Legality of Tulare council Line of Credit vote in question
By Nancy Vigran Reporter for the Sun-Gazette
TULARE – The legality of a 2-0 vote with one abstention and one recusal made by Tulare City Council Tuesday night is being questioned by one council member and other community members. During a special meeting Council “passed” a motion to provide a line-of-credit to the Tulare Local Healthcare District (TLHCD).
The matter has been contentious during the past few weeks during which time City Interim Attorney Mario Zamora and Finance Director Darlene Thompson had prepared the documents for the potential loan. Council was to vote on the matter at its last regularly scheduled council meeting on Feb. 5. With two abstentions and one council member absent, there was no quorum. At the special council meeting called for on Tuesday, Councilman Greg Nunley, who had recused himself on the subject at the prior meeting, recused himself again. Councilman Carlton Jones, who had been absent at the previous meeting, was absent again.
The Rule of Necessity
This left Mayor Jose Sigala, Councilwoman Terry Sayre, and Vice Mayor Dennis Mederos on the dais. Mederos had previously recused. But, on Tuesday, through a prepared statement, he said he was invoking the “Rule of Necessity.”
“In substance, the Rule of Necessity provides that in non-procurement situations, a public officer is permitted to carry out the essential duties of a council member’s office despite a conflict of interest where it is necessary to proceed when there is not an alternative reasonable way to do otherwise,” Mederos stated.
“We now have paralysis which would leave us unable to make a final decision on this important matter. There is no alternative source of decision making.
“As a result, I am invoking the Rule of Necessity.
“By invoking the Rule of Necessity, it gives me the ability to participate on this Agenda item while recognizing the potential conflict of interest issues that I would normally have to deal with.”
The paralysis Mederos referred to was the absence of Jones from two council meetings and the anticipated absence of his participation at the next regularly scheduled meeting of Tuesday, Feb. 19.
A decision was urgent in the matter not because of any potential City business, but rather one for the TLHCD. It needs funding, fast, to stay solvent by paying off creditors and keeping up with bankruptcy proceedings.
More broadly, some say the funding or lack thereof, could possibly effect the hospital itself.
Also in question is whether Mederos should have been allowed to invoke the “Rule of Necessity,” or whether that should have been done by the Mayor, if he wished to do so. Also, if that were the case, should it have forced or given Mederos the right to participate, or should straws have been drawn between those who recused, Mederos and Nunley, to determine which councilman would become part of the quorum.
The City is looking to provide a $9 million line-of-credit to TLHCD, with a 36-month time limit on credit. For those 36 months 6% interest is to be paid to the City on credit activated. TLHCD would then have two additional years to pay back the amount borrowed and interest in full.
If there wasn’t such a rush by TLHCD the item could have been tabled until the first council meeting in March which Jones said he’ll be available to attend.
According to Mederos’ statement, he was told by Interim City Manager Rob Hunt that Jones had said he would not be available for any meeting at least until March 5.
On Feb. 6 Jones told the Sun-Gazette he would try to attend a special council meeting if possible. He was not available the evening of Feb. 12, although he told the Sun-Gazette he had told the City he would be available earlier that day.
Jones added, the rumors of Jones boycotting council and the subject matter of the loan is just not true.
Jones is also being accused by some of trying to sell his attendance by requesting the matter be placed on the agenda as a potential resolution rather than an adoption item.
Jones said he was trying to get the matter changed to a resolution, because that is the way this type of matter has always been handled, he told the Sun-Gazette.
The difference could mean the Council would have to come to a quorum vote without an abstention, he said. On Tuesday, while Mederos did give-up his recusal, he did abstain from the vote, leaving it a 2-0 vote.
Jones feels the vote is illegal and he intends to file a Fair Political Practices Commission complaint.
According to an article by the Institute for Local Government, Deciding When to Participate in an Agency Decision: Abstentions and Disqualifications the following conclusions have been made:
If your agency has a five-member governing board and three members attend a meeting but one abstains, the board can still take action because the two voting members and the abstaining one constitute the requisite quorum of three. However, the two voting members must each vote in support of the matter for it to pass, assuming that the matter is not one that requires three affirmative votes or another special vote threshold.
If Mederos had the right to invoke the “Rule of Necessity,” and if he had the right to become the council member to withdraw his recusal, than the vote, itself, is valid.
Funds behind the loan
Jones says that It is not that Jones wants the TLHCD to fail, it is that he is afraid it might. And with that, he worries about the loss of funds for the City.
Funds would come from approximately 80 accounts which includes the general fund reserve of $16 million, according to Interim City Manager Rob Hunt.
“The balance of those funds, the bulk, are the enterprise funds. Those funds are rate-payer funds in nature and reserved for future projects – sewer, water, and infrastructure-type projects,” he told council. “Another pot of money it represents is development impact fees. Those are projects that are related to expansion to city facilities such as police, fire, parks, recreation, and those are typically paid by developers.
“The balance of those funds are accounts such as landscape maintenance districts. Those are funds paid by the assessments and are used. These funds are evolving on a continual basis; money is being deposited in and withdrawn out of those.
“As a reminder, this is being looked at as an investment. The investment policy that the City has does layout specific guidelines. This is not entirely in line with that, and I would just request that if council should move forward with this item that staff would be looking for direction with any potential gains or loss allocations across those accounts.
“This could be problematic depending upon where we pull those funds from – Developer impacts fees, as our state law governs how those are spent, as well as the assessment districts, and TCPA settlement money in there as well.
“My role here, my intent, is just to make sure the outcome is as council desires, should council move forward. Depending on that and where we pull those funds from, this could be problematic. I just wanted to recap that issue.”
The loan agreement calls “for first deeds of trust for all [TLHCD] properties except the hospital itself, which the appraised value is about $14 million” according to Zamora. Those properties include 10 cottages around the hospital and the Evolutions Fitness and Wellness Center property and entity, according to Kevin Northcraft, president of TLHCD. Copies of the appraisal reports have been provided to the City.
But Jones is afraid that others may already have primary claims on the properties and he hasn’t seen proof otherwise.
With Adventist Health signing a lease agreement with TLHCD, Adventist becomes officially in charge. The non-profit health company has several properties up and down the state including Hanford, Selma, and Bakersfield.
Leasing a property to manage a medical facility is not their usual MO, Jones said. Through the lease, if TLHCD goes completely under, Adventist Health can get the property for pennies on the dollar, he added.
Concerns and Reassurances
Jones is not alone with his concerns regarding the loan. Ronda Quintero has lived in Tulare for about 20 years. While she did not attend the meeting, she had questions when she learned of the vote. Having received answers, she is not happy.
“I think it was totally a conflict of interest [for Mederos],” she told the Sun-Gazette. “It was not a valid vote.”
Quintero said she feels that the people of Tulare, or at least council, should have been able to see the other TLHCD loan options as proof they had really received those other options.
A Facebook page called Citizens for Hospital Accountability started at a time of wide-mistrust of the hospital’s previous management firm, Healthcare Conglomerate Associates (HCCA). A new discussion started following the Tuesday night meeting.
“The $9M line of credit from the City will be gone shortly to pay off a $1.8M settlement to Benzeevi, nearly $6M in seismic upgrades to be completed by Nov. 2019, possibly the Celtic loan settlement of $500K and likely some to Wipfli, the interim management group, who is owed for services rendered,” a moderator posted.
Dr. Benny Benzeevi is the CEO of HCCA.
“Citizens for Hospital Accountability Your numbers are incorrect,” responded TLHCD Board Member Xavier Avila.
The moderator asked, how so?
Avila responded, “Citizens for Hospital Accountability I would advise you to get the correct information from the district. We had that information at our last board meeting. BTW Adventist is spending their money on some improvements too. . .
“I suggest people should do some research before making such statements. I think it’s important to inform people correctly.”
The Sun-Gazette is currently working on obtaining that information.
Part of the loan agreement is that TLHCD itemize just where the funds will be spent whenever any part of the credit line is requested, according to Thompson.
Tulare resident Janet Lebaron spoke during public comments on the issue.
“I am extraordinarily proud of the research and the decision that you’ve made, Councilman (Mederos), extraordinarily proud, whatever your decision is. It took great strength and courage,” Lebaron said.
She further discussed how she perceived this “a pivotal moment for the hospital,” and how happy she is with the TLHCD board and “the management company” of Adventist Health. She hoped, she said, council would vote to offer the loan.
Council made a good decision according to Randy Dodd, president of Tulare Regional Medical Center following the meeting.
“Adventist Health is here for the long run,” he said.
According to Sigala, the special council meeting and vote were legit and the decision has been made.
“Dennis did his due diligence in laying out why he did what he did,” Sigala said.
He looks forward to council moving on to other issues within the City.