Voters created the Palm Drive District and approved the parcel tax to support a Community Hospital with an Emergency Room. Now, both are gone, but we still have $millions of debt to pay for the next 14 years.
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LAFCO VOTES AUGUST 2020
Palm Drive Healthcare District 2000 - 2020
UPDATE
We know that Measure W funds were never intended to be used for anything other than operating Palm Drive Hospital. The Board knows that, too. They have been told in writing from people who were involved with setting up the District.
They assessed District residents the maximum rate in 2019-20 and allocated $110,000 for "community health" and awarded grants to other organizations as money was requested. Now they think they have a "surplus". We think not, since we will be paying on the District debt until 2034.
The District voted in February 2020 to dissolve itself, effective at the end of this fiscal year. A Board dissolution committee, consisting of two Directors, Staff and District counsel, was established. They began planning terms and conditions to attach to the application to LAFCO for dissolution. Their discussions with the successor agency (the County of Sonoma) and the pandemic caused the County to seek a delay in taking over the District's affairs. This in turn led to concerns that the District might have to participate in (and fund) the November election even if the District had been dissolved by then. The County reconsidered and the Board immediately submitted an application to dissolve with no terms and conditions.
However, the District is now considering a proposal to donate public funds (before the date of dissolution) to a nonprofit grant-making organization associated with Sonoma County Health Action.
In 2000, the Palm Drive Healthcare District was formed "to ensure local access to emergency services and health care."
Also in 2000, Measure G authorized the District to borrow $5.9 million for the purchase of Palm Drive Hospital from 35 for Palm Drive.
In 2001, voters approved Measure D to levy a "special tax on each parcel within the District (not to exceed $60 per year for five years) to ensure access to locally owned and operated community hospital services and to be used for medical services, including emergency, medical/surgical, intensive care and out-patient services, and for no other purpose..."
In 2004,voters passed Measure W--our current $155/year parcel tax. The Measure included the following passages:
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"The primary purpose of the Measure is to ensure that Palm Drive Hospital, with its Emergency Room serving 10,000 patients yearly, can remain open."
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"A secondary purpose... is to enable the hospital to retain its nurses, physicians, and clinical staff."
Measure W had no sunset provision so it would be a steady revenue source to keep Palm Drive open. However, it also gave the District Board the power to borrow without further voter approval--forever!
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And borrow they did!
In 2005, the District borrowed $9.8 million because of continuing hospital operating losses--without voter approval! The debt was secured by 20 years of future parcel taxes (until 2025).
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In 2007, despite previous borrowing and the increased parcel tax, the District filed for its first bankruptcy because of relentless financial losses.
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In 2010 the District borrowed another $11 million to exit bankruptcy--again, without voter approval. These additional bonds were secured by 25 years of future parcel taxes (until 2035)
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In 2014 the District filed for bankruptcy a second time and closed the hospital.
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In late 2015, the hospital reopened as Sonoma West Medical Center (SWMC). The hospital was operated by a 501(c)3 of the same name, under a Management Agreement that wisely limited the District's responsibility for operating losses.
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Almost immediately, hospital operating losses mounted for SWMC, which began borrowing to cover the bills. A succession of managers attempted to stem the hospital's losses, without success.
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In the spring of 2017, the River communities detached from the District, citing financial mismanagement and administrative incompetence. Residents of these communities continue to pay about $105/year in parcel taxes as their share of past debt repayment.
In the summer of 2017, SWMC contracted with Aaron Durall, a Florida lawyer, to provide urine drug testing services at the hospital. In a convoluted scheme, patients and insurers were charged 5-10 times market rates for simple drug screening tests. SWMC received some of this insurance money; Durall took most.
Within months, Anthem-Blue Cross filed a claim against the District, SWMC and Durall, alleging insurance fraud. Eventually, Durall and SWMC were sued by Anthem-Blue Cross for insurance fraud, and Durall was sued separately for his activities at other hospitals as well. He was also included as an unindicted co-conspirator in a federal health care fraud indictment and conviction in Florida.
By late spring of 2018, the Durall scheme had collapsed, and SWMC faced deep losses and demanding creditors.
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In August 2018, the District terminated its agreement with SWMC and contracted with a California company named AAMG to manage the hospital. (SWMC filed for bankruptcy a month later.)
Incredibly, the District gave AAMG an exclusive 10-year option to buy the hospital and, even worse, agreed to cover all hospital operating losses--exactly what had caused the District's two bankruptcies. In just seven months, AAMG racked up $4.5 million in losses, which the District recently agreed to pay.
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In April 2019, the District leased the hospital to AAMG for a renewable two-year period, again with an exclusive option to buy the hospital.
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In May 2019, the District passed a resolution stating that it was getting "out of the business of running a hospital."
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In July 2019, Bodega Bay residents successfully detached from the District, for the same reasons as the River detachment. The remaining District has about 70% of its original voters and 58% of its original parcels.
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In December 2019, the District sold the hospital to AAMG for only $2 million in cash and a $1.2 million promissory note--what many believe was significantly below its actual worth.
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Today--the District has no hospital, no emergency room, and remains $25 million in debt--which won't be repaid until the year 2034.