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Coast Hospital Dilemmas

Turbulent times continue at Mendocino Coast Hospital (MCDH). During a Monday, April 1st special meeting the hospital's board of directors approved the hiring of Wayne Allen as interim Chief Executive Officer (CEO). Allen has served the hospital in this capacity before, including for an extended period while the hospital was in bankruptcy.

The MCDH Board actually interviewed two candidates at the mostly closed session gathering. Nancy Schmid, the current risk manager at MCDH who also served, not so long ago, as a hospital CEO in Healdsburg, interviewed first. That interview took up forty-five minutes or more before Allen's visit with the board consumed a similar length of time. During the interview process the board was joined by MCDH's chief human resource officer, Dan Camp. After the interviews were concluded the board met for another half hour before rendering their decision in favor of Allen. After that announcement multiple board members commended both applicants for their input during the interview sessions.

The vote to approve the hiring of Allen was on a 4-0 count. John Redding (Finance Committee Chair) abstained, stating, "The whole process has been flawed from the start."

This comes on top of Redding's five minute speech at the conclusion of the finance committee meeting in the last week of March. In that session he criticized his fellow board members, saying, “Maybe affiliation [with another hospital group, such as Adventist Health] is a good thing, It looks better to me now than it did before, not because the Adventists offer better, more professional management. I don't think that's the case. I think we have a great team here [he presumably meant Chief Financial Officer Mike Ellis and other MCDH administrative managers]... but they [Adventist] would provide professional governance, which I don't think we have here.”

Redding added, “I'm sorry to have to say that so early into this, but this board does not meet my standards of professionalism.”

He concluded that finance meeting by stating, “I like my colleagues. I know that they intend well. They do intend well, they are likable people, but good intentions don't translate into good actions. So, I needed to get that off my chest because I think the biggest problem facing the hospital right now is the board that I sit on.”

Two days later at the monthly board meeting, Redding did not repeat those remarks, but there was a lengthy and somewhat testy exchange between Redding and planning committee chair Jessica Grinberg. The planning chair proposed combining the two standing committees (finance and planning) into one special board meeting. Redding, in essence, wasn't having it. Eventually, holdover board member Steve Lund proposed a compromise that amounted to the finance and planning chairs talking to each other before any changes to either committee meetings occurs. The item was thus informally tabled, but the animus between Redding and the other three new members of the board (Grinberg, Amy McColley, and board president Karen Arnold) was in the air. It must be said, however, that the latter three and Lund maintain a calmer, less petulant public demeanor.

A bit later in that March 28th meeting an agenda item, “Interim CEO Agreement,” sparked criticism from Redding. That CEO agreement was a contract with Wayne Allen. It was on the agenda despite the fact that not all the board members had been able to talk to Allen. Since Mr. Redding has attended all the MCDH Board meetings during his tenure, one must assume that any other board members' conversations with Mr. Allen were done outside of official hospital meetings. Redding stated , “One of the things I did not like was having a chance to ask Mr. Allen, 'What is your plan for this hospital? What are your goals? How are you going to fix this hospital?' I did not get the chance, I don't know if anyone did?”

That agenda item and the discussion around it assumed Wayne Allen to be the only candidate for the interim CEO position. During the discussion, board members other than Redding (Arnold and Grinberg) used words like “presume” to describe Allen's ascension to the interim CEO post. Yet, lo and behold, at the public meeting on April 1st, there was Ms. Schmid as a second candidate. Whatever convoluted events took place between Thursday night and Monday, one can only imagine. The public was not apprised of any of this as the Monday meeting commenced. Best guess speculation would make you think that Ms. Schmid had interest in the position prior to that weekend. Any guesses as to how or why her interest and/or application was overlooked would be mere speculation as well, but the incident does provide back up for Mr. Redding's concerns about the process.

So we are left with Wayne Allen as interim CEO, with the MCDH Board promising that a search continues for a permanent CEO. Previously, Allen served as interim CFO at MCDH from 2006 – 2008 then as interim CFO first before assuming the joint interim positions of CFO and CEO during the period from 2012 through much of 2014. After leaving MCDH Allen served shorter interim CEO postings at Colusa, where the hospital was on the verge of closing when he arrived. The institution did fail and area medical needs are served now by a physician run institution and Adventist Health clinics. Allen was also interim CEO at a Coalinga hospital in similarly dire financial straits to Colusa when he first came on the scene. It closed shortly thereafter, entered bankruptcy, and may follow the Colusa pattern with a facility headed by doctors. Lesser known is Allen's CEO tenure at Nye Regional Medical Center in Tonopah, Nevada in 2015. Nye was the only medical facility in roughly a hundred mile radius, serving two different counties. This was another failing financial situation, the hospital having filed for bankruptcy two years prior. MCDH is not in bankruptcy any more and its financial picture seems a bit better than the institutions in Tonopah, Colusa, or Coalinga, but it is still out of compliance in two of the three financial categories its overseer, Cal Mortgage, measures. Our local hospital only operates on its own due to a waiver granted by Cal Mortgage. It will need another waiver to continue operating independently from July 1st through the end of 2019. At the March 28th meeting, John Redding stated that he, board president Arnold, and Chief Financial Officer (CFO) Mike Ellis had recently met with Cal Mortgage officials and that those officials seemed to maintain a positive attitude toward MCDH.

One of the factors that prompted Cal Mortgage to grant MCDH a waiver to operate on their own, without Cal Mortgage stepping in to manage the facility, was the influx of new parcel tax money as a result of last year's passage of Measure C. However, there's a relatively overlooked fly in that ointment: The largest landowners in the hospital district are corporate timber companies, such as Mendocino Redwood Company, Lyme Timber Company, and others. Those companies own many, many different parcels of land each throughout the coast hospital district. The parcel tax charges $144 per parcel. In the case of Mendocino Redwood Co. (MRC), the largest landholder in the district, that would total out to about $90,000 per year payable to MCDH. Do you think they want to pay that? Let's stick our necks out and surmise that they do not.

Measure C's language offers something of an out if parcels are contiguous to each other. The property that I am trustee of benefits from this clause in Measure C, allowing me to pay less for multiple parcels that I live on, but which touch each other. The timber companies appear to want to invoke that same clause, consolidating the properties they own that touch each other. By so doing, a company like MRC could reduce its parcel tax from approximately $90,000 per year to somewhere in the neighborhood of $10,000 annually.

Of course, there's a catch. Measure C's language only allows that exemption for contiguous parcels for properties “used solely for owner-occupied, single family residential purposes.”

The owners of these corporate timber lands do not live on their properties within the coast hospital's boundaries. This writer has been asking CFO Mike Ellis about the corporate timberland taxation issue since I learned near the first of the year (2019) that MRC was looking at ways to get out from under the $90,000 per year parcel tax charge. My first question came at a January 10th board meeting. Ellis's response then was something along the lines that the matter was in the hands of the county and legal counsel. In January, I checked with folks in the county assessor's office as well as the planning department. Their response was that any decision on corporate timber lands and the Measure C parcel tax was really in the hands of MCDH administration. A planning department official said I should check with the tax collector's office.

I did just that. As late as a few days ago, the response from the tax collector's office was pretty much, 'We don't decide who pays taxes, we collect taxes.'

A relatively lengthy conversation the next day with a seasoned member of the assessor's office told a similar tale. That office fully expects MCDH to make the decision on how much the timber companies pay on the parcel tax.

At the March 28th board meeting CFO Ellis gave what could charitably be described as an abbreviated explanation about the timberland situation. Unless one was well versed in the matter, his words might have been interpreted as muddying the waters rather than clarifying the issue. He also stuck pretty close to the refrain used since January, “We're seeking legal counsel and working with the county closely.”

Apparently, the second half of that statement is and hasn't been true. It is perplexing to try and understand why CFO Ellis or a board member (like long time one Steve Lund) don't come right out with the truth on this matter. That truth being: at some point rather soon this MCDH Board of Directors is going to have to decide between sticking to the wording of Measure C, under which the corporate timber land parcels could not be consolidated because the property owners (such as the Fisher family in the case of Mendocino Redwood Co.) don't reside on their timber lands, or the MCDH Board will capitulate to the possibility of being sued by entities like the Fisher family (owners of The Gap, Inc, the Oakland Athletics, and other companies). In that capitulation scenario, regular, single parcel taxpayers (and voters) are going to wonder why they are paying full price per parcel and the timber companies are getting 80% or 90% tax breaks.

Giving the large timber companies a tax break, in addition to shoving it to single parcel taxpayers, will mean lost revenue to the district, revenue that rises into six figures. At present it is unclear how well the new members of the MCDH Board understand this choice that is chugging toward them. Only holdover board member Steve Lund seemed to grasp the issue on March 28. He said, “We have the contiguous parcel language that those of us that worked on the measure understand very clearly then this more complex concept that Mike [Ellis] just described came out and the reason we're seeking legal counsel is to be able to bring a decision, fundamentally, to the board to make regarding how these larger landowners should be handled under the context of Measure C language in order to avoid potential litigation. So, we'll see what our counsel recommends in terms of what they think is the best way forward for the board on this issue...”

In the context of this article Lund's comment makes sense, but given nothing resembling a clear explanation by Ellis or anyone else on the board Lund's words appeared to pretty much fall on deaf ears. Only board member McColley offered up brief questions on the timing, not the heart, of the matter.

Lund went on to say that he thought the decision would be made in April or May and that it would be based on “[T]he best chance of not encouraging an adversarial relationship with certain landowners if possible, and there are trade-offs, it's complicated. Like everything else we do.”

The “certain landowners” undoubtedly means the large timber companies. “Not encouraging an adversarial relationship” sounds pretty close to a capitulation to those big timber companies.

The MCDH Board is in a darned if you do, darned if you don't position on the corporate timber lands issue. If they hold to the language of Measure C and force the corporate timber companies to pay up (don't expect corporations like MRC to give in to what's best for the area's hospital when eighty thousand dollars a year is on the line), a lawsuit with one or more of those entities may ensue. That sort of lawsuit could be as expensive, or more, than the money gained from collecting the parcel tax. On the other hand, if the hospital board gives in to the threat of a lawsuit from the timber companies and allows those companies to consolidate their parcels, the board would then appear to be acting in violation of Measure C's own language. That violation could be seen as so severe that it invalidates the parcel tax measure. The mess, financial and otherwise, that would put the hospital in is almost unimaginable. Almost.

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