El Centro council approves term sheet to transfer hospital property and license to Imperial Valley Healthcare District

The El Centro City Council on March 4 approved a term sheet outlining the proposed transfer of El Centro Regional Medical Center's real property and operating license to the Imperial Valley Healthcare District (IVHD), advancing a negotiated sale that includes a one-time city payment and follow-up conditions.

The term sheet approved by the council calls for the city to make a $5,000,000 cash payment to IVHD at closing, to pay $1,500,000 in closing costs and for ECRMC to enter a $15,000,000 three-year line of credit prior to closing that will remain in place after the transfer. The agreement would transfer all hospital assets and liabilities to IVHD and requires IVHD to maintain at least $5,000,000 in cash on hand at closing.

Why it matters: IVHD was created by state legislation (AB 918) to combine the county's two acute-care hospitals to improve Medicare reimbursement and reduce duplicate administrative costs. City leaders and health-district officials said the consolidation is intended to stabilize local acute-care services and preserve access for Imperial Valley residents.

Interim Finance Director Elizabeth Putem introduced the cityfinance presentation; contract financial consultant Andy Heath presented a five-year general-fund forecast and reserve analysis. Heath said it is "anticipated that the city will have a surplus in the general fund of just over a million dollars" in the midyear fiscal 2024-25 forecast but warned that a one-time payment of $5,000,000 to $6,500,000 (including closing costs) would reduce the cityreserve balance by roughly 16 percent under the scenarios he presented.

The city's interim manager summarized the term sheet and emphasized that "the real estate and license are being acquired for a dollar is actually not the case," noting the term sheet requires the city payment and closing costs. The manager said definitive agreements would be drafted by counsel and that a closing and license transfer through the state could take months.

IVHD representatives and outside counsel pressed the council to approve the term sheet. Joshua Snyderman, a mergers-and-acquisitions attorney for IVHD's outside counsel, said an independent appraisal prepared for the parties showed ECRMC's enterprise was deeply underwater and that consolidation offered the hospitals their best chance of long-term survival. Adriana Ochoa, IVHD's legal counsel, told the council the district's negotiating team had made repeated concessions and asked the council to approve the term sheet so IVHD could reconsider the offer at its board meeting.

IVHD CEO Chris Bjornberg said the district was not seeking to "put one over on the city" but that "we need the city to help us with that so that we can make this work for the entire community for everyone in Imperial County." Katie Bernsworth, chair of the IVHD board, described the district's process and said no individual board member can finalize a deal alone.

Hospital staff and community members urged the council to approve the terms to protect jobs and local access to care. Virginia Torres, an ECRMC employee of 19 years, asked, "What happens to a thousand employees who depend on their jobs at ECRMC? Does it close?" Dr. Andrew LaFrige, chief of staff and an emergency physician at ECRMC, described lost services over the past decade and said the district approach offered "a real chance to rebuild and restore the services that our community needs." Several speakers noted seismic compliance deadlines: city and IVHD presenters said ECRMC has largely completed seismic work and that Pioneers (the other county hospital) faces larger seismic retrofit costs.

The term sheet includes additional conditions: at closing IVHD must have at least $5,000,000 cash on hand; certain specified payables may not exceed a limit set in the term sheet; IVHD will offer employment to terminated ECRMC staff at pre-closing compensation levels; IVHD will use commercially reasonable efforts to operate ECRMC as a general acute-care hospital for 10 years post-closing; and the parties will cooperate on a countywide tax measure that must be on the ballot by November 2026 to support the district's funding plan. The term sheet also contemplates transfer or restructuring of existing bond obligations (Preston Hollow bond) as a prerequisite to closing.

Council action and next steps: After public comment and discussion, a motion to approve the term sheet was made and seconded. The council voted to approve the term sheet (motion passed, three in favor, one abstention). Council members and staff said approval now directs attorneys to prepare definitive transaction documents; IVHD's board must still consider and accept the terms and state licensing and closing processes must be completed before any transfer occurs. IVHD representatives said the district may reconvene its board this week to reconsider the offer if the city approves it.

Budget and risk: City finance staff and the consultant said the city can accommodate the one-time payment without immediate insolvency but that using reserves carries trade-offs: the payment would reduce reserves set aside for emergencies, PERS and other long-term obligations and the city remains responsible for monitoring the funding path. The city will not be obligating itself to liabilities beyond the amounts described in the term sheet, city staff said.

What remains unresolved: the definitive purchase and transfer agreements have not been signed; IVHD's ultimate choice to accept the term sheet and how the countywide funding measure will perform at the ballot remain unresolved; and the long-term financial and operational outcomes depend on the final definitive agreements and the tax measure that IVHD plans to place before voters by November 2026.

The council recorded its vote and adjourned the special meeting.

Sources: El Centro City Council special meeting presentations, finance forecast presented by Andy Heath, public comments and statements from IVHD counsel and board members, and the term sheet summarized during the council discussion.