San Fernando : City Moves to Protect Its Stake in Hospital

The San Fernando City Council voted in closed session this week to hire a bankruptcy attorney to protect the city’s interest in Mission Community Hospital.

The hospital, which has facilities in San Fernando and Panorama City, filed for protection under federal bankruptcy laws last week.

The city issued $2.6 million in bonds on behalf of the hospital in 1976 and in exchange received a “reversionary right” to the property after the bonds are paid. Some City Council members have said they are concerned about the impact the bankruptcy filing will have on the hospital owners’ ability to pay back the bonds.

After meeting in a closed session with their city attorney, the council voted 4 to 0 Monday to hire a bankruptcy attorney to examine the city’s position relative to the bonds and the city’s reversionary right. Councilman Ray Ojeda was not present.

“A motion was made to authorize the city attorney to engage special bankruptcy counsel for a fee not to exceed $3,500,” Deputy City Clerk Wilma Miller said.

City Atty. Michael Estrada said Wednesday that because the hospital filed for protection under Chapter 11 bankruptcy laws, which allow the hospital to reorganize its debt, he believes the hospital owners intend to continue making bond payments. Estrada will work with the bankruptcy counsel to advise the city on what steps are necessary to protect its interest.

A spokesman for the hospital said service at the 159-bed facility would not be affected and that no layoffs are planned. The spokesman attributed the hospital’s financial status in part to delays in receiving payments from state and federal health-care programs.

The hospital’s assets are about $22 million, with liabilities of about $26 million.

Mission Community Hospital was created by joining San Fernando and Panorama community hospitals in 1992. Since then, the San Fernando facility has been used largely as a psychiatric treatment center.