By Traci Chapman

Parkview Hospital board members approved a $2.45 million loan financing program during a special meeting held Monday.

The proposal – financed by Canadian State Bank - would help the hospital’s cash flow and consolidate its outstanding obligations. The Department of Agriculture would provide a guarantee for 80 percent of the loan, CSB president Doug Tippens said.

If approved by City Council, the loan would consolidate the hospital’s existing letter of credit with Vermont Insurance Department, as well as “about 40 Uniform Commercial Code filings” the hospital has pending with various lenders for the purchase of equipment and supplies, Tippens said.

To obtain the financing, Parkview must pledge its “equipment, inventory, receivables and rights to payments,” as well as give an assignment of its lease with the city of El Reno. Tippens said the hospital’s options are limited because it has run in the red the last two years and due to the large number of filings on its equipment. Vendors file UCC statements to collateralize equipment, which constitute a lien against that equipment.

Chief Financial Officer Rod Shook suggested speaking to other banks with the goal of refinancing the letter of credit. Mayor Matt White said the “pay as you go method” has not worked for the hospital, and the CSB loan was the only viable option to help the struggling hospital.

“You have to swim in the water you’re in,” he said. “I know you don’t like it, and I know we don’t agree on how to get there, but our goal is truly the same goal. I don’t want to see this hospital shut down.”

White said he would make sure the plan appeared on the agenda for a special City Council meeting scheduled for Thursday.

“I think it’s a good plan,” White said.

City Manager Tony Rivera, who attended the board meeting, said he did not see a downside to the proposed loan.

“I would emphasize (to City Council) the need to stabilize the (hospital’s) cash flow situation,” he said. “I don’t see that we would be in any worse position than we currently are as far as the lease assignment goes.”

In addition to consolidating the $161,904 letter of credit – held by the Vermont Insurance Department as collateral for Parkview’s self-funded insurance plan - Administrator Lex Smith said the 10-year loan would infuse needed cash flow into the hospital. Board member Ron Ward said the consolidation will net the hospital about “$23,000 in additional cash flow” initially.

After four years, however, the benefits to the loan will reverse, and what provided a positive infusion of cash will begin to cost the hospital “big money” if the loan is not paid before that time.

“The first two years is the big benefit, and in year three it pretty much becomes a break-even situation,” Smith said. “After that, it goes into the red.”

Tippens said consolidating the hospital’s outstanding obligations with the proposed loan, which has a ceiling of 9 percent, would save the hospital more than $280,000 in the first year. That benefit would decrease to $214,204 in year two, $136,559 in year three and $29,812 in the fourth year. Year five paints a much different picture, Smith said, with a loss of $232,332 if the loan has not been paid off or restructured by that time.

Board member Rosemary Klepper said she wanted to review the loan in three years to avoid “going into the same situation we’re in now.” Members agreed a review of the loan before that time would be prudent.

Tippens said he believed the interest on the loan will be about 7 percent “or lower,” but that CSB officials used the 7 percent to 9 percent figure to give the hospital a conservative estimate of the actual cost of the financing.

Ultimately, the board approved the financing package in a 3-0-1 vote, with Ward – who also sits on CSB’s board – abstaining, and White, Klepper and Dr. Margaret Mehle voting in favor of the proposal. Chairman David DeLana and members Glen Nichols and Dr. Mike Compton were absent.