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Eastern Plumas Health Care tweaks language of city loan

Trish Welsh Taylor
Staff Writer
10/12/2011

Eastern Plumas Health Care’s board held a special meeting Thursday, Oct. 6, to discuss the $348,000 loan to EPHC from the city of Portola.

With board chairwoman Gail McGrath and Janie McBride absent, EPHC board members Larry Fites, Jay Skutt and Lucy Kreth constituted a quorum.

Skutt acknowledged the city “gave a quick response” to EPHC’s petition for financial support. Kreth said, “They stepped out to help us.” Help indeed.

EPHC has been paying $5,200 monthly for the property. That will be reduced to $429 during the first two years of interest-only payment on the loan from the city.

The monthly bill on the loan will be $2,453 once payments begin to include principal. That’s about half of the cost the district has been paying. The interest rate is 1.48 percent, adjusted annually, which is far lower than the rate it’s been paying.

During the special board meeting, a quick response was needed from Steve Gross, attorney for the city as well as for EPHC in this matter. Skutt was uneasy with the legal language, “right of first refusal.” A question arose: “Will the hospital have to get city permission to sell any part of the property?” If that was the case, what if the city refused? That didn’t sound like it was in the best interest of the hospital.

As generous as the city of Portola has been, the members of the EPHC board had to consider “what if” scenarios, such as sale of a single parcel, given the rigid and binding language of the legal documents. After all, selling parcels is very much in the plan of the whole “deal.”

Though it seemed to everyone to be typical legal language, it was feared that the city was taking on the right to say to EPHC, “don’t sell.” Board members did not want the hospital to be at the mercy of the city’s possible refusal to sell a specific segment, “not without sound reason,” Chief Executive Officer Tom Hayes recommended.

Getting Gross on the phone for a conference call, language was sorted out to include the expectation that proceeds of any sale of any section would be used to pay down the note and that the city would agree to such sales, not using the “right to first refusal” without reasonable cause.

Gross stated that changes of this sort that do not stray from the intent of the City Council’s original loan documents would simply require signature by the mayor, not a review by the entire City Council. With that assurance, conversation with Gross ended and the EPHC board got on with its business of signing the loan papers, the critical act of accepting the loan.

Skutt motioned to allow vice-chairman Fites to sign the documents in place of chairwoman McGrath and to approve the loan document, deed of trust and the promissory note with the following changes:  loan agreement 16b to read, “Borrower will not sell, convey, suffer to be conveyed or subdivided the Real Property, or any portion thereof, in a manner that eliminates, reduces or jeopardizes the Lender’s security interest in the Real Property without the Lender’s prior written consent, which lender may not unreasonably withhold.”

Promissory note Paragraph 5 is to read as before but with an added clarifying phrase: “the proceeds from the sale shall first be applied to the interest and principal due on this Note.

Kreth seconded the motion, which passed unanimously, and Fites adjourned the meeting. One more signature to go.


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