A special recall election set for June 19 is asking voters to determine the fates of eight members of the Wrangell Medical Center Board of Directors.
The election, which is seeking the ouster of all board members except Dorothy Hunt-Sweat, may have a larger effect, however, than changing the composition of the hospital’s leadership team – it may signal a change in the support of the USDA and their backing of a $24.7 million loan to finance the construction project.
According to Jim Nordlund, the director of the USDA Rural Development office in Alaska, he is most concerned over a wholesale shift in the hospital board’s membership.
“The real issue here is the management of the hospital,” Nordlund said. “When the original commitment was made, it was based upon a certain management group in place among the administrator and the board. If that changes we might have to change our conditions.”
The current loan agreement, which was signed in 2011, calls for a revenue bond which would finance the construction and be repaid to USDA out of hospital revenue. A general obligation bond, which is one of the options on the table for USDA, would require assembly and voter approval and force the city to dip into borough finances if there were a shortfall in the repayment of the debt out of hospital funds.
Nordlund also said the USDA plans on holding off on any decisions regarding the terms of the loan until after the recall election is decided.
“The letter of conditions on this loan agreement expires in early June, before the election,” Nordlund added. “Because of this, it will have to be reauthorized. At that point, we’ll look at whether conditions are the same or different, and whether they need to be modified.”
While a revenue or general obligation bond can be approved by an assembly or other city government in Alaska, a general obligation bond for the WMC project would also require majority approval of the citizens of Wrangell. Additionally, a general obligation bond could constrain the borough on how much it could borrow to finance the project.
Borough Manager Tim Rooney said such a voter-approved loan might be significantly smaller than the current $24.7 million amount.
“On general obligation bonds we are limited as to how much money we’re allowed to borrow,” Rooney said. “We would have to borrow against what our tax base is. We’re looking into whether the $24.7 million would be within that allowed amount.”
Rooney also said if a special election is called it could slow down the timetable for the project as it now stands.
“Right now, the city is geared toward everything closing in the first week of June,” Rooney added. “If USDA requires us to have a general obligation bond it would force us to have a special election. If that happens, we’d have to schedule one 45-90 days out. If it falls within that many days of a general election, we’d have to wait for that election, so there would be delays.”
One of the banks set to help finance interim construction on the project was First Bank. Their involvement changed last week when they informed project financier InnoVative Capital that they did not intend to submit a bid for funding.
In an April 19 email sent by InnoVative CEO Alan Richman to Rooney, Richman stated that the main reason behind First Bank’s reticence to get involved was over the recall effort.
“First Bank said no thanks specifically because of the recall petition,” Richman stated in the email. “Alaska Pacific Bank backed out because the transaction is just too complicated for them. Wells Fargo, First National Bank of Alaska, Commerce Bank of Washington, Municipal Capital Markets and USDA have each voiced concerns about the recall petition, the uncertainty regarding a potential recall vote and its impact.”
Mayor Jeremy Maxand said the borough is working through the USDA’s concerns in a slow, thoughtful manner.
“We’re taking this financing deal step by step,” Maxand said. “The USDA has, for two years, been committed to providing us with a revenue bond. We want to hold them to that commitment.”
Maxand also said that the borough has acted in good faith in their dealings with the USDA – and that the membership of the board should not change the terms of the deal.
“We put up the land and building as collateral in this agreement,” Maxand added. “Whether or not the members of the board are recalled or not, change happens in every organization. But, that doesn’t mean the organization or the hospital plan will be fundamentally changed, and the USDA should know that.”
The petition for recall was sponsored by Wrangell resident Gary Allen, Sr., with Mike Ottesen, Sr., as an alternate sponsor.
Allen said he – and many others he has spoken to in Wrangell – believe the board members need to go because of a number of important issues.
“I feel they have not been following the municipal codes the way they should have and they also haven’t maintained the correct procedures for hiring and firing the help,” Allen said. “As far as building a new hospital, they never had the authority to do that. And with the way they have treated Dr. Greg Salard, you now have physicians that don’t even want to come to Wrangell anymore.”
The petition asks for the named members of the board to be removed from their posts for what Allen and Ottesen call, “misconduct in office, incompetence, or failure to perform prescribed duties,” as outlined in the Wrangell Municipal Code. The petition also charges that on Aug. 17, 2011, the board prohibited the Borough Assembly liaison from participating in an executive session and that they engaged in conflicts of interest in regard to a privileging hearing for Salard.
WMC CEO Noel Rea countered the argument against physicians wanting to come to Wrangell – and said he wants public input regarding the board and its practices.
“I believe there was a letter from the Delta Company that implied actions taken by the board would negatively impact the ability to recruit physicians here. Delta retracted that and said they were not in a position to know that the board worked with disregard for the impacts on the community,” Rea said. “One of the things the board is trying to do, for those people that have questions, is to have them come down and meet us on Friday mornings over coffee at the Stikine Inn. I want to encourage people to do that if they believe there was some sort of wrongdoing. We want to have a dialogue.”
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