RINGGOLD, Ga. — To pay some of Hutcheson Medical Center’s debts, Catoosa County leaders decided this week to dip into their rainy-day fund.
But Walker County officials, unlike their neighbors to the east, don’t have enough money saved up to pay off the roughly $4.5 million they owe. So what will they do?
Walker County Attorney Don Oliver said Friday he expects to pay the debt in the coming weeks. He isn’t sure of the exact method, but he said the county will borrow money — either through a tax anticipation note or “a more long-term vehicle.”
That means Walker County residents are looking at a potential tax hike for the second consecutive year. In September, the county increased the portion of property taxes that goes toward local government by 15 percent.
Among other loans, Hutcheson received $6 million from Regions Bank and $550,000 from Erlanger Health System in 2013 to help pay its employees. Catoosa and Walker county officials decided to guarantee those loans, meaning county taxpayers would have to pay them off if Hutcheson could not.
The hospital has since filed for bankruptcy.
The loans matured at the beginning of this year, and on Tuesday the Catoosa County Commission voted to pay their half of the debts, which comes out to be about $3.5 million including interest and attorney’s fees.
“These debts are due,” County Attorney Chad Young told the commissioners. “They’re not only due; they’re past due. … The longer we delay payment, the debt amounts just go up.”
Rather than borrowing the money, commissioners decided to use some of the county’s $14.5 million of reserve funds.
Walker County has to pay an extra $1 million because Sole Commissioner Bebe Heiskell decided to guarantee an additional loan from Regions Bank in November 2013. While Catoosa County officials decided to stop backing any loans, Heiskell said Hutcheson needed the money to pay its employees.
Walker County will have to borrow money to pay that back.
“We’re still debating exactly how to approach it,” Oliver said. “We don’t have the money sitting in reserves like Catoosa does. Unfortunately, we don’t have cascades of tax dollars coming in to keep our coffers pumped up like they do. … One way or the other, it’s going to be paid. We’ll take care of that soon.”
After paying Regions and Erlanger, Catoosa and Walker county officials can try to get their money back by filing a claim against Hutcheson. But they would join a long line of creditors with their hands out.
According to a statement of financial affairs filed in U.S. Bankruptcy Court on Dec. 15, the hospital has $82.8 million in liabilities and only $32.8 million in assets.
In addition to the $7 million guaranteed by Catoosa and Walker counties, Hutcheson also owes Regions $19 million from previous loans.
The hospital also owes Erlanger about $20 million more. Catoosa and Walker counties have guaranteed that money, too, though neither county has to pay it. For now. The Chattanooga hospital and the Fort Oglethorpe hospital have sued each other, and any payments are delayed until those cases sort themselves out.
In 2011, with Hutcheson losing about $1 million a month, Erlanger signed an agreement to manage the hospital. It agreed to provide physicians, executive leadership and a $20.5 million line of credit.
Erlanger later loaned Hutcheson an extra $550,000. But in 2013, Hutcheson ended the agreement, its leaders arguing that Erlanger’s executives didn’t keep their promises.
With the two hospitals suing each other in federal court, Erlanger has tried to foreclose. U.S. District Court Judge Harold Murphy ruled in October that Erlanger could sell Hutcheson on Jan. 6.
Hutcheson’s attorneys have since filed a motion in the 11th U.S. Circuit Court of Appeals, and the hospital filed for Chapter 11 bankruptcy in November, delaying Erlanger’s efforts to foreclose.
Contact staff writer Tyler Jett at tjett@timesfreepress.com or at 423-757-6476.