Adair County Hospital District files Chapter 9 bankruptcy

In a move perhaps unprecedented in Kentucky, the Adair County Hospital District has voted to file for protection under Chapter 9 of the federal bankruptcy code, the same chapter used by bankrupt cities such as Detroit.

The district has a $20 million debt, creditors demanding payment, and no clear way to pay them. “The Chapter 9 filing will
allow the hospital district
to reorganize by extending
the timeline to repay debt,
refinance debt, or reduce
debt by different means. It
does not liquidate the taxing
district nor does it close
down operations” of Westlake Regional Hospital in Columbia, reports Sharon Burton of the Adair County Community Voice.

David Cantor, an attorney
with Seiller Waterman
LLC in Louisville, told Burton the filing is
“incredibly rare” and perhaps the first in the state. “We cannot find any
published cases of a Chapter
9 in the Commonwealth
of Kentucky,” he said.

Farmers National
Bank of Danville has sued in state court, seeking to force the  district board
to levy a local property tax
to pay its debt. “The federal court will,
however, now likely decide
the local taxation issue,” Burton reports. “The hospital board voted to
establish a tax but it is
stalled until at least the
2014 general election after
a group of citizens successfully
filed a recall petition.”

Only part of the Community Voice story is online, but a 7 MB PDF of its three pages with hospital news can be downloaded here.