Officials eye deal amid money woes
UAMS earns $648,110 subleasing Washington County’s property
FAYETTEVILLE — The University of Arkansas for Medical Sciences Northwest regional campus earns $648,110 annually by sub- leasing property Washington County owns.
The county has leased property to the university for $1 per year since 2007, county lease records show.
Some elected officials are considering taking back some of that property and getting the rent money for the county. Also, the move could mean lower rent for at least one nonprofit organization subleasing from UAMS.
The county has a $5 million gap between expenditures and revenue, according to records from the Treasurer’s Office. Justices of the peace have discussed budget cuts and tax increases even before starting the 2018 budget process.
Justice of the Peace Tom Lundstrum, a Republican representing northwestern Washington County, has said the county’s financial situation is dire and something must be done. Justice of the Peace Joel Maxwell, a Republican representing western Washington County, has said the Quorum Court should consider selling or otherwise better utilizing some of its properties.
The county owns about 51 parcels countywide, according to a list provided by County Attorney Brian Lester. Among those, nine are near College Avenue and North Street, property records show. UAMS leases five of the parcels, Lester said.
County Judge Joseph Wood said in an email the county is exploring the idea of selling some property or developing it to “help with the projected budget shortfall.” Wood is not interested, however, in taking over property UAMS is using, he said.
County judges control county property under state law.
UAMS occupies the former Washington Regional Medical Center main building. A few buildings surrounding it have remained vacant for years, including one the county remodeled earlier this year for a Veterans Service Office.
UAMS subleases 64,257 square feet of county property to five agencies, said Leslie Taylor, UAMS spokeswoman said in email. WelcomeHealth, a nonprofit organization formerly known as Northwest Arkansas Free Health Center, leases one of the buildings.
The money from the subleases pays for utilities, maintenance, security and insurance for tenants, Taylor said.
UAMS has put $15 million into the properties “for necessary improvements and significant maintenance upgrades to make the property usable for clinical, educational and research space for our Northwest Regional Campus,” according to a statement released by the university.
UAMS and county officials are still talking, Taylor said. This is the first time the county-UAMS agreement has been questioned since it started 10 years ago, according to the UAMS statement.
It’s a new administration raising questions, Taylor said. Wood became county judge in January.
Justice of the Peace Ann Harbison, a Democrat representing southern Washington County, became concerned over the sublease with WelcomeHealth late last year after a doctor called her about it. Harbison said the $102,282 annual rent that WelcomeHealth pays UAMS is too high, Harbison said.
Harbison said she asked Lester to look into the matter. The university said it has held up its end of the bargain, including maintaining buildings.
“The property was leased to us in good faith, and we have managed and utilized the property as agreed,” according to the statement.
TO LEASE OR NOT TO SUBLEASE
Allowing UAMS to sublease property was meant to help the university generate revenue locally, said George Butler, who served as county attorney from 1999 to 2014 and then returned as chief of staff in 2015.
Butler was involved in negotiations to get a UAMS Fayetteville campus after Washington Regional moved to North Hills Boulevard in 2002. The medical center had started as the Washington County Hospital in 1950.
The main building, which sits on about 8 acres, sat empty until County Judge Jerry Hunton signed a lease with UAMS in 2007, Butler said. Hunton left office in 2008. Marilyn Edwards served as county judge from 2009 to 2016. She signed a new lease with UAMS in 2009. The lease ends Feb. 29, 2029, but can be extended another 20 years, according to the lease.
Hunton said he never discussed subleasing with UAMS during the original negotiations, but he wouldn’t have minded. UAMS is good for the community and has the right to run its own business, he said.
Justice of the Peace Sue Madison, a Democrat representing southeastern Fayetteville, said the University of Arkansas System, which includes UAMS, doesn’t “seem desperate” for funding. Taking that property back and using it for new revenue for Washington County seems like a good idea, Madison said.
Lester said the main part of the campus was purchased from the federal government with a restriction the property be used for a hospital or similar activities. But, that restriction shouldn’t apply to all the parcels UAMS leases, he said.
Madison, who served as a justice of the peace in the 1990s, agreed, and said she didn’t know why some of those parcels ended up being part of the “UAMS deal” originally. Plus, the lease may not be valid because Edwards didn’t hold a petition hearing or issue an executive order, both of which are required, Lester said.
Wood said in email he wants a contract “that complies with the requirements of Arkansas law.”
Butler said the county had the right to lease property under state law, and the lease is proper.
CAUGHT IN THE MIDDLE
The subleases came to light after WelcomeHealth officials began asking for a lower rent. UAMS hasn’t responded to the request, said Monika Fischer-Massie, executive director of the nonprofit medical clinic. The clinic rented space from the county on College Avenue near the historic courthouse until 2013.
The nonprofit group changed its name to WelcomeHealth in 2015.
Fischer-Massie said she recently met with Wood who told her the county would lower the rent if it takes back the property. The nonprofit group also may get the option to buy the building, said Brittney Gulley, director of development.
“Whoever our landlord is, we’d like them to consider that we are a community need and a nonprofit,” Gulley said.
Lester said the amount the university charges to WelcomeHealth is an “exorbitant amount of rent.” Taylor said the amount is below market value.
WelcomeHealth pays $11 per square foot, according to figures partially derived from county property records. Commercial medical space in Fayetteville ranges from $15.51 to $17.39 a square foot on average, said Mervin Jebaraj, interim director of the University of Arkansas’ Center for Business and Economic Research.
The rent includes utilities and makes up 12 percent of the free clinic’s $855,000 budget, Fischer-Massie said. WelcomeHealth also has spent $750,000 to renovate the building so it could be used for medical purposes, she said.
WelcomeHealth rented from the county for next to nothing for years, but the group thought that building would be razed for a parking lot, Gulley and Fischer-Massie said. Two previous county judges, including Edwards, had talked about building a parking lot there, Butler said.
Fischer-Massie said the clinic’s plans to move were already in motion by the time county officials nixed the parking lot idea. Even so, no one forced WelcomeHealth to move, Butler said. The nonprofit group chose UAMS, Taylor said.
“They could have chosen to rent at another location,” she said.
The nonprofit group is worried about shrinking revenue with the high rent, but it doesn’t want to move, Gulley said.
“In a sense, [UAMS] kind of got us where they want us,” Gulley said.
“We’re a moneymaker for them,” Fischer-Massie said.
Marr-Lynn Flory (right), family nurse practitioner, speaks with volunteer Rachel Best on June 21 at the nurses station at WelcomeHealth in Fayetteville. WelcomeHealth is paying about 12 percent, or $102,000, of its annual budget to University of Arkansas for Medical Sciences.
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WelcomeHealth as seen June 21 in Fayetteville. The nonprofit group also put about $700,000 of its own money into the old building to provide better community, medical service to lowincome “working poor” people.