Erlanger caught in sales tax web

Erlanger caught in sales tax web

March 5th, 2011 by Emily Bregel in News

The $3 million in public funds that Erlanger Health System has received each year for decades could be in jeopardy this spring.

A 45-year-old sales tax agreement between Hamilton County, Chattanooga and the other municipalities is about to expire. The agreement guarantees $3 million a year to Erlanger to treat indigent county residents.

Now city and county officials are at odds over what the loss of that agreement would mean for Erlanger's funding.

Chattanooga Mayor Ron Littlefield argues that the legislative act that created Erlanger, formally called the Chattanooga-Hamilton County Hospital Authority, makes clear that paying for indigent care is the county's responsibility.

The sales tax agreement transfers some sales tax revenue to the county to help fund civic and social service agencies. If it expires, the obligation to fund Erlanger falls on the county, Littlefield said.

The hospital authority act "says 'the county,'" Littlefield said. "It does not say 'the city and the county.'"

Dan Johnson, Littlefield's chief of staff, said the hospital authority act provides that if the authority goes out of existence, its land and buildings revert to the county.

"In other words, that act put the hospital authority in the hands of the county," he said.

But Louis Wright, Hamilton County finance officer, said the act makes it clear the county is responsible for those funds only while the sales tax agreement is in effect. It's debatable what would happen if the sales tax agreement expires, he said.

"Prior to the sales tax agreement, that [Erlanger] was funded 50-50 between the county and the city," he said.

If the agreement expires, the responsibility should be shared, Wright said.

"That's the way I read it," he said.

The 1977 Hospital Authority Act states that Erlanger will receive at least $3 million annually from the county "so long as the 1966 Hamilton County Sales Tax agreement shall remain in effect."

The agreement sends about $10.5 million in city sales tax revenue to the county each year to help fund agencies and groups including the library, Erlanger, the Chattanooga-Hamilton County Regional Planning Agency and public television station WTCI.

But the agreement will expire in May, and public leaders have not indicated whether they will renew it, create a new agreement or let it fade away completely. Depending on what happens, some agencies could lose funding, officials have said.

Johnson doesn't think there's enough time to negotiate a new agreement before it expires. Whether the city will decide to voluntarily help the county support Erlanger still is up in the air, he said.

"The city may do something in the future or may not. But I don't think it's our responsibility," he said.

Erlanger spokeswoman Pat Charles said in an e-mail that hospital officials are waiting to see how city and county discussions evolve.

taking the lead

Wright said county leaders are waiting on the city to take the lead in determining the future of Erlanger's funding.

"I think that Erlanger will get funded somehow. But I don't know how," he said. "I have no idea what the city intends."

Charles said the county money helps pay for uncompensated care losses. Erlanger records show about $82 million in uncompensated care costs in fiscal 2010, including $28 million from TennCare, $25.8 million in charity care to uninsured patients and $28 million in bad debt.

Littlefield said $3 million is "insignificant" for a major regional hospital such as Erlanger. The hospital had $473 million in net patient revenues and an operating profit of $8.58 million last year, according to financial statements.

"It should go up, or we should quit trying to do it," he said.

But hospital trustees say those funds are an important part of the budget.

"Right now we need it because the indigent load is so great," trustee Russell King said.

In lean years, Erlanger leaders have asked the county to increase its support.

The county provided Erlanger $3.5 million in 2000, 2001 and 2002, but returned to the $3 million level in 2003 and hasn't changed it since, according to newspaper archives.

"The $3 million was never meant to be a ceiling. It's the minimum," King said. "[But] it's hard to ask for more money from government when the hospital's making a profit."

For the past two fiscal years, the hospital has earned a profit and awarded bonus pay to executives.

Staff writer Cliff Hightower contributed to this story.