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Heffernan board vows to fight for portion of sales tax revenue

March 08, 2001|By AARON CLAVERIE, Staff Writer

CALEXICO — Board members of the Heffernan Memorial Hospital District said Wednesday they will fight to keep $250,000 of the nearly $1.8 million of half-cent sales tax revenue taken in annually by the district to pay off the hospital's debts.

The district could lose the money after the Calexico Special Financing Authority voted Tuesday to refinance the $9.235 million bond issue taken out in 1996.

The SFA is a joint powers authority established in 1996 between the city and the hospital district to manage and purchase the bonds used to pay off the past bankruptcy of the hospital as well as other debts.

At Tuesday's SFA meeting all four members of the board agreed to refinance the bond issue, which would decrease the interest rate from 7.4 percent to 4.2 to 4.5 percent.

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When the bond is refinanced it will have to be restructured and money will be made available to pay off debt owed by the SFA or go to the hospital to provide medical services.

"The issue is whether that $250,000 comes to the hospital," said Henry Legaspi, the administrative assistant for the hospital district.

As it stands, according to a tax settlement agreement between the SFA and Calexico resident Rudolfo Moreno, the hospital district is to receive no more than $250,000 a year from the sales tax revenue.

The district receives none of that now as it is tied up with a more than $1 million debt to MedCap, an Oregon-based firm that fronted the district moneys based on anticipated earnings back in 1997. The hospital closed as those earnings never came to fruition.

Moreno, treasurer for the SFA, said Wednesday he will try to make sure that the $250,000 is given back to the authority to pay the debt off faster.

Moreno said the people and businesses of Calexico would benefit more if the hospital's debts are paid off sooner because the half-cent sales tax would end.

"The hospital doesn't want it to end because they would lose the $250,000 from the sales tax," Moreno said.

In 1997, after the hospital went deeper into debt, Moreno threatened to file an initiative repealing the sales tax and preventing the city from bailing out the hospital district.

This worried "creditors in Los Angeles," Moreno said, because the sales tax was the source of revenue that was to pay off the bonds.

Instead of trying to repeal the sales tax, the SFA and Moreno reached an agreement in which the hospital district would receive $250,000 a year.

Moreno said Wednesday that when the bond issue is refinanced the hospital district should get none of the money that will be freed up.

"The Joint Powers Agreement (SFA) is not authorized to acquire any additional debt of the district," Moreno said. "The district is now asking the JPA to give them $1.5 million so that they can pay off the debts they incurred after they were relieved of all of their debts ($9.5 million) in the bankruptcy court.

"The JPA has no legal authority to relieve the district of any further debt," he added.

Norma Apodaca, chairwoman of the hospital board, said, "Obviously we have a difference of opinion."

District Trustee David Ouzan, also a board member of the SFA, said he won't back down from Moreno.

"Moreno can fight and he can continue to fight and he will run out of energy, but we won't because we are much stronger and united. It's a matter of using better tactics and we will win," Ouzan said.

One of the tactics the hospital board talked about is making a new agreement with the SFA when the bond is refinanced.

Eduardo Rivera, attorney for the hospital district, said when the bond is refinanced the rules that guided it before can be changed.

"It's a new bond issue and we can make new agreements," Rivera said.

Robert Swerdling, the financial consultant that is advising the SFA on the refinancing, said they can decide to "give all, some or none" of the money to the hospital.

These issues can't be settled until the SFA actually signs off on the new bond issue.

That is expected to take place in two or three weeks, according to Swerdling.

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