Council votes to terminate lease agreement with Tahlequah Hospital Authority

The Tahlequah City Council, during a Sept. 3 meeting, voted to terminate a lease agreement with the Tahlequah Hospital Authority on property located at 111 Cherokee Ave.

City Attorney John Tyler Hammons said it was the THA that approached the city with the lease termination request.

"It appears back in 1974, to be effective on Sept. 4, 1975, a lease agreement was entered into between the city of Tahlequah and the Tahlequah Hospital Authority whereby we would lease to them this building that we are sitting in so they could use it as collateral to obtain financing to make improvements to the hospital," Hammons said.

According to the lease termination and mutual disclaimer and release agreement, the THA issued tax-exempt bonds to finance the construction of the new hospital, which were repaid with operating revenues generated by the THA's operation of the new hospital.

"Since the completion of the new hospital, the authority has not used or exercised any control over the old hospital building; rather, the old hospital building has been used for governmental purposes by the city and Cherokee County officials," the agreement stated.

Former Mayor Sue Catron approached the board and said there is a clause in the original lease agreement that's not referenced in the release agreement in which the previous attorneys, from Hilborne & Weidman, P.C., had referred to as the, "hereinafter acquired clause."

"And that clause captures the entire system derived from the original property. So with that, we aren't just talking about 'this' building but we are talking about all of the buildings and property that has been acquired using the debt of the hospital building, not just this building but the one that was built to acquire that property," Catron said.

Additionally, Catron said there was more involved than just, "No, you're not using this building any longer and debt on this building is paid off."

"This is actually involving the lease that is for all of the property," she said.

Hammons agreed and said by executing the agreement, the city is agreeing that any property that is titled in the THA will remain with the THA for the use of healing of the sick, and any property titled in the city will remain with the city for municipal purposes.

Ward 3 Councilor Stephen Highers, who is a trustee on the THA, also reminded the board that the THA is a trust of the city and as such, the city is the sole beneficiary of what the THA owns, did own, and will own in the future.

"If tomorrow the trust were to dissolve, everything that the hospital owned, used to own, or will own in the future, comes back to the city, correct? Even by not having this lease in place, we still in reality are the main beneficiary and are the entity that would be able to claim anything that were to happen," Highers said.

Catron said the lease agreement had information on how and when the agreement could be terminated.

"There's language in there about if there is still any outstanding debt and that would not be outstanding debt on this property but any outstanding debt that is using the current hospital property or the revenues thereof to pay for that, and there is still debt," she said.

Catron's recommendation to the council was to let the lease agreement roll as it's not impacting life and would allow for the council to renew the agreement for a shorter period of time.

Ward 2 Councilor Keith Baker asked if there were any outstanding debt issues and Hammons said it was communicated to him that there was no outstanding debt as it related to the agreement.

"I have not independently verified that, but that is what has been told to me," Hammons said.

Jim Berry, Northeastern Health System CEO, said he can't, from memory, quote any debt related to any building one way or the other.

"The points that I would have made have been eloquently made by others, around the trust authority of the initial intention of the lease and why the lease was proposed in 1974 as collateral has come to its end, " Berry said. "It's been recommended by council to terminate the lease. I really think that's your decision but I think Council Highers said very eloquently that the property of the trust becomes the city as the beneficiary at termination of the trust."

Baker asked Hammons if he was comfortable with the outstanding debt and it not being an issue, Hammons said he wasn't concerned. Baker made a motion to authorize Mayor Suzanne Myers to terminate the lease with the THA while Ward 1 Councilor Danny Perry seconded.

What's next

The next Tahlequah City Council meeting is Monday, Oct. 7 at 5:30 p.m., at City Hall.