During the past decade Primary Health Care, which occupies a Walker County government-owned building in Rossville, has received more than a million dollars in free rent, utilities, building maintenance and insurance, all at the expense of taxpayers, says Commissioner Shannon Whitfield.
That arrangement, Whitfield says, must end, especially since the county itself is millions in debt.
Whitfield, who took office in January, said Primary, which operates six facilities in Northwest Georgia, has millions in annual revenue, including more than $300,000 in profit each year.
Primary, under a lease agreement set up by former Commissioner Bebe Heiskell, is paying the county $1 per year to occupy the building .
"It's time for Primary Health Care to step up and do the right thing, which is stand on their own feet and pay their own way," Whitfield said.
Primary CEO Diana Allen, asked to respond on the matter, said in an email Wednesday, Nov. 22, "We have our attorney reviewing the Rossville lease so we’re not prepared to make a statement right now."
According to the Chattanooga Times Free Press, in a story published Nov. 23, Primary purchased "Hutcheson Medical Center's abandoned hospice building on Oct. 5 for $280,000, Catoosa County property records show. Built in 1992, the building is 14,000 square feet and located on Mitchell Road, behind what is now Cornerstone Medical Center."
The lease agreements
The county held two five-year lease agreements with Primary, Whitfield said. The first lease began Jan. 1, 2007, and ended Dec. 31, 2011; the second began Sept. 1, 2012, and ended Aug. 31, 2017, he said.
Under the leases, the county charged Primary $1 per year, which included rent, utilities (electricity, water, sewerage, natural gas), building maintenance and insurance, the commissioner said.
During the 10-year period, the agreement cost taxpayers $1.356 million: $$1,056,090 in rent, $190,000 in utilities, and $110,000 in insurance and building maintenance, Whitfield said. Also, five years ago the county paid $400,000 to renovate the building, he said.
Whitfield said he discovered the Primary leases in February 2017, shortly after taking office.
In July 2017, Rominger & Associates appraised the building at $1,110,400, submitting a comprehensive 80-page assessment that included suggested prices for "low, high and average" rent, with the "average" rent being $1.07 per square foot per month, Whitfield said.
The 9,500-square-foot building was appraised with 8,225 square feet being rentable or leasable. Whitfield, using the average rent, came up with the $8,800.75 per month figure, which calculates to $1,056,090 over 10 years.
"That (rental charge) is very very comparable to any type of business," Whitfield said.
Whitfield compared this appraisal to Chickamauga Family Practice, which is leased to Memorial Hospital at $5,000 per month at about $1.08 per square feet. He also compared this to the CHI Memorial Convenient Care in LaFayette, where the rent is $1.08 per square foot per month.
Commissioner: Primary profitable enough to pay more
The commissioner said that while Primary is a "non-profit," that simply means it does not pay taxes. "It doesn't mean they don't make a profit," he said. "They have to make a profit to survive. ... The county government has been subsidizing them for 10 years."
Whitfield said he met with CEO Allen in May 2017 and told her the building would be appraised. Given that the lease was running out in August, this allowed time for discussion between the Primary and Walker County, he said.
Whitfield said he offered Allen five options: a month-to-month lease; a one-year lease; a three- to five-year lease; the county could sell the building to Primary; or Primary could move out of the building.
Whitfield said he told Primary to do what was best for the company, but the previous arrangement had to be changed because the county is struggling financially, and since the company is an independent, free market business, it should be paying its own way.
Whitfield said that according the company's 2016 financial audit, Primary's total revenue that year was about $6.4 million ($6,480,861). The total in expenses was $6,148,274, leaving the company with a $332,587 profit.
"When you look on their balance sheet at their unrestricted (net assets), it's over $1.1 million in their unrestricted," he said. "When we look at our unrestricted on the county's financial report, we are negative $7.5 million and they're $1.1 million positive. So if anybody should be supporting anybody, we should not be supporting them when they are eight-and-a-half times stronger than we are financially."
Whitfield said if Primary decides to leave the Rossville location, it has two other facilities in Walker County as well as facilities in Dade and Chattooga counties and one in Cedartown in Polk County.
Whitfield said if Primary decides to leave, another health care service will fill the void because the market needs it.
"Whatever they want to do, I am good with. I just know the current lease agreement has expired. We've honored that lease through August (2017). I've taken a step forward and given them an extra month of September, because we were in conversations, but they will be responsible for the rent for October, November and any month thereafter that they decide to stay," Whitfield said.
Asked if he is hitting Primary too hard, too fast, Whitfield said he asked to see the organization's financial records and Primary refused. But the county was able to obtain a copy of the records, he said. According to the company's 990 tax filing, Eddie Upshaw is the organization's vice president.
"So naturally he is going to be advocating for something less than that and I understand that and I don't hold that against him," Whitfield said. "But it also showed that Ms. Diana was making over $135,000 per year as her salary. They still have profits of over $332,000."