Tulare City attorney defends validity of council vote for loan to healthcare district

By Nancy Vigran Reporter for the Sun-Gazette

TULARE – Tulare Interim City Attorney Mario Zamora defends the Tulare City Council 2-0 vote on Feb. 12 to offer a $9 million line of credit to the Tulare Local Healthcare District (TLHCD). In a special Council meeting called just for this matter, Councilman Carlton Jones was absent and Councilman Greg Nunley attended but recused himself on the matter and left for the evening.

Vice Mayor Dennis Mederos, a Tulare attorney, had previously recused, but read a prepared statement citing the “Rule of Necessity” to explain forgoing his formal recusal and staying for discussion and a vote. He did not participate in the discussion, however, and he abstained from voting.

Mayor Jose Sigala and Councilwoman Terry Sayre each voted in favor of the loan.

Recusal, reassessment, and abstention

Mederos’ citation for the “Rule of Necessity” has been called into question with regard as to whether he had the right to make the call and, if so, did he have the right to fill the void of a third voting council member, or should it have come down to the drawing of straws between the two recused, Nunley and himself.

Despite Mederos’ former recusal, Zamora said he feels it was unnecessary in the first place. Mederos has performed pro-bono legal work for a member of the TLHCD board with regard to her seat on the board. He also owns his firm’s office building which borders the Tulare hospital property owned by TLHCD. He cited those two reasons for recusing himself.

Neither should have been an issue with regard to his recusal, Zamora said.

“There is a very elaborate test that the FFPC has developed and you have go through the steps to determine whether those facts at hand actually create a conflict where someone cannot participate,” Zamora stated in email correspondence with the Sun-Gazette.

 

“The language from the FPPC materials is specific about this:  ‘At the heart of deciding whether an official has a conflict of interest in a specific decision is determining whether an effect on the financial interest is reasonably foreseeable (might realistically happen or is too remote a possibility) and is material (financially important enough). Determining whether a decision’s effects are foreseeable and material will depend on the nature of the specific decision and the relationship of the official’s interest to the effects of the governmental decisions.’

 

“First – the past work, whether voluntary or paid makes no difference under the FPPC test because there is no current financial interest.

 

“Second – we must examine the question regarding the property.

 

“So the first question we ask is: Whether the financial interest is reasonably forseeable?

 

“In order to answer that question the FFPC has another test which we have to determine whether the interest (the property) is “explicitly involved”.  It is explicitly involved if any of the following are true:

 

“1) The interest is a named party in or the subject of a governmental decision, or

 

“2) The decision involves the issuance, renewal, approval, denial or revocation of any license, permit, or other entitlement to, or contract with, the interest, or

 

“3) The decision affects the real property of the official as described in Regulation 18702.2(a)(1)-(6).”

Regardless of the reasoning for his Mederos’ change in heart, Zamora said his participation and abstention were by the book, and the 2-0 vote is valid.

“My opinion is that Mederos did not have a conflict and even if he did, the public generally exception would apply, and therefore the rule of necessity does not come into play,” Zamora said. “If Mr. Jones thinks that there is still an issue, the easiest way to remedy that is to agendize it so Mr. Jones can show up and we can cure any deficiencies he believes exist.”

One councilman files FPPC complaint

Jones said hold on. He doesn’t believe the vote was proper and he doesn’t want a revote until clarifications are made. He has had numerous phone conversations with the office of the Fair Political Practices Commission and has filed an official complaint about the vote.

“They’re trying to get me to ‘cure’ it,” Jones said, adding that he doesn’t know exactly what Zamora meant by the word ‘cure.’

Jones has been opposed to the loan from the get-go and was unable to attend the special Council meeting or the previous regular meeting where the matter had been on the agenda. He worries about the City working as a bank or loan office.

This isn’t the first time council has been approached for a loan by TLHCD, he said. A few years back the hospital’s previous management firm, Healthcare Conglomerate Associates (HCCA) along with the TLHCD board, had also asked Council for a loan. Former city manager, Don Dorman, along with council including Jones, said “there is no way we would consider it,” Jones said. It was never placed on an agenda.

The recent vote, if it holds, approved a $9 million line-of-credit to TLHCD, with a 36-month time limit on credit. For those 36 months 6% interest is to be paid to the City on any credit activated. TLHCD would then have two additional years to pay back the amount borrowed and interest in full. Any request for credit will require itemization of how the funds would be utilized.

The loan is secured by a first deed of trust of all properties owned by TLHCD with the exception of the hospital, itself. Part of Jones’ contention is that HCCA CEO Dr. Benny Benzeevi already has a lien on at least some of that property including Evolutions Fitness and Wellness Center. Part of the requested line-of-credit is to be used to pay off the debt owed to Benzeevi and to free up that that lien.

Part of the conditions for consideration for the loan were for TLHCD to have a signed lease agreement with Adventist Health, the current management for the hospital. That signed agreement was sent to Zamora shortly before the Feb. 12 special council meeting.

Jones also questions the validity of the lease agreement. It is signed by TLHCD Board President Kevin Northcraft on a standalone page, and by an official for Adventist Health, whose name is not clearly legible by the signature nor is the name typed in, on a separate standalone page. Neither signature was witnessed by a notary or otherwise. As a major business binding contract, Jones finds this another issue.

TLHCD already owes the City of Tulare nearly $84,000, part of which is owed through past utility usage, and part of which was a loan-agreement to defer economic development fees on a clinic the district was building at 325 North West St. in 2013. That loan payment was due in July, 2018 and despite a request from TLHCD for it to be forgiven, council would not, according to Jones.

The Sun-Gazette was awaiting response from Vice Mayor Mederos and the FPPC at press time.

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