Travis County Commissioners Court
August 31, 2004
Item 18
Number 18 is consider and take appropriate action on the Travis County hospital
district.
>> sherri fleming, acting executive manager for health and
human services. I believe under this item, Commissioners, you have a letter
that has been drafted from you to the hospital district board of managers
relative to reporting relationships between the board of managers and the
hospital district. Staff at h.h.s. Researched several of the existing hospital
districts to discuss with them their reporting relationships with their governing
body and we've got information on a whole -- I guess a plethora of different
options in terms of how they are reporting relationships or structure. Therefore
we brought forward a recommendation to you that for this first year that we
would offer to the hospital district reporting every 60 days with that first
reporting being approximately December 1st, which would give them the opportunity
to be at your last meeting of November or the first meeting of December. And
then have this reporting relationship revisited during their budget hearing
each year so in case any party would like to recommend any changes.
>> when would that actually be scheduled for their budget
hears. We know what's going on now, but in the future would they basically
be running in concert as far as the time frame, as far as how we did on this
here?
>> this year's budget hearing is September 14th, I believe.
But I think in the future it will fall into our normal budget hearing cycle.
They will be scheduled through p.b.o. Just as our other county departments.
I don't see anyone from p.b.o. So I guess that makes me the expert. [laughter]
>> and this is as good a time as any to remind folks that
the hospital board of managers themselves will have a public hearing on their
budget, which is the prerequisite for coming to us with the recommendation,
and that is this Wednesday night starting at 6:00.
>> that's correct, Commissioner.
>> and we will have it on our court agenda o September 14th.
>> yes, sir.
>> I did indicate to them that it may be a good idea to try
to give notice of a time certain so we'll take them up either in the morning
or afternoon, whichever is more convenient. For them. The other item that's
pretty important is that we do receive from the chairman of the district an
indication, sort of informal indication at this time they would ask Travis
County for $2.5 million contribution to the required reserve. We have been
thinking all along that we would transfer 11% of the amount we spend on health
services, so we were thinking about -- about a million dollars. And their
request is 2.5 million. That's $1.5 million more than we have been thinking
about for the last few months. And mr. Highbig indicated he was trying to
reach all members of the court by telephone to make that communication. The
internal committee did discuss that figure yesterday in our meeting and I
asked planning and budget to incorporate that into our budget issues and budget
markup. My response to the chairman was that, you know, the Commissioners
court would look at why that amount is necessary, what is city of Austin's
contribution would be, et cetera. Clearly, though, it seems to me that a substantial
reserve is important. Had is one of those areas that to great extent are beyond
your control. It is probably as volatile as any other program in Travis County.
In.
>> communication we got from the Travis County financial
adviser what he said really was that the financial firms really expect you
to have so many days of cash available so you can operate the hospital and
other health facilities if necessary. And three to four months seemed to be
about the average what they expected. And if you take really about a third
or fourth of 60 to 70 million dollars, the reserve they are trying to get
to, I知 told, 13 to 15 million, is more than appropriate.
>>
>> [one moment, please, for change in captioners]
>>
>> the board made some decisions about things they wanted
to adjust, and by the end of the evening here about 127,000 off of being balanced,
so my cast between now and tomorrow night when we have the public hearing
is to finalize the administrator's budget on which the public hearing will
be held, and I can tell you that it will be balance and it will achieve all
three of those goals when it's presented to the public tomorrow night. It
does not, however, currently have any reserve in it. The budget is balanced
and it achieves those three goals, but to do that there's nothing set aside
for a reserve. And that obviously is critical to the district to be able to
function and to be financially sound, that there be an appropriate reserve.
>> jim, I guess when we stocked that reserve --
>> I知 sorry?
>> in establishing the reserve for the hospital district,
here is an example is an example of how we spent in about 11% to make sure
we had all our safeguards and we had a pretty good safeguard of establishing
a reserve and ensure that that's protected. And I guess you can tell me, at
what percentage would they like to establish a reserve at? In other words,
there's no reserve, what percentage are they looking at, something we do with
Travis County or something that someone else has adopted, or what does that
mean for an amount that would be looked at?
>> I don't know that I can speak for the board in terms of
what the board would like to establish the reserve at. They have gotten considerable
amount of advice. Folks who represent the city and advise them a total percent
of five -- and advise them that five percent would be a good part of their
budget. Christian from the county has told them they should have a 10 or 11
percent unallocated reserve, plus a five percent unallocated reserve, plus
a million dollars in a capital reserve. In analyzing the budget -- and part
of the reason why -- and they told them he they smuf between 100 and 125 days
in expenditures in reserve, which would be closer to 20 or 25 million rather
than the percentage numbers that other folks have talked about.
>> and that's the Travis County financial advisors?
>> yes. The Travis County financial advisor, as far as I
know, he's the only one who has actually been in consultation with bond rating
firms about their expectations for hospital districts. There were a number
of people who thought his advice was terribly high on the ground that this
district was not actually operating a hospital because all of the services
for hospitals would be contracted out, and that the services for the clinics
and the indigent health care program would be contracted out to start with.
And they compared us most frequently with nueces county, which a little praits
on the same contract model. All are their services are contracted out. So
we went to the trouble of checking with nueces county. They have an annual
expenditure budget of 32 million and a reserve of 60 million. And they do
that --
>> 60?
>> 6-0 million because their reserve is almost twice their
annual expenditure budget. And their reason for doing that, they said among
other things, was that they did have the services contracted out. And if for
any reason those contracts should be broken, that they needed a substantial
reserve in order to be able to step in and take those back over. I took all
of that into account as well as taking into account the practicalities of
the financial situation and the communication -- and the community in which
this district exists. And my recommendation to the board and the budget documents
I presented them last night was that they ought to have 11% in unallocated
reserve. They would under ordinary circumstances ought to have five percent
in allocated reserve, but because their only option for funding an allocated
reserve was from one-time funds, and allocated reserve is a reserve which
you expect to use, and once they use a one-time cash reserve, they have no
way to replenish it without increasing revenue or decreasing expenditures
in the following year. So I felt it was prudent to do you believe that five
percent recommendation that christian had made so that my recommendation was
that they had a 10% allocated reserve on the premise that that really gave
them two years of allocated reserve and two years of opportunity to try to
find ways to replenish that reserve. And then a million dollars in capital
reserve. So all of that comes out to something over $16 million in reserve
that I recommended to them that they ought to have. And given all of the information
that we've gotten from different sources, I think that's -- I think that would
be a reasonable amount. Obviously, you know, what you want and what you get
are two different things, but my recommendation would be that if they had
the optimum reserves, it would be fashioned in that way and be a little over
16 million.
>> has there been any investigation to determine how other
urban hospital districts establish reserves? I notice you mentioned nueces
county with $60 million in reserve. In other words, in the start-up of their
particular district or was it something that just grew as time progressed?
>> nueces county, I know how the nueces county hospital district
did it. I don't know how others have done it. I know some of the others and
what their reserve amounts are, but I don't know how they accumulated those
reserves, but we do know how nueces county aaccumulated their reserves. Eight
years ago, in 1996, was the first time that they contracted out their hospital
and indigent care services. They had been providing them directly before then.
Up to that point, they had built a 30-million-dollar reserve or 32 -- I知
sorry, about a 30-million-dollar reserve from disproportionate share funds
that were paid to the district in compensation for serving a disproportionate
share of medicaid patients under a federal program. So they have built up
a 30-million-dollar reserve. They then contracted out their services, they
kept the 30-million-dollar reserve. Four years ago they got into litigation
with an hospital organization that they had leased to, and they realized that
their lease was in fact an issue that put them in some jeopardy. And after
that they aaccumulated some of the lease payments that they got from the hospital,
and over the last four years they have built up the reserve to 60 million.
Because of their concern about the tenuous nature of their lease arrangement.
>> that's a good answer.
>> so we're looking at generating another $1.5 million. And
my recommendation is we go ahead and generate that or put together a strategy
before that total goes to $140 million. [ laughter ] we'll follow the nueces
example. The maxwell language, language, language ritter accounting firm has
done it's work with Travis County on the tax rate verification which is required
by law, and they would like to give us a preliminary report this Friday at
2:00 o'clock, and the entire committee is invited. This developed yesterday.
Friday is best for the firm. And 2:00 o'clock is the best time. So for the
Travis County committee members, probably the fifth floor conference room,
we'll have that presentation from the firm. The other thing is that mr. Collins'
salary for a part of August or all of August and September?
>> from August 17th, not all of August.
>> August 17th through September 30th, we discussed in committee,
and in our view, rather than have the district pay that -- remember, our goal
is really to have the district's financial life to start October 1. And our
fear is that if we're not comfortable, we would spend a whole lot more money
trying to do what's required by law on record keeping, financial accounting,
etcetera, for '04 than it's actually worth. So we did ask david escobedo if
from his caps co-account he could pick up that amount, and my indication is
that he would have that amount of money in that account and would work with
us on it. What that means is that whatever he would have transferred to the
general fund he will not transfer. And so so far we have been trying to enable
the district to start its financial life October 1, which kind of simplifies
the legal record keeping for Travis County as well as the district.
>> on baft of the district I want to say that we have received
super hero support from various members of the county staff. Without that
support this district would be nowhere near the condition it's in now, and
we really appreciate it. They've done a wonderful job.
>> so at this point in the future, whatever we need to do,
if anything, toward solid fieg that agreement, I don't know that it needs
to be memorialized as long as jim's checks don't bounce, I think everything
is probably all right. But if we do need to do something as a Travis County
entity, let us know.
>> we can do it one of two ways. One would be whenever the
county attorney's -- [ inaudible ]. That money could be designated through
-- I talked to the Commissioner and I think he's aware it can be designated
through that salary. That is just as comfortable to david, I think, as paying
directly out of that caps co-budget.
>> now, there have been several actions that we need to know
about, and I don't know that we need to do anything else on. The board did
pass a sort of yes, we accept your first offer to assist us with purchasing.
>> yes. Actually, the board made a formal request to the
Commissioners court by resolution. And you instruct the purchasing agent to
provide purchasing services to the district. That's that is something that
you have the right to do under the statute. You have the right to require
the purchasing agent to require those services. And any additional costs to
the purchasing agent would be paid for by the district. I don't want to speak
for sid and she's here, and we've had substantial discussions on what it would
involve to have purchasing for the district and the way the district is structured
in '05. And I believe it is her opinion that that can be done at no additional
cost to the county, so that essentially you will be asking syd and her department
to provide purchasing services to the district at no cost to the district.
>> [inaudible - no mic]
>> if there's anything the court needs to do on that, we
normally don't require the purchasing agent to do that. We request it. It's
been a good working relationship to date.
>> and the statute is worded in terms of the Commissioners
court and to require county officials and employees to perform services.
>> we never use the full brunt of our authority?
>> and that stems from the is the full wisdom of the Commissioners
court.
>> and one thing we discussed is we probably need to pull
together and list for the full members of the court of all those kind of other
kind of relationships that need to be rememorialized or memorial eyes understand
a different way. And some of them are going to be interlocals between Travis
County and the hospital district. But I think we're talking about especially
for this next year, the idea of memorandum of understanding because I think
there is a desire to get every advantage that we can give to you that doesn't
cost you money. The first year and maybe the second, but that may not be the
way it is for the future because you then will get strong and be able to operate
in a whole better way than we are today. So the thought was perhaps we needed
a memorandum of understanding that says things like this next year we can
absorb that and not have to charge for it, but to say out loud that may not
be the situation for the sfiewt foout so there aren't any ms. Understandings
in the future.
>> and the dynamics of operation of the district will change.
I think probably rather dramatically in subsequent years. In fy '04, the current
consideration is the district will have a total of four employees and a single
office. So the sorts of services that would directly support those folks are
minimal. It's not expected to remain that way for the indefinite future. In
fact, the contract with the city is being structured in such a way so that
the district can take over that contract and bring those services within the
district sort of piece by piece. When they can't eat the whole apple at once,
they can bring a bite in and then a bite in. So I would anticipate that the
district staff and operations and direct operations, we're going to grow gradually
over the next three or four years while the services are contracted out and
diminished. But of course services like purchasing and accounting and that
sort of thing become more complex and the district is probably going to want
and have those staff do that sort of thing.
>> [inaudible - no mic] I would imagine that both the city
and Travis County are wanting to do that, contribute here at the beginning
so that we're off to a good start.
>> and I know we've had a good deal of discussion about reserves
and I知 heart ened by the board of managers focusing on a number that I think
protects them and is something that will help them. We always like to use
the phrase shack absorbers, because i'll tell you the things we've seen come
up in budget over the last six weeks in terms of where we need to find more
money and put it into real programs and real people, it's all been on the
indigent health care front. So we already know that that is something that
is still there, something that medicine costs a lot. And until something takes
that pressure off, it's going to continue. And so I applaud their decision
to seek a reserve rate that I think really reflects more of reality. And we'll
see if the strategies in terms of the two and a half million dollars, because
that's what they've asked us to put into the deal, and I think it is incumbent
that somebody else is being asked to fill in that equation and they need to
do what they can to get to that number as well.
>> next we'll look at the lines of communication memo that
we did not formally pass, but that has been shared with the board of managers
already, as patrick says, and they're in support of this. They want us basically
to approve that form. So I move approval of it and I would have two originals
to execute this afternoon. I somehow lost mine between our meeting yesterday
and now. But we have seen that.
>> yes, sir.
>> all in favor? That passes by unanimous vote. And we simply
recommend several ways for us to take this to the board of managers today.
>> I wanted to assure the Commissioners court that your mexican-american
mexican-american row is entirely support and -- memo is entirely appropriate
and we will communicate with you as frequently as any of you would like to.
There are times that you may think we're communicating with you way too much.
So should you -- don't feel that the board or the administrator is suggesting
that that's the most that ought to be done, but we certainly have no problem
with the communication schedule set out in that memo.
>> okay. Commissioner?
>> jeff, since you're the acting administrator, I guess I知
going to go back to the thing that I知 still not happy with at all, and it's
amazing that we have just gotten $33 million from the city. I know that there
has been a legal opinion from, I guess, b and e, that what the city did with
30 to $33 million was legal.
>> [overlapping speakers].
>> if it's fulbright, that's fine. I mean, what in the world
are we doing? I mean, our financial advisor that we depend heavily on is telling
us that we need $25 million. We have heard everything from under 10 million
to 12 to 15 to 16 million. The person that I知 -- that I probably would rely
the most on would be our advisor, especially since he has spoken with people
in the industry about what kind of reserves that we're supposed to have. We're
already having to put in apparently two and a half times what we thought --
or another time and a half, one and a half times as much as what we thought
we were going to do, which is going to affect us somehow because we're going
to be talking about 51 today, which are raises -- 21 today, which are raises
and dollars that we need in this community and the county anyway. I知 just
not -- I知 still not happy with that. It just seems like it's okay. We discussed
that. We've got some legal opinions and we're $30 million in. I mean, what
in the world are we doing? Have we just swept it under the rug? Maybe I need
to have the board come and make a presentation as to exactly how y'all feel
about it. Because we are moving so fast into this thing now, and for good
reason because we need to get this thing up, but I suppose somebody just needs
to tell me, do you know what, Gerald, get over it. You're not going to get
$30 million from the city. The city said they're not going to do it, and again,
one of the comments that I made in the room yesterday with our e.m.s. Agreement
was that if I知 going to enter into agreements, interlocal agreements with
the city of Austin, the first thing that I need to do is feel comfortable
that I知 dealing with somebody that's leveling with me. And I have seen toby
futrell the last couple of weeks, and something was mentioned, and my response
was, I said why don't you just ask us to come over and sit down and to show
us. I知 decent with arithmetic. If you show me where it went, then -- but
I知 not going to get over that. And especially given that I know that we really
need more money in the reserves. I mean, we don't even have a comparison that's
the most like us, nueces county, and they've got 60 million. And we all know
that the numbers are going only one way. The line is longer. Indigent needs
are out the roof. And as far as I知 concerned -- and -- it's only going to
get that way. I know we're trying to get this thing going. And all of us --
and me included -- want to get it going because we've got to now since it's
in. But what exactly is the deal with that? That subject matter never gets
brought up again. Is it really an over with deal and you're not going to get
it from the city?
>> I am not sure that I can speak for the city and what the
city's going to do and what they're not going to do. I believe that -- if
I understand the city's position correctly, it is that they are not going
to transfer 33 million to the district unless they're forced to through litigation.
The board of managers has not made a decision that they will not sue the city.
There's been no decision that okay, well then we won't sue the city and we
want to get the 33 million. On the other hand, the board and certain members
of the board have been actively engaged in intensive rounds of negotiation
with the city about how much they would be willing to transfer to the district
without litigation, as you do any time there's a threat of litigation, you
try to see if you can settle the issue without having to resort to the courts
to do it. And as there are in most litigations, there are reasons to settle
the dispute outside of court for less than the total amount that you could
possibly get if you went to court. So even in the very best of lawsuits, it's
ordinarily -- you ordinarily come out ahead financially if you avoid the litigation
and settle for some amount, even if it's not 100% what you might have gotten.
The board of managers I believe right now is in an effort to make a decision,
and the recommendation that I made, it's my recommendation, not the board's
decision. The recommendation I made about reserves is my recommendation, not
the board's decision. The board is, I believe, engaged in a very serious and
fairly sophisticated effort to try to find an amount of reserves that they
believe would be responsible for them to begin operating the district pretty
much regardless of whether the city has 33 to transfer or 60 million or one
million. But to try to reach independently a number where they think it would
be responsible to begin operation of the district with that amount of reserve.
And that's a difficult decision for them, as it would be for anybody, because
you have other interests. It's not only important for the district to have
an important reserve, but it's important for other entities to have reserves
as well. And that will have to come from tax reserves, whose ever treasury
they reside in. And so the board knows that there are competing needs for
the same money. And in their effort to determine what would be a responsible
amount of reserve for this district to begin with, they are trying to balance
those competing interests, always knowing that the ultimate bottom line is
that we just throw down the gaunt let and go to combat and try to get 33 million
from the city and whatever we can get from the county, by the way. It is my
understanding from discussions with the board that when they do settle on
a number that they believe is responsible that they are not prepared to compromise
below that number. That there's at least a substantial portion of the board
members who are willing to say we will throw down the gaunt let. We will insist
that we have at least the amount of reserves that we think, taken all the
factors in consideration, is responsible. And whether or not they will make
it my number that I recommended as a responsible number or some number less
than that might be responsible or some more -- some number more than that
might be responsible, I do not know that right now. And frankly, no one can
officially know that until September eighth when they vote to adopt their
budget. I am comfortable taking into account everything that I know that the
amount i've recommended is a responsible number. But my judgment is limited
by my capabilities, and you have nine ordinarily competent folks with very
different areas of expertise all participating in a very sophisticated way
in making this decision. You will receive a presentation of their budget on
September 14th for you to vote to approve or not approve their budget, and
it's my intention to post a meeting of the board on the same day that you
consider approval of their budget so that every member of the board can, if
they choose, come here and participate in the discussions of their budget
if they want to. I know we don't -- I don't know if we'll have any that want
to do that, but they can all come to your meeting if they want to. And I anticipate
at that time they're going to be able to explain to you what has been their
motivation for whatever decision they make regarding the amount of reserves.
But Commissioner, nobody has forgotten that 33 million. I wake up every morning
and the first thing I think of is that 33 million, and when I go to sleep
I think about that 33 million. And all I can tell you is that the existence
of that 33 million and its history is one of the factors that I considered
in trying to reach a decision that I think is not only responsible for the
hospital district, but responsible to the community at large. And it may be
the right decision or the wrong one, and that's anybody's judgment.
>> kimberly, that's your quote of the day for tomorrow. Joe,
if it makes you feel any better, I have not forgotten that $33 million as
well, and as far as I知 concerned, that is not the ceiling, that is the base
of what is in question. Because that simply is what was transferred out of
that reserve fund into the general fund over at the city of Austin. What we
have not discussed are the millions of dollars beyond that in terms of revenues
that were at one point being deposited in the hospital fund that suddenly
stopped and were starting to be deposited in the city of Austin's general
fund. Where I am heart ened is that you do have, if I read the press reports
correctly, an amount in your administrative budget, jim, related to getting
that baseline audit that we've all been talking about in terms of were the
proper resources from the very beginning from both the city and the county
accounted? Did you get everything you were supposed to get the baseline? And
I think that is where that question can be answered about the 33 or some greater
number than that. And I知 going to take this to the end scenario. Let's say
that 33 million does not get transferred in any form or fashion. I personally
think that there will be a lot of repercussions if the city chooses to keep
that, to repay themselves for carrying the burden of indigent health care
for all those years. And I can guarantee you that if they come to us on certain
kinds of projects and say we'd like your participation, we need your money,
my answer is going to be perhaps you need to look into your own general fund,
because it's already there. And that would be a sad state of affairs because
I think there are many, many good things that we can and should work together
on in this community, but this is something that is -- it's troubling, it's
troublesome, and it's far from over.
>> I was about to move on.
>> let me make one request from jim before we move on. Jim,
is there any way possible, since the reserves appear to be a hot button topic
this morning as far as the hospital district is concerned, is there any way
possible that I and that our Commissioners court can receive the reserves
that the other urban hospital district is operating on? What do they actually
have in reserve to acquire that information? You've already given one that
you need $60 million, but there are other areas, harris county, dallas, all
these other urban counties that operate within a hospital district. I'd like
to have that information if possible as soon as you possibly can.
>> we'll try to get that information for you. I will confess
to you that between now and tomorrow night at the public hearing I知 a little
busy, so it may not be tomorrow.
>> I understand.
>> but we have that information for harris county and for
tarrant county. We don't have it for any of the other counties. Harris county
and tarrant county both have over 100 days of revenue.
>> that would be good to know because even though whoever
landed on how the persons voted in the community as far as the hospital district
is concerned is passed, I guess my whole point is how do we take care of and
deal with the indigent health care needs in this community and how we can
set this up where it will not fail. But again, you're still talking about
money and being that those reserves I think are very important and I may want
to get a snapshot of what everybody else is doing. Doing in the state of Texas
as far as hospital districts are concerned as far as their reserves.
>> we'll have that for you as soon as we can put it together.
>> thank you very much.
>> we will have this item back on the agenda next week.
The Closed Caption log for this Commissioners Court agenda item is provided by Travis County Internet Services. Since this file is derived from the Closed Captions created during live cablecasts, there are occasional spelling and grammatical errors. This Closed Caption log is not an official record the Commissioners Court Meeting and cannot be relied on for official purposes. For official records please contact the County Clerk at (512) 854-4722.
Last Modified: Thursday, October 27, 2005 11:04 AM