What's All This About Taxes

As it today, the San Benito Health Care District collects property taxes and has incurred bond measure debt of $43 million, paid for through property owners' property tax bills. Approximately $157,000 of all the property taxes the county collects goes directly to the hospital. The County collects $2,5 million annually from the property taxpayers to retire bond measures debt. If Insight were to purchase the assets of the San Benito Health Care District, AKA Hazel Hawkins Hospital, the District would still extist and it would still be collecting property taxes. There is some belief that any cash received from Insight would have to be used to eliminate at least the general obligation bonds. If the District were not to sell at all, then operations of the hospital and collection of property taxes and bond measure monies would simply continue. If the District were to sell to a private property, such as Insight, it would have to be determined who gets the property taxes and any bond measure funds post transaction.

Under What Circumstances Would Taxes Be Increased?

If Insight Buys The scenario that we should be worried about is this: Insight purchases all of the other assets aside from the real estate, which it leases with an option to buy in 5 years. Insight operates the hospital for 5 years, taking a "management fee" of $16 million a year (total $80 million) and then decides to not operate the hospital any longer. We are then left with a hospital that may not have been upgraded or well-maintained AND we don't have the ability to run one anymore because they moved all executive and senior management functions to Flint, Michigan (and may have brought their own nurses in). A bond measure would most likely be needed to restore the hospital to functional operational status. In similar vein, if the state of California were to enforce their seismic upgrade regulations, possibly an increased risk with a private owner, Insight could decide to bail sooner than 5 years so they do not have to incur the cost or could coerce the District into floating a ballot measure to pay for those upgrades. Focus on that management fee above; would Insight forego it in order to pay for upgrades? Sidenote: We have to wary of the current hospital board allowing lease payments that Insight would pay for the real estate to decrease the exercise price of buying the real estate. If Insight Does Not Buy As it is right now, Hazel Hawkins Hospital is generating plenty of cash flow ($15 million annually) and should be able to afford effective maintenance and upgrades to its facilities from cash flows. The County of San Benito is willing and able to contribute $5 million with additional oversight. If it adopts a business plan similar to what experts have suggested, Hazel Hawkins will grow in revenues, providing more capital for more improvements. However, no one can predict the future and what it holds for us or Hazel Hawkins Hospital. There could be some huge discovery or event that could lead to the hospital going to the residents again, but that same risk holds whether we sell to Insight or we do not.