Stevens Hospital District taxes to stay

It's a question that's been asked ever since Seattle's Swedish Health Services first proposed taking over management of Stevens Hospital: Should homeowners still have to pay property taxes to support the hospital district?

Brook Townsend of Edmonds said she didn't think so. During a meeting in January to gather public opinion on the proposed management agreement, she asked: "Swedish is not supported by taxes in Seattle; why should it here?"

With Swedish poised to take over the hospital's management Wednesday, hospital board members say the answer is more complex than it may appear.

First, taxes will continue to be paid to the public hospital district, not Swedish.

Second, the hospital district collects two taxes from property owners.

One tax is the maintenance and operations levy of just over 8 cents per $1,000 in assessed valuation. That tax brings in about $1.9 million a year. The owner of a $300,000 home pays $25.77 each year in these taxes.

The other tax pays off a $25 million bond issue from 1991. That tax, of just over 9 cents per $1,000 in assessed value, costs the owner of a $300,000 home $28.14. It will expire next year.

Like mortgage payments due to a bank, the hospital district cannot walk away from that financial obligation, regardless of the management agreement, said Fred Langer, president of the five-member elected hospital board.

Since Swedish will be paying the hospital district about $7.2 million in annual lease payments, some taxpayers are questioning if the maintenance and operations tax needs to continue.

The hospital district boundaries, where business and homeowners are taxed, include much of south Snohomish County, including the cities of Brier, Mountlake Terrace, Edmonds, Woodway and surrounding unincorporated areas.

Public hospital district board members have the authority to set the rates of maintenance and operations levies as part of their annual budget process, said Jeff Mero, executive director of the Association of Washington Public Hospital Districts.

"In theory, the Stevens board could decide to lower the maintenance and operation levy to whatever level they felt appropriate," he said. But they need to take into account any existing financial obligations and agreements, Mero said.

Part of the reason board members say they're reluctant to make any changes is that big transitions are underway, both at the hospital and in the hospital district.

Board member Chuck Day said that the agreement with Swedish is unlike anything undertaken at a public hospital to date in Washington.

Stevens will be leased to Swedish, a not-for-profit organization. The hospital district, and its five elected board members, will continue in far different roles.

Board member Deana Knutsen has said the new organization will be more like a foundation, providing various types of health care services to people in south Snohomish County.

For example, a similar lease arrangement of a public hospital was approved in Larimer County, Colo., in 1994. Proceeds from the lease, taxes and other payments are being used to provide services including dental care, mental health services and wellness programs such as cholesterol and blood pressure checks.

Board members say it's too early to know how the hospital district's money would be used in south Snohomish County. But the district could consider using the money to establish programs to improve mental health services, battle childhood obesity, provide mother-baby services, or help seniors get their prescriptions.

To do these or other programs, an organization has to be established to administer them. That means overhead costs, such as paying someone to oversee its day-to-day operations and hiring someone to keep watch on finances.

Once the new programs are up and running, it may be possible to look at the need for the maintenance and operations levy, Day said.

"Until we find out how this all exactly comes together, I would be reluctant to say it can be eliminated," Day said.


While Swedish will be responsible for maintaining and improving hospital-owned properties, money should still be set aside for unexpected expenses, Day said.

As one example, if contaminated soil from a previous development were discovered on what is now hospital property, the hospital district potentially could be held financially responsible for part of the cleanup, Day said.

That's one example of why the maintenance and operations levy should continue, he said.

Langer said he has no doubts about the future of the maintenance and operations levy. "It should absolutely remain in place," he said.

"It's been the same rate for a long time," he said. "It's still one of the lowest of any public hospital (district)."

Howard Thomas, a consultant hired by the hospital board to hammer out the proposed deal with Swedish, said that as part of the agreement, Stevens was required to document the condition of both the hospital and its businesses.

"If something goes wrong on some of those things, we could have (financial) liability," he said.

And if the deal between Swedish and Stevens falls apart at some point in the future, the hospital district would have to take the hospital back, he said. For this reason, a minimum $5 million reserve fund will be established, he said.

The hospital district's maintenance and operation levy "clearly needs to continue in the short to medium term, Thomas said. "Five years from now, I think it's a very good question to raise."



Sharon Salyer: 425-339-3486; salyer@heraldnet.com.