Palm Drive Health Care District moves forward with dissolution

Feb. 5--The Palm Drive Healthcare District, which for nearly two decades supported operation of the only hospital in western Sonoma County, voted Monday to dissolve itself.

The unanimous decision of the district board comes just two months after it sold the hospital to Modesto-based American Advanced Management Group, AAMG, for $2 million.

Even under dissolution, residents in the district remain on the hook for paying off the district's debt, which totals about $25 million. The annual parcel tax is $155, and district estimates show all of the debt won't be paid off until 2034.

The move brings to a close a 20-year effort on the part of local residents, health care professionals and prominent community leaders to keep the financially strapped hospital open. When the district sold the hospital in December, many began wondering why the taxpayer-supported entity still existed.

"It seems like the logical thing to do -- we don't own or control a hospital," said Dennis Colthurst, president of the district board. "The district needs to be responsible and this is the most responsible thing to do."

The district was formed after a special election in 2000 by voters in nine west county school districts that encompass roughly 200 square miles.

But the embattled hospital was closed as a result of financial troubles in spring 2014, not long after the district declared bankruptcy. The hospital reopened in fall 2015, but nonprofit operator Sonoma West Medical Center struggled for several years to make the facility profitable and later declared bankruptcy.

In 2016, amid the tumult, residents in the Monte Rio, Guerneville and Forestville school districts, waged a successful campaign to detach their properties from the district.

Two years later, health insurance giant Anthem Blue Cross accused Sonoma West Medical Center of conspiring with an out-of-state medical laboratory in a billing scheme Anthem claimed defrauded the group and its members of $16 million. Sonoma West Medical Center filed for bankruptcy in September 2018.

AAMG has managed the site since late 2018 as a nonemergency, extended-stay care facility, going by the name Sonoma Specialty Hospital.

Last March, voters in Sebastopol, Graton, Bodega Bay, Occidental and other towns approved a ballot measure authorizing the district to unload the hospital.

Former board member Jim Horn welcomed news of the district's Monday action. Horn, who has supported dissolving the district since last April, when the board approved leasing the hospital to AAMG with the intent to sell the facility.

Once the sale closed in December, Horn said many west county residents wondered why the district still existed. Horn, who resigned from the board last May, said he and Sebastopol residents Gayle Bergmann and Alan Murakami began a petition drive three weeks ago for a ballot measure that would, if adopted, force dissolution of the district.

The taxing district generates more than $3 million annually, with all but up to $700,000 committed to paying off the district's debt, Horn said.

The vote Monday authorizes the district's counsel to prepare a formal dissolution plan, which the district is expected to vote on at its regular meeting in March. That plan then must be submitted to the Sonoma County Local Area Formation Commission, which regulates the boundaries of cities and special districts.

Mark Bramfitt, LAFCO's executive officer, said his agency will have to decide on a successor agency, much like the executor of an estate, which will be charged with winding down the affairs of the district.

"The main thing the successor agency will do is continue to collect taxes until the debt is paid off," Bramfitt said. "That could be years -- it will be years."

The Palm Drive board has set a target date of June 30 for final dissolution of the district.

Horn, Bergmann and Murakami have already collected 1,200 signatures, half of what they need to put dissolution before district voters. The three will continue their voter campaign until the board makes the dissolution official in June, Horn said.

"We're not going to stop collecting petitions until the board passes that resolution," Horn said.

You can reach Staff Writer Martin Espinoza at 707-521-5213 or martin.espinoza@pressdemocrat.com. On Twitter @pressreno.

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