Cash-strapped Modoc County approves hospital tax

Voters in a rural California county in such dire financial condition that it's seeking a state bailout approved a tax to fund their hospital Tuesday.

The vote gives Modoc County, in the state's northeastern corner, a much-needed infusion of cash and likely means it will avoid bankruptcy.

Voters approved both measures - one to impose a $195-a-year parcel tax to keep their struggling hospital, and another to create a hospital district to oversee its operations. The tax required two-thirds voter approval.

Local officials said they needed the tax because the hospital's operating costs have overwhelmed county finances. They had hired a bankruptcy attorney and have requested a $12.5 million loan from the state.

State finance officials are considering the request and said they want to be assured the county could repay the loan. The vote results make that more likely.

"By God it passed, and by God that's all that counts, so we will keep our hospital," Modoc County Supervisor Patricia Cantrall said after the votes were tallied.

In unofficial results, the tax measure passed with 68 percent of the vote, while the hospital district was approved by 70 percent.

The vote was not countywide, but rather was among the 3,724 voters who live within the county's existing hospital district. Among that population, turnout was nearly 63 percent.

If the parcel tax had failed, its supporters fear the end of urgent medical care in their community, nearly 400 miles northeast of San Francisco.

The nearest emergency room is more than 20 miles away, over mountain roads that are often closed due to snowy conditions in winter. Others are more than an hour's drive away.

The Modoc Medical Center has been reducing staff and services to deal with its budget deficit, including halting surgeries and baby deliveries, said Monica Derner, interim chief operating officer.

The county's dire fiscal situation stems from its practice of improperly borrowing from county funds intended for education, transportation and other purposes to pay hospital expenses. A review by the state controller's office determined the county had to repay that money immediately.

The hospital has been in the red for more than a decade, losing between $600,000 and $2.8 million annually in recent years, and the county has racked up more than $12.5 million in debt trying to keep it afloat.

Modoc County requested a loan from the state when it was told it had to repay the money. Tom Dresslar, a spokesman in the state treasurer's office, said the loan request is unusual, but it's in the state's interest to prevent the county from falling into bankruptcy.

County officials said the parcel tax will generate $3.1 million a year for the hospital, freeing other tax money for local services.

Opponents said a tax increase is the last thing residents need, especially at a time when people are struggling to make ends meet.

Doug Knox, a retired rancher, had been running ads against the measures on local radio stations and questions whether the county will bring in as much revenue from the new tax as it anticipates.

He said much of the tax base is tied up in a sprawling residential development site that is filled with vacant lots. Knox believes the owners of those parcels will just walk away rather than pay the additional property tax, compounding the county's financial problems.

"The people here are looking to save the hospital," he said Tuesday night after the vote. "I'm looking to save the hospital, and I'm also looking to save Modoc County."

Associated Press Writer Tom Verdin contributed to this report.

© 2010 The Associated Press.