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Hospital Taxes

Judge expected to rule hospital taxes owed for ‘06, ‘07

By John Howell Sr.
and Billy Davis

U. S. Bankruptcy Judge David Houston is expected to sign a final order this week giving Panola County almost $1 million of the $1.95 million in back property taxes that the county has claimed it is due from the Tri-Lakes Medical Center bankruptcy.

The judge has recognized a “valid priority claim for taxes due for 2006 and 2007.”

The amount that will be paid to the county and to the City of Batesville is $992,189.99, the proposed order states.

A portion of the taxes are also owed to the South Panola School District, said Colmon Mitchell, assistant city attorney for Batesville.

It was unclear, when the Panolian went to press Thursday, how the funds would be divided.

The disbursement would be “based on percentages” from 2006 and 2007 millage rates taxes for the county, Batesville and South Panola, Panola Chancery Clerk Jim Pitcock said.

An exact division of the $992,189 was unknown, he said.

UPS Capital Credit and Stillwater National Bank had objected to the taxes claimed by the city and county. UPS Capital Credit was the senior lender that provided the financing for the 2005 purchase of Tri-Lakes by Physicians and Surgeons Hospital Group, a non-profit organization formed by Dr. Robert Corkern.

The financiers based their claim for ad valorem tax exemption on a state law that exempts non-profit hospitals from paying the taxes.

The city and county based their claim for collection of the ad valorem taxes on the 2005 sales agreement that Corkern signed with the city and county agreeing to pay the taxes. Corkern later transferred the obligations in the sales agreement to the non-profit Physicians and Surgeons Hospital Group.

Determining whether the city and county were due ad valorem taxes from the facility, which declared bankruptcy in August, 2007, was “nothing quite like I’ve seen before,” Judge Houston said after he heard arguments from both sides on August 31.

The City of Batesville and Panola County hired Southaven attorney Al Welshans, formerly of Batesville, and Memphis attorney David Blaylock to represent their claim for the tax. The county collects ad valorem taxes for the city.

Andrew Turner of Tulsa, Okla. and other attorneys represented UPS Capital Credit.

The hospital was sold to Alliance Health Partners in a Section 363 sale that closed Sept. 4.

At an August 10 hearing which determined Alliance to be the successful bidder for the hospital, Welshans and Blaylock agreed to waive their objections to a “free and clear” sale after Judge Houston announced that he would place $1.95 million in escrow while the tax question was being resolved.