CLARKSVILLE —
The Clarksville Town Council on Thursday night balked at a lease deal that would have aided bankrupt Kentuckiana Medical Center.
Under the deal, the hospital would have been refinanced by a private third party then leased to Clarksville, which would sublease it back to its owners.
The town wouldn’t have been responsible for the refinance but the move would have put its credit rating at risk. Town attorneys Chris Sturgeon and Rebecca Lockard advised that doing so could limit the town’s ability to pursue other projects.
The council stopped short of taking a vote to reject the lease proposal, with councilman Bob Popp saying a rejection sends the wrong message. Instead the proposal died for lack of a supporting motion.
“It’s like the shiny Corvette in the window,” councilman Tim Hauber said. “It’s beautiful, I want it, but I can’t afford it.”
The medical center is located just off U.S. 31 in Clarksville. The privately owned facility opened in 2009 then filed for chapter 11 bankruptcy protection — which allows for debt restructuring — in September 2010.
The proposal, which had also been rejected by the Clark County Commissioners in January, is known as a credit-tenant lease. The town would not be giving the hospital money, but instead allowing its credit rating to be used for the refinancing.
FINISHING IT
Tim Donahue, chief restructuring officer, said the hospital could be more profitable if it was completed. It’s only about 50 percent done, he said. Outpatient surgery and emergency room facilities would help the center’s bottom line.
“The hospital was never intended to work with only 26 beds,” he said.
Currently, there are 175 employees there now, said Lockard, who researched the deal for the council. Finishing it would likely add another 75 jobs.
Donahue noted that any kind of deal assumes a financial stabilization for the hospital. Regardless, Lockard said, there was no way to guarantee the town could get out of the deal without hurting its credit rating.
Sturgeon noted that Clarksville’s rating was recently upgraded from a BBB to an A- when it issued a bond to pay for its new firehouse last summer.
“The size of this [deal] would cause it to go down immediately,” he said.
Popp, who chairs the Clarksville Redevelopment Commission, confirmed that it could not afford it either.
WHAT’S NEXT
Donahue said a private firm — that would have been interested in the hospital even without backing from a government like Clarksville — may now have backed off following a tough negotiation with the hospital’s real estate firm.
Some questions may be answered next week when hospital officials head back to United States Bankruptcy Court Southern District of Indiana in New Albany.
Clarksville has been supportive of the hospital in the past. Already it has invested about $1.2 million in infrastructure improvements — roads, curbing and a $41,000 storage tank to handle waste from the hospital’s decontamination room.
Kentuckiana Medical Center is a partnership of CHA, a hospital development company based in Wichita, Kan., and Kentuckiana Investors, a group of 33 local physicians.
The one-story, 76,000-square-foot complex was about a $46 million construction project.
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Related Photos
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The Town of Clarksville on Thursday turned down a request from officials with the financially-troubled Kentuckiana Medical Center asking the town to become the hospital’s leaseholder. File photo
Discussion
Town has no cure for ailing medical center
Clarksville balks at deal
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