expires April 20 and Providence announced its intention to seek a lease renewal in October.
Williams said the lease agreement had not been explained to her.
“There are too many flaws ... (and) too many questions,” Williams said.
In previous work sessions on the contract, Williams asked for a legal opinion on the financial and legal aspects of the lease. Majority members balked, saying the borough’s contracted attorneys can be asked to give opinions on matters of law, but should not be expected to give advice on policy decisions.
“My opposition is to a lease which I feel is highly swayed in Providence corporation’s favor,” Williams said in the meeting, adding later, “I’m not sure this would withstand judicial review.”
Gifford said the resolutions the assembly was set to vote on are the work product of the borough’s attorneys.
“They have written these resolutions and that is their work and their opinion,” he said.
At one point, Gifford said his own 17 years of experience in small-government management in Alaska gives him confidence that Kodiak is getting a good deal with Providence.
Assemblywoman Sue Jeffrey said she did not understand Williams’ claim the contract has unanswered questions.
“I’m having a hard time understanding what assembly member Williams is talking about,” Jeffrey said, saying hospital CEO Don Rush had met with the assembly several times in recent months.
Mayor Jerome Selby agreed.
“In all fairness, Ms. Williams, we’ve had three work sessions on this contract in the last six months,” Selby said.
During debate and after the leases were approved 4 to 1, each assembly member present took time to say they were pleased with the service Providence provides in Kodiak.
After the meeting, Rush said that the last time he went over the lease and explained Providence finances during an assembly work session, no questions were asked.
Rush said some assembly members have accepted his open invitation to visit him at his office.
“They are always welcome to come in and ask any questions they have, but only a few did come to ask about the contract,” Rush said.
Providence began operating the hospital in 1997 and has paid the borough $9.7 million between 1997 and 2005, according to audited figures Rush included in his presentations.
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