The City of Gadsden is dipping into its “rainy day fund” to help settle two legal matters: one involving a refund of sales taxes to a local hospital and the other a lawsuit by firefighters over the calculation of overtime pay.
The City Council on Tuesday authorized the transfer of $862,500 from the undesignated general fund balance into the legal claims account.
That money, plus $416,000 already budgeted, will be used to pay $1,016,000 to Riverview Regional Medical Center for a refund of sales taxes paid on durable medical equipment, plus interest; and $262,500 to settle the firefighters' suit.
Council members also approved both actual settlements.
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The items were passed as new business following unanimous consent to suspend the rules (and discussion during a lengthy executive session in the pre-council meeting).
The city in 2023 had to pay $1,507,356.08 to Gadsden Regional Medical Center on a similar sales tax claim.
Etowah County also had to issue refunds: $411,332.34 to GRMC and $176,536.32 to Riverview.
The claims were filed because of a quirk in a 2014 state law that exempts durable medical equipment and items like catheters and supplies, ostomy bags and supplies, oxygen and related supplies, prosthetic and orthotic devices and specialized wound care products from state, county and municipal sales, use and rental and leasing taxes, if they are covered by and billed to a health insurer or Medicaid or Medicare.
Medical providers must seek an exemption certificate to take advantage of the tax break. However, the law as originally written gave them a three-year window to do so, plus consulting and legal firms citing ambiguity and confusion about billing, coverage and documentation requirements have helped providers bring claims against Alabama municipalities and counties in these situations.
The quirk in the law was closed in this year's legislative session, as a bill sponsored by Rep. Mack Butler, R-Gadsden, was passed that will require providers to obtain exemption certificates before purchasing the items.
That's not retroactive, however, meaning past claims had to be addressed, and Gadsden officials are incensed that Riverview and its parent company, Prime Healthcare Services, insisted on receiving interest on the city's bill while waiving it on Etowah County's.
“Forcing the city to tap our rainy-day fund makes it more difficult to build next year's budget,” Mayor Craig Ford said in a statement. “While the CEOs of private corporations like Prime Healthcare and Riverview Regional Medical Center rake in record profits, everyday people like our employees struggle to keep up with the skyrocketing costs of basic needs like health care and medicine.
“I appreciate Gadsden Regional Medical Center's leadership for working cooperatively with the city in processing their claim last year,” Ford said. “Gadsden Regional's corporate citizenship cushioned the blow so we could still provide much-deserved raises for our first responders and city employees."
The firefighters' lawsuit, filed in U.S. District Court in May 2022, alleged that personnel above the rank of basic firefighter had scheduled overtime pay calculated at time-and-a-half of the basic firefighter pay rate, rather the pay rates of the rank they actually held, in violation of the Fair Labor Standards Act.
The settlement agreement was reached last week following mediation, according to the ordinance submitted by the city's legal department. It is subject to federal court approval.
"It is good to put another outstanding lawsuit to bed,” Ford said in his statement. “This situation began before we took office, so I am happy we were able to reach an agreement.”
Council President Kent Back descibed the situation as “an oversight, an honest mistake by the payroll department” and noted that the attitude from the beginning has been, “If we owe the money, we certainly need to pay. If someone works and is underpaid, by all means we need to make that right.”
Ford in his statement said, “As long as I am mayor, the City of Gadsden will always do what's right for anyone willing to put their life on the line for the people of Gadsden. In the fire department, we just celebrated reaching full staffing for the first time in more than a decade, and now have a waitlist for recruits. I think that is the proof in the pudding that things have changed since we took office 20 months ago."
This article originally appeared on The Gadsden Times: City of Gadsden settles sales tax claim by Riverview, OT lawsuit by firefighters
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