HUNTSVILLE — The projected Dec. 31, 2012 closing date has come and gone and still no agreement has been reached on the transfer of the Scott County Hospital to S.M. Promen of Tennessee, LLC.
But work is continuing, according to Promen CEO Irving Sawyers, Jr., who, at Mayor Jeff Tibbals’ request, provided a written response on Monday, as well as answered several questions posed by commissioners, Dr. Cathy Martin and County Finance Director Brian Strunk.
At Monday evening’s commission work session, Tibbals read aloud the seven-page response emailed to him and commissioners earlier in the day.
Sawyers pointed out that everything has been completed on his end with the lone exception of providing the State Attorney General’s Office with a document certifying that the capital funding ($3 million) is in the bank.
And the reason for that, he wrote, is that negotiations with his investors was slowed due to a change in the Asset Purchase Agreement which prevents using the property for collateral to borrow money to operate in the first two years of ownership. He also cited the holiday period interrupting negotiations with investors.
“Until the agreements are signed and the funds are in the bank the process is not complete,” Sawyers wrote. “And this process is, in large part, responsible for the present delay.”
He went on to point out that four (of the original 10) investors “have responded affirmatively,” with another expected to make a commitment by January 11, “and I will try to have two of the others do the same which I think would give me the first $3.0 million or a little bit more.”
Sawyers also accepted blame for not meeting his own deadline for closure.
“My anticipation of 12/31/2012 was a push on my part as I realized that that date presupposed being able to address everyone’s requests during the Christmas/New Year’s corridor and I was wrong,” Sawyers wrote.
Later on in Sawyers’ response, in answering a question posed by Commissioner June Jeffers as to which side is to blame for the delay, Sawyers wrote:
“The County has cooperated in all respects. The delay is due to the holidays and the process necessary for investors to get comfortable with the proformas for the hospital. As noted earlier, the two year covenant prohibiting using the facility as collateral has been an issue.”
Despite the unexpected delay in closing the deal and budget overruns now exceeding nearly $160,000, Mayor Tibbals expressed confidence that the deal could be finalized within the next two weeks.
In fact, he announced that Sawyers would be present at the formal meeting of the commission on January 22. Sawyers, too, expressed that sentiment when he wrote:
“Once the closing occurs there is no change in the time between actions that it will take to procure the license, DNV survey, deemed status and Medicare provider number.
“A core staff will be identified, hired and take us through the issuance of a Medicare provider number. Volume of patients and staff will be minimized as much as possible during this time. I know that I’ve stated many times before but feel a need to reiterate it as the question of hiring keeps coming up.”
In addition, in response to a question posed by Commissioner Dennis Sexton, Sawyers stated: “I expect the hospital to open no later than 90 days after close.”
Among his responses to a series of questions submitted by Commissioner Mike Slaven, Sawyers wrote:
“I will not try to open a facility that is underfunded.” and,
“The 24 month + 6 month period of not having the asset available to collateralize if needed has been mentioned by every investor as a weakness that we had to overcome.”
Sam Lyles submitted a series of questions related to Promen’s funding capabilities, and the “strain on the county budget” due to the delay. He added: “It would be nice to receive some good news on this project.”
Sawyers’ response: “Sufficient funds are available but the methodology to put those funds to work is a process that commences with all participating investors signing a Subscription Agreement and Operating Agreement . . . We’ve shouldered quite a cost responsibility ourselves in legal fees, survey fees, appraisal fees, etc. We are working on finalizing the offering and closing the sale on a full-time basis.”
Commissioner David Jeffers asked Sawyers: “Is it really this hard to give someone a hospital. . . Is the deal falling through?’
He responded: “We have expended too much money to ‘back out of it.’ But as I mentioned during the presentations the two year moratorium on being able to use the facility as collateral for financing capital needs of the facility is better described as ‘giving you a hospital later’.”
Among Commissioner Paul Strunk’s questions was one in which he said he was disappointed “in your willingness to personally appear before the commission” after having been asked to do so in both November and January; “Will you commit to being at our meeting on Tuesday, January 22, 2013 at 6:00 p.m.?”
“I have communicated to Mayor Tibbals that I would attend the meeting . . . as I anticipate that I will be in town anyway because I think that we will have all our ducks in a row by then and working towards what is necessary to open. I apologize if I seemed to offer excuses for not coming to meetings. I believed that the need to respond to investors and get the offering completed superseded the need for me to appear at the County Commission meeting. This was not disrespect, it was pragmatism.”
He wrote in answer to Dr. Cathy Martin’s question about when the financing would be complete, to which he stated: “Likely within the next week.”
Commissioner June Jeffers asked when the county citizens would be notified of the hospital’s reopening.
“I expect [Attorney General] approval and close to be published, so everyone will be aware of that occurrence. We will count on the local Board and media to keep citizenry informed.”
In other business:
• The Intergovernmental Committee sent to the full court a request for $10,000 to help subsidize the 16-county “Operation Sharing” initiative which last year provided $16.1 million in assistance to government and non-profit organizations in a 16-county area. That motion came following a request by John V. Thompson, who heads up the charity at a warehouse in Oneida;
• That committee also approved a change in the commission’s regular monthly meetings for January and February from the third Monday to the third Tuesday due to Monday holidays of Martin Luther King Day and Presidents Day, respectively;
• The Community Development Committee (in addition to the hospital-related business) approved sending to the full commission a request from the Solid Waste Management Board to make certain changes in regard to rules and regulations at the Solid Waste Recycling Center in Huntsville, concerning creation of a designated smoking area, and prohibiting loitering;
• The Building & Grounds Committee voted to send to the full commission a draft of a Request for Proposals for the purchase and or lease-purchase of the old Scott County Jail in Huntsville. If approved by the full commission, the RFP will be advertised and proposals accepted for review by the committee, which make a recommendation for the full commission’s consideration.; and,
• The Budget Committee approved a list of “housekeeping” amendments in the County General Fund.