Council approves escrow to clear tax liens so hospital sale can close

Helena City Council voted to place $144,264.08 in a separate escrow on a delinquent tax notice tied to Phillips Hospital Corporation and approved proceeding with the planned property sale while other indebtedness is resolved.

City Attorney and staff told the council that title work done as part of the buyer’s due diligence revealed three outstanding claims that could cloud the warranty deed. The council was told one is a state certificate of indebtedness for wage withholding in the amount of $58,909.56; another is a delinquent county tax notice totaling $144,002.64 that the administration disputes as a municipal liability; and a separate $150,000 obligation to Phillips County for past jail fees. The administration said it has agreed to set aside $600,000 previously for hidden repairs and said the buyer reduced the purchase price during negotiations (from $3,000,000 down to $2,400,000, and later discussion referenced $2,100,000), which also affects closing calculations.

“The city is tax exempt,” the City Attorney said during the discussion, arguing the county assessment against Phillips Hospital Corporation should not bind the city. The attorney recommended placing the county’s delinquent tax amount into escrow so the sale can close while the city continues to dispute the claim with county and state officials. The attorney also noted a state “certificate of indebtedness” filed 07/22/2024 for wage withholding and said the city had been in touch with state and local parties to resolve or reduce that amount.

Council members pressed for clarity on whether escrowing funds would effectively forfeit the $144,264.08 if the county or buyer does not remit it back. “If the $144,000 is the deal breaker, then make it be the deal breaker and break the deal,” one council member said, expressing concern that escrowed funds might never be returned. The City Attorney replied that funds placed into escrow are not an admission of liability and would be released or otherwise applied only after the parties complete the dispute-resolution steps specified by the closing agent and applicable law.

The motion presented to the council said, in part, that the $144,264.08 relating to the Phillips Hospital Corporation delinquent tax notice would be put in a separate escrow account and that the other certificates of indebtedness would be taken from the closing proceeds as appropriate. The council approved the motion by roll call (6–0). The council directed staff and the city attorney to continue negotiating with Phillips County, the state, and the buyer and to return with documentation and updates as needed.

The administration said the escrow step is intended to remove the cloud on title so the city can complete a warranty deed transfer and avoid delaying or voiding the sale because of outstanding liens discovered during title search. The council was also reminded that the city previously agreed to put $600,000 in escrow to address possible hidden repairs the buyer identified, and that those funds would be handled separately.

The decision lets the planned closing proceed immediately while preserving the city’s ability to contest the tax claims. The council and staff said they will continue to pursue refunds or adjustments if the county or state agrees the charges were misapplied to the city or to the hospital seller.