Health clinic, hospital finances center stage in boundary debate

For the third time in four years, the community of Ninilchik is the center of a debate about who in the Kenai Peninsula Borough should pay taxes to which of its two hospitals.

The Kenai Peninsula Borough Assembly is set to consider an ordinance at its May 1 meeting that would move the common boundary between the Central Kenai Peninsula Hospital Service Area and South Kenai Peninsula Hospital Service Area to the south, moving some of the residents of Ninilchik and the surrounding area into the northern service area, pending voter approval. In its present form, the line would move south to approximately the landfill transfer station near Ninilchik.

The main contention is over property taxes. Residents of Central Peninsula Hospital’s service area pay a nominal mill rate — .01 mills, or $1 per every $100,000 in property value. South Peninsula Hospital service area residents pay 2.3 mills, or $230 on every $100,000 in property value. If the assembly approves the ordinance, voters in the Central Kenai Peninsula Hospital Service Area and those in the area that would become part of it would vote on it in the October election. Residents in the area proposed two switch into CPH’s service area would not see their property taxes descend all the way to .01 mills immediately — they are still obligated for the bonds at South Peninsula Hospital for some years — but they would be reduced.

Opponents’ main concern is for the future of South Peninsula Hospital. Proponents call it an issue of fairness, as many of the people who live on the north side of Ninilchik use Central Peninsula Hospital but pay taxes to South Peninsula Hospital’s service area.

At a public hearing on the ordinance Thursday in Ninilchik, opinions fell all over the board, from support to opposition to mixed feelings.

“Really, the issue is about taxation without representation,” said Ninilchik resident Kathy Wallace.

One of the arguments against moving the line is the future of the Ninilchik Community Clinic. The clinic, owned and operated by the Ninilchik Traditional Council, partners with South Peninsula Hospital to provide prenatal and baby exams and imaging, among other services. If the service area boundary is moved, the hospital is legally prohibited from continuing the partnership because the clinic would be outside the service area boundaries.

Shelly Self, a Ninilchik resident who said she also works at the Ninilchik Community Clinic, said she opposed the move both personally and through her work because of the impact on the clinic.

“The amount of people that come through our community that get service has increased and will increase in the future,” she said.

Assembly member Dale Bagley, who sponsored the ordinance, said at the meeting he sees the move as a fairness issue because many people currently in South Peninsula Hospital’s service area have said they use Central Peninsula Hospital. A number of Ninilchik residents at the Thursday meeting and at previous hearings in 2016 and 2015, in support of the boundary move, have said they prefer to use Central Peninsula Hospital. Clam Gulch resident and former assembly member Brent Johnson said at the meeting that the discussion over the line’s location has been going on for decades, with the controversy largely over the same issue, so South Peninsula Hospital’s administration has known it could happen.

He noted that Seldovia and the south side of Kachemak Bay, which use South Peninsula Hospital, are not included in the service area either.

“It seems especially unfair that I should be paying taxes to a hospital that I don’t attend while folks who do attend that hospital don’t pay taxes there,” Johnson said. “… If you’re short of money, please try to get money from those folks.”

Derotha Ferraro, the director of public relations and marketing for South Peninsula Hospital, said at the meeting the hospital’s reliance on the mill rate is not due to poor management but rather because of the hospital’s large number of patients paying with Medicare or Medicaid. The two public insurers reimburse providers at a rate of about 60–65 cents on the dollar, or may not pay for some services.

About 60 percent of South Peninsula Hospital’s patient base uses Medicare or Medicaid, in part due to the aging population in the area, she said. Central Peninsula Hospital has more commercial payers and a larger population base for its services, she said.

“For the assembly to work on and advocate a move that would threaten an anchor to an economy or threaten an anchor to health care just seems to me a step backwards,” Ferraro said.

Both the South Peninsula Hospital Board of Directors and the South Kenai Peninsula Hospital Service Area Board submitted resolutions asking for postponement to give them time to discuss the proposal. Assembly members Kelly Cooper and Willy Dunne have submitted an amendment for the May 1 meeting to postpone the ordinance. Homer resident Roberta Highland, who sits on the service area board but said she spoke for herself at the meeting, said the boards had not had enough time to discuss the proposal or gather input from the public.

“I would love for us to come up with an idea that satisfies everyone, if that’s possible,” she said.

The discussion brought up a debate hovering in the background of the borough’s service area structure about whether taxes should be treated as user fees. Several members of the public said they would support the assembly looking at uniting the two service areas to avoid the disagreements altogether.

Cooper, who coordinated the public hearing with Bagley, said another point to consider is that many people in the area may not be paying property taxes anyway because of the number of exemptions in the Kenai Peninsula Borough, such as the senior property tax exemption, which provides senior citizens up to $300,000 in exemption on their residences in addition to the borough-wide $50,000 property tax exemption for all homeowners. The borough also has a hardship clause in which senior citizens are exempt from property taxes greater than 2 percent of their gross total income, Cooper said.

The assembly will also take public testimony on the ordinance Tuesday, both in Soldotna and at the borough annex in Homer.

Reach Elizabeth Earl at

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