Sparks sale to result in property tax revenue loss for schools, local governments

While the sale of Sparks Health System to Little Rock-based Baptist Health is viewed by many as a positive for the Fort Smith metro, local governments and schools stand to lose a combined $1.138 million in property tax revenue.

It was announced July 18 that Franklin, Tenn.-based Community Health Systems (CHS) is selling Sparks to Baptist in a deal expected to close before the end of the year. Terms of the deal have not been disclosed.

The move comes as CHS is shedding assets to reduce its highly leveraged debt level. The nation’s second largest hospital operator recently hired Lazard to help it address $4.8 billion in debt set to mature in 2019 and 2020. The company’s long-term debt is around $13 billion, significant for a company that posted a $2.459 billion loss in 2017. CHS sold 30 hospitals in 2017 for $1.7 billion, and in 2016 spun off 38 hospitals to create Quorum Health Corp. As of December 2017, CHS owned or leased 125 hospitals with 20,850 licensed beds, and employed approximately 2,000 physicians and 1,000 licensed healthcare practitioners.

Naples, Fla.-based Health Management Associates acquired Sparks in a $138-million deal that closed Nov. 30, 2009. Then, in a deal that closed in early 2014, Sparks was part of the sale of HMA to CHS, a company whose portfolio of hospitals was then nearly double the size of HMA’s portfolio. The $7.6 billion deal closed in early 2014.

Since 2010, Sparks has been owned by a for-profit company and has paid property taxes of more than $1 million a year. Baptist is a non-profit entity and is not required to pay property taxes.

According to information provided to Talk Business & Politics by Sebastian County Assessor Zach Johnson, property tax payments in 2017 tied to Sparks total $1.138 million. Following is how most of the 2017 tax payments were distributed to local governments and schools.
• Fort Smith Public Schools: $791,124
• Sebastian County general fund: $108,384
• City of Fort Smith general fund: $108,373
• Fort Smith street fund: $32,511
• Sebastian County road fund: $32,510
• Fort Smith Public Library: $21,682
• Fort Smith Police Department: $21,682
• Fort Smith Fire Department: $21,682

“It’s going to be quite a shock. It’s a good chunk of change,” Johnson said of the expected lost revenue.

Zena Marshall, spokeswoman for the Fort Smith Public School District, said the lost revenue is “on the radar,” but it will be a year before the schools and government see the reduction. Indeed, CHS will make a tax payment for 2018 in 2019. If the deal with Baptist closes in 2018, the first year of lost revenue will be in 2020.

“We have not really outlined a plan for that loss, and it will certainly make a pretty significant dent, but we will just have to make adjustments where we can make adjustments and move forward,” Marshall said.