Health Care District Passes Budget, Putting Parks at Risk

Budget decided against backdrop of pandemic, responsible for limiting primary care provider search.

Editor’s note: The Vashon Health Care District convened a special meeting this week and reaffirmed their vote for a property tax levy of $.58 cents per $1,000 of assessed value. See the story in next week’s paper.

Commissioners of The Vashon Health Care District approved a $2.23 million budget for 2021 last Wednesday, accounting for their expenses and working toward targeted goals but simultaneously jeopardizing the island’s park and recreation services.

In 2021, the health care district will collect $1.9 million in tax revenue that will be used to fund operations and keep the district sustainable by implementing a property tax levy of $.58 cents per $1,000 of assessed value.

The health care district’s budget accounts for the superintendent’s salary, an hourly administrative director, advertising costs, a $1.5 million subsidy granted to the island’s new primary care provider, Sea Mar Community Health Centers, and assumes further borrowing anticipated for 2021 in the amount of $250,000.

The budget was decided against the backdrop of a pandemic that changed health care around the country and was responsible for significantly limiting the district’s search for providers that could have replaced outgoing Neighborcare Health at the Sunrise Ridge Clinic.

The commissioners said that their choice of the levy rate was informed by a variety of factors and was not made lightly. That and the Vashon Island Fire District’s proposed levy of $1.50 per $1,000 of assessed value will curtail the Vashon Park District’s $1.5 million budget, slashing it by 9%, a total loss of $132,000 coming next year.

Many in the community feared this scenario, in which the park district would be forced to compromise itself for the health care district after commissioners set their levy rate, given the minimum headroom left under the state-imposed cap of $5.90 per $1,000 assessed value.

Under Washington law, the combined levy limit for cities, counties and most special districts is $5.90 per $1,000 of assessed value. Should that limit be exceeded, so-called “junior” taxing districts would see reductions to their levy rates. For Vashon, the park district is the first to be affected and will lose tax revenue.

Health care district commissioners have weighed several options over the last month as they considered what levy rate to implement to fund the district. Initially, they considered a draft budget with $.52 cents per $1,000 but, prior to the public hearing on the budget held last month, a revised draft budget proposing $.54 cents was released, still within the $5.90 limit according to the commissioners.

The meeting on Wednesday was the first time that commissioners had addressed a $.58 cent levy. Under Washington state law, hospital districts have the capacity to levy up to $.75 cents per $1,000 of assessed home value.

At the meeting, superintendent Eric Jensen presented a series of budget scenarios to the commissioners prior to their adoption of the $.58 cent levy, which would make the district viable in 2021, raising $132,000 more in property tax revenue than the district would have been able to collect by levying $.54 cents per $1,000 as proposed earlier.

A $.58 cent levy will allow the district to adequately cover negative cash flow in the first quarter of 2022. That amount will also mean the district’s year-end cash balance will be significantly greater than it would be under a .$54 cent levy.

In the best circumstances, with practically no surprises coming down the pipeline, a $.54 cent levy would still eventually leave the district overdrawn with a negative low monthly cash balance of -$114, compared to a $.58 cent levy, which will provide the district with a comfortable $45,000 low monthly cash balance.

The district will also be able to pay off some of its remaining interfund loan balance to King County with the $.58 cent levy rate.

Under the two other budget scenarios Jensen presented, with both set at a $.54 cent levy and providing for debt reduction and debt service, the low monthly cash balance fell well below zero, the year-end cash balance was reduced, and the district remained financially vulnerable. Jensen supported the $.58 cent levy to support the district.

Board president Tom Langland set aside ample time for the commissioners to share their thoughts about the $.58 cent levy before proceeding with a final vote.

“This is stuff we’re talking about that affects each and every one of our neighbors on the island one way or another,” he said.

The commissioners were all in agreement that the extraordinary and unanticipated difficulties related to the pandemic that they encountered in their first year serving on the new board were responsible for pushing the district in this direction. Don Wolczko, who supported the levy, started by saying that he felt that the board had a responsibility to bring affordable, high-quality primary care to Vashon and that this was the only way to do it.

“I think we need to make ourselves whole; we need to have enough tax revenue so that we’re not in another deficit even for a couple of months in the year and looking for money from the county, assuming that it’s going to lend us some more money,” he said.

The higher levy rate was also supported by Commissioner Wendy Noble. She cited the dramatic impact of the pandemic on the health care sector, in addition to other misfortunes caused by bad luck this year, such as the loss of the West Seattle Bridge, exacerbating the island’s transportation challenges, and potentially leaving islanders in the lurch when it comes to accessing outpatient services and off-island care.

She added her belief that it is critical the district is able to guarantee that it can support the clinic without going into more debt.

Noble mentioned the Vashon Island Fire District’s intent to raise its levy rate in 2021 to $1.50 per $1,000 of assessed value, an increase over this year’s tax rate of $1.47, though a final public hearing is scheduled after press time for 6:30 p.m. Wednesday, Nov. 25 on Zoom. She added her hope that there is an understanding among the boards of the island’s other taxing districts that they and VIFR deserve to be the priority, especially given the urgency of the pandemic.

“I have great respect for how the parks are affected by this [budget]. [But] the trails, the fields, they’re not affected by this crisis,” she said.

Before the vote, Langland, for his part, acknowledged that the commissioners were struggling with the decision, noting that the problems they have faced included the high cost of keeping Neighborcare open long enough to attract a new provider while retaining the nurses and doctors who work there.

Citing his business background, he said there were too many unknowns to endorse another lower levy rate, adding that $.58 cents is “not exactly proposing a fat cat budget for the healthcare district.” The forecasts of the commissioners on debt service coverage and the clinic subsidy changed significantly from only a year earlier, underlined, he said, by the volatile impact of COVID-19.

“And so I am asking for some consideration by the other junior taxing districts affected, the parks, namely, that they partner with us, that they shoulder a part of this unknown disaster that we really can’t afford to let threaten health care,” he said, noting that the park district is debt-free and presently financially secure.

He also commented on the park district’s loss of 9% of its budget.

“That hurts, that’s big, they’re going to have to get creative if we pass this levy rate. But I don’t think it varies the part. I’m sorry for the damage it does. I love the parks, my grandchildren do; they are a huge part of Vashon life. But I don’t think this is in any way a death sentence for the parks,” he said. “They’re going to have to get nimble; they might have to go to the county borrowing pool short term, like we did, to make themselves whole if we pass this.”

Hans Van Dusen, chair of the park district, did not agree, speaking during the public comment period. Acknowledging the efforts of the commissioners to set up the health care district, he said that the parks would not be able to comfortably withstand the blow that they had decided to inflict upon it.

“It’s significant. The park district’s budget has been leaned down, it’s quite trim. We’ve held back wage increases for the employees to make it work. We’ve deferred maintenance. We’re pretty bare-bones right now,” he said, adding that he believes the two districts are aligned in outcomes of public health, with recreation programming, fields and pools helping islanders stay well.

Van Dusen said based on the figures shared at the meeting he believed the health care district had a narrow financial path forward without having to opt for the higher levy. He reminded the commissioners that in the last election nearly 80% of the island voted for the park district to be funded.

“There is not $130,000 to cut from the parks district budget,” he said.

Not everyone on the Health Care District Board came to the same conclusion as to whether or not to accept the levy. Commissioner Eric Pryne said he was hesitant to surpass the $5.90 limit, concerned by what repercussions it might have for the board’s relationships in the community. He also said that because the district more or less endorsed the narrative that the park district would stay untouched with a vote for the health care district, the board would lose credibility.

“We got a 70% ‘yes’ vote and mandate, but at the same election, voters gave the park district levy an 80% ‘yes’ vote. And it’s clear that the community values both,” he said, adding that there were other options for reducing the district’s debt service and that a conversation about potentially reducing the large subsidy to Sea Mar could begin next fall.

“For me, at least, the disadvantages of a higher levy rate outweigh the advantages,” Pryne said. He was the only member of the board to vote against the budget.

The health care district was formed with 70% voter approval during the 2019 November general election. In the voter’s pamphlet, Sharon Nelson and Gary A. Koch wrote the statement in favor of the measure, saying that the district would sustain Vashon health services with local funds needed to build and support long-term continuity in health care operations and facilities.

But the impact of the health care district has long been a point of contention for those who opposed it in the first place, with some claiming last year that it would put Vashon parks at risk.

The opposition statement in the voter pamphlet against establishing King County Public Hospital District No. 5, submitted at that time by islander Hilary Emmer, noted that the health care district levy “will also decimate the Park District budget.”

The issue was addressed in the rebuttal.

“Parks vs. Healthcare is a false choice. Strong communities have both, which is why levy rates will be modest, and ultimately accountable to taxpayers,” read the statement.

On the ballot simultaneously, the park district ran and later passed a $.45 cent levy — the equivalent of less than $19 per month for a $500,000 property — to fund the district from 2020 to 2023, after voters rejected a $.52 cent levy earlier in 2019.

The dilemma for the park district is greater than just the health district going ahead with a higher levy. Increased property values have usually contributed to steady or decreasing tax rates in the county, preventing any problems with the $5.90 ceiling. But Vashon’s median home prices have fallen by 2.2% and, as property values decline, taxing districts need to increase their rates to generate the same amount of revenue.

This is why the fire district is also seeking a tax raise again. As the island’s total assessed value declines, even at the fire district’s highest tax rate of $1.50 per $1,000 assessed value, it would see a decrease in property tax revenue for next year.

The fire district’s new levy could mean an additional loss for the park district. Meanwhile, other special taxing districts in the county such as the King County Roads or the library system are said to be strongly considering raising their levy rate next year to keep up, all creating a greater likelihood that the island’s park district could be prorationed much further.

At the park district’s Nov. 10 board meeting, executive director Elaine Ott-Rocheford shared that she was in communication with Rep. Joe Fitzgibbon, who last December proposed legislation to rewrite state tax law that would allow Washington’s park and recreation districts to collect tax revenue beyond the “local district” limits required by state law. The bill did not go anywhere, but Ott-Rocheford said that Fitzgibbon is prepared in the legislature to force the bill forward.

The park district is not spared by the decrease of levy dollars relative to falling property values. Ott-Rocheford said reduced levy revenue, combined with the hit from prorationing, will cut the district’s budget by nearly 11%. Her recommendation to the board during their regular meeting, after press time at 7 p.m. Tuesday on Zoom, will be to preserve staffing while eliminating recreation programming and capital projects.

“Every district needs to do what they need to do. Certainly, we all understand that. But it’s disappointing,” she said.

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