As the Big Bear community mulls whether to support a measure to extend the tax funding operations at that region’s hospital another ten years, the district must contend with a lawsuit alleging it has not properly spent nor accounted for the money entrusted to it by voters in a similar measure passed a decade ago.
In 2014, the Bear Valley Community Healthcare District, a jurisdiction in the eastern San Bernardino Mountains which covers the City of Big Bear Lake, the unincorporated county area known as Big Bear City, and the other unincorporated county areas of Fawnskin, Holcomb Valley, Sugarloaf, Erwin Lake, Baldwin Lake, Bluff Lake and Lake Williams, placed a measure on the June 3, 2014 ballot corresponding to that year’s California Primary Election asking voters there to approve renewing an existing $20 per unimproved parcel and $45 per approved annual special tax that was imposed on properties within the district boundaries. Under the terms of the measure, as proposed in the resolution by the Healthcare District Board that asked for it to be placed on the ballot, the proceeds from that special tax were to be committed to “continue maintaining local access to life-saving emergency medical care at Bear Valley Community Hospital, keep hospital medical technology up-to-date, and ensure the hospital has enough qualified doctors and nurses… for 10 years only, with annual independent financial audits, no money for administrators, all funds dedicated to hospital services in Big Bear Valley.”
That initiative was designated as Measure F.
In the election, Measure F passed, with 2,706 or 80.56 percent of the district’s 3,359 voters participating in that election supporting it and 653 or 19.44 percent opposed.
One of the conditions contained within the resolution to place the measure on the ballot was that upon passage of the measure, a sequestered account for holding the funds was to be maintained and that the “Board of Directors of the Healthcare District shall, pursuant to Government Code Section 50075.2, file an annual report as provided therein, accounting for the tax collected and the manner in which it has been spent” and that the “annual report must state (a) the amount of funds collected and expended and (b) the status of any project required or authorized to be funded by the special tax, as identified in the ballot measure.”
In recent years, it was noted by some Big Bear Valley residents that the healthcare district had failed to abide by the requirement that the annual audit be completed, that an audit report be generated and that it be made available for public review.
Efforts by members of the Big Bear Community, utilizing the California Public Records Act, to ascertain through an examination of the hospital’s books and/or the healthcare district’s books the information that should have been provided through the audits and in the audit reports resulted in the district having Brentwood, Tennessee-based QHR Health, LLC dba Ovation Healthcare, a private healthcare management company that has a contractual relationship with Bear Valley Community Healthcare District for the provision of administrative services, intervene to prevent that information from being released.
Rather than comply with the California Public Records Act request, QHR Health had its attorney, Jeff Gibson, respond.
Gibson took the position, first, that the California Public Records Act request, which was made of The Bear Valley Community Healthcare District, a California entity, was transferable to QHR Health, LLC/Ovation Healthcare, in that it provides to the Bear Valley Community Healthcare District the chief executive officer (CEO) and chief operating officer (COO) who oversee operations at Bear Valley Community Hospital. Second, he maintained that QHR Health, LLC/Ovation Healthcare, as a corporation based in Tennessee, is exempt from the California Public Records Act.
In a letter dated August 15, 2024 to Big Bear Valley resident Joseph Kelly, who had filed the public records request, Gibson stated, “Bear Valley [Community Healthcare District] does not have employment contracts with the CEO and COO. Rather, these executives’ services are the subject of private arrangements involving only QHR and the executives, none of whom qualify as a ‘public agency’ under the [California Public Records] Act. Both executives render services to Bear Valley on behalf of QHR by virtue of an administrative services agreement executed between QHR, a private third-party vendor, and Bear Valley. As a result, there is no employment contract of a public agency subject to disclosure. Second, the Act exempts disclosure of records “the disclosure of which is exempted or prohibited pursuant to federal law, including, but not limited to, provisions of the Evidence Code relating to privilege.” Cal. Gov. Code § 6254(k).”
In this way, according to Gibson, “the requested records incorporate proprietary information, as well as protected trade secrets, and are privileged pursuant to California Evidence Code § 1060, which provides that ‘the owner of a trade secret has a privilege to refuse to disclose the secret, and to prevent another from disclosing it, if the allowance of the privilege will not tend to conceal fraud or otherwise work injustice.’ QHR respectfully asserts this privilege herein.”
With the district having failed to live up to the provision of Measure F requiring that an accounting of tax money collected as the result of its passage be completed on an annual basis and be made publicly available and the district engaging in highly questionable legalisms in an effort to prevent the public from learning how the Measure F funds were being applied, Kelly went to court, suing the district in filing a petition for a writ of mandate.
Kelly’s complaint, in which he is represented by San Diego-based attorney Eric Benink, references the Local Agency Special Tax and Bond Accountability Act, passed in the year 2000, which added Government Code Section 50075.3, a requirement that a governmental entity, as in this case the Bear Valley Community Healthcare District, file a report with its governing body at least once a year detailing “the amount of funds collected and expended [and] the status of any project required or authorized to be funded” as the result of the passage of a special tax measure, as in this case Measure F.
“The District has violated these accountability measures,” the complaint states. “It did not create an account into which the special tax proceeds were deposited. It only created such an account sometime after July 31, 2024 and only after plaintiff requested information pertaining to it via a Public Records Act request. Neither the district’s chief fiscal officer nor any other district official ever filed any reports with the board pursuant to Government Code Section 50075.3. The district refuses to issue historical reports to provide a full accounting of the use of the special tax proceeds as required. The ballot measure specified that the funds would only be used for the district’s hospital related expenses, and not for administration.”
The lawsuit continues, “The failure to segregate and account for special tax proceeds undermines the public’s confidence in the district as a steward of public funds. The district is charged with the solemn responsibility of expending special taxes for the specific purposes identified in the ballot measure. Special taxes may not be utilized for general purposes. The public is entitled to know whether the district abided by its statutory duties. Without reports, it is impossible to confirm that the projects/purposes identified in the ballot measure have been exclusively funded as promised to voters and as the law demands.”
Continuing, the lawsuit propounds, “Accordingly, plaintiff requests that the court issue a writ of mandate that commands the district to issue Government Code Section 50075.3 reports for each fiscal year in which it imposed special taxes pursuant to Measure F. Plaintiff further requests, to the extent the district cannot issue such reports or if the reports reflect that special tax proceeds were not properly expended, a declaratory judgment that states that the district has violated the Local Agency Special Tax and Bond Accountability Act.”
Implied by the lawsuit and perhaps to be demonstrated if it goes to trial is what is suspected in several quarters of Big Bear Valley: that Bear Valley Community Healthcare District outright violated the provision of Measure F pertaining to “no money for administrators.”
Indeed, the manner in which Gibson locked onto the issue of the district’s relationship to the chief executive officer and chief financial officer at the hospital when he stated in his August 15 letter, “Bear Valley [Community Healthcare District] does not have employment contracts with the CEO and COO” indicates that the source of their income is a central issue in the matter.
While the lawsuit introduces a degree of complication into the existence of the district, its board and its administration, its timing and particulars may prove particularly nettlesome.
Measure F’s taxing authorization will sunset next year, in consideration of which the Bear Valley Community Healthcare District’s current board – consisting of Steven Baker, Dr. Peter Boss, Ellen Clarke, Jack Briner and Mark Kalliher – voted to place on the November 5, 2024 ballot an initiative asking the district’s voters to extend the special tax another ten years.
It is the hope of the board and many of those who are strong supporters of the hospital and its operations that issues at play in the lawsuit will remain under relative wraps in the quiet and unheralded confines of the Courtroom of Judge Thomas Garza in Department 27 at the San Bernardino Justice Center. A wide airing of the facts alleged so far by Benink on Kelly’s behalf – in particular that the district in its stewardship of the money entrusted to it ten years ago failed to live up to its commitment to abide by the legal requirements that it keep the money in a sequestered account and that it make an accurate and constant accounting of how the money was spent – not to mention what the suit implies – that a portion of the money was not spent on providing medical care as was promised but was instead spent on administrators with stratospheric salaries – could greatly upset and outright disillusion the voters the measure’s supporters are counting upon to reauthorize the tax. Given that Measure U must get two-thirds approval to pass, it is particularly vulnerable to any arguments that might be made against it. Indeed, that those to whom the Measure U tax money is to be entrusted failed to properly account for such funds currently in their care and are yet engaged in an effort to hide the money and obscure how it is being spent could result in the district’s voters failing to pass the initiative.
The Sentinel this week inquired by email with Gibson, seeking from him whether he yet stood by his assertion in his August 15 letter to Kelly that information pertaining to the Bear Valley Community Healthcare District remuneration of the chief executive officer and chief operating officer at Bear Valley Community Hospital is exempt from disclosure under the California Public Records Act because they are contractual employees with QHR Health doing business as Ovation Healthcare rather than ones directly employed by the hospital.
The Sentinel asked Gibson to weigh in on the underlying issue, that pertaining to why the Bear Valley Healthcare District has not been able to live up to the provision of Measure F and the parallel section of the California Government Code, i.e., Section 50075.3, by providing an accounting of the funds generated by the Measure F parcel tax, in particular, how they have been and are being spent on operations at Bear Valley Community Hospital.
The Sentinel asked Gibson if there is a block wall between QHR/Ovation and the Bear Valley Healthcare District which prevents the Bear Valley Healthcare District from having access to the financial ledger at Bear Valley Community Hospital and knowing or discovering how the taxpayer money generated through the Measure F parcel tax is being spent with regard to the remuneration of the hospital’s chief executive officer and its chief operating officer.
The Sentinel asked if QHR/Ovation was preventing the Bear Valley Healthcare District from having access to Bear Valley Community Hospital’s books.
The Sentinel asked Gibson if he could cut through whatever artificial walls there are between the status of the Bear Valley Healthcare District as a public entity under California law and QHR/Ovation’s status as a private sector entity due privacy considerations to make publicly avail detail on how Measure F money is being spent at Bear Valley Community Hospital, including how much is being paid to those employed there – including the chief executive officer and the chief operating officer.
The Sentinel offered Gibson an opportunity to provide information and documentation to answer and controvert the contentions of some in the community that Measure F money has been squandered.
By press time, Gibson had not responded to the Sentinel’s email.
Kelly told the Sentinel that while the healthcare district’s exact financial circumstance remains shrouded, there is evidence to indicate it is running well in the black, and that the augmentation of the special parcel tax that was approved by voters’ passage of Measure F in 2014 and which voters are being asked to perpetuate with Measure U in November is unnecessary.
“The hospital district is saying that they ‘need’ the extra tax money, whereas they don’t actually need this special tax. They are just saying they need it to sell this tax measure. To me, it’s a matter of corruption, utter lack of transparency and dishonestly selling the tax measure by claiming ‘need’ when they have lots of money. This ‘story of need’ belies the fact that the district made a surplus (profit) just this year of over $6 million.”
Kelly said there is an available “district financial report showing a reserve of about $44 Million.”
He said an untold amount of money being brought in by the special parcel tax is being illegally diverted to administrators with QHR Health doing business as Ovation Healthcare.
“We don’t know exactly how much the out-of- state profit making corporation [i.e., QHR/Ovation] is getting, but I estimate over $500,000 per year just for the CEO and CFO salaries,” he said.