Three council members, Don Willis, an HRMC employee, Danny Hamilton, whose wife is an employee, and Kay Ross, each voted no to the annexation attempt. The vote came after a comment by attorney Jimmy Webb, who said there may be "ethical concerns" because of Willis' and Hamilton's affiliation with the hospital.
Willis, who was turned down when he asked that the council postpone the second reading of the ordinance until representatives from the hospital made their comments, said the city is "singling out" the hospital to obtain more taxes.
"It's not fair to single out the hospital," Willis said after the meeting. "We're talking about 400-some employees and, if I'm not mistaken, I believe 34 of those employees live in Prestonsburg."
Kathy Rubado, director of public relations at the hospital who gave a presentation at the meeting, confirmed yesterday that 34 hospital employees live within city limits.
During the meeting, Willis suggested that the council take a vote of residents living in Branham Village.
"If the residents don't want to pay for it, why should the hospital pay it?" he said before unsuccessfully requesting a motion to table the matter.
Ross and Hamilton both refused to comment on their vote after the meeting.
Prior to the vote, Rubado, accompanied by CEO Bud Warman and Jack Blackwell, chief financial officer, argued against the annexation. Her main topics of concern centered around water, gas, sewage and police services provided to the hospital.
Rubado said the hospital was built outside of city limits in order to provide services to both Floyd and Johnson counties. Rebutting Mayor Fannin's claims that the hospital is receiving city services without paying for them, Rubado argued that the hospital only receives sewer services from the city and that annexation would require "around the clock" police protection which would increase city costs.
"We believe the medical center is being singled out to increase the city's tax base," Rubado said, "and it's illegal." (Webb later challenged that statement, saying it was not illegal for the city to do so.)
Rubado described the hospital as a "good corporation" that has donated $165,000 over the past three years to city organizations.
"There are some people seated in this room that have come to me for support and we never turned you down," she said. "There are some people in this room that called and asked us to help with their medical bills, and we never turned them down."
She pointed out that the hospital, a nonprofit organization, could not be taxed and that the employees would bear the brunt on their pay stubs.
Fannin argued that the hospital could "offset" the payroll tax with savings the hospital receives from city supplied water services after the annexation takes place.
Rubado and Warman both argued that the hospital, which purchases gas and water services from Auxier, doesn't understand how those savings will take place.
Fannin referred to two letters, one written by the hospital in 1970 requesting water service from the city during construction. He said that the city provides water to Auxier Water Company and owns the line and the meter for water supplied to the hospital. Auxier Water Company employees, he said, read the meter and charge the hospital "three times" what the city charges them for it.
He also blamed the hospital for sewage smell problems in the residential vicinity, saying that "residents in that area have to put up with that." He said the city is planning a $1.2 million improvement to the sewage line on Route 321 "to service the hospital."
"We can't grow and give our kids and senior citizens things if we don't grow out," Fannin said, later pointing out his opinion that "everybody should pay their own part" instead of requiring city residents to bear the brunt in taxes for people who live outside the city limits. People outside city limits who receive city services, he said, should "pay their part, too."
Rubado, who presented a petition with 500 signatures, vowed to fight the annexation.
"Our position remains firm," she said yesterday. "We will challenge this legally. We don't feel that the city council is fully informed of the facts and it's unfortunate because it will lead to a long, expensive legal challenge. Annexation is not good for the city or the hospital."
The hospital is currently preparing an "immediate" legal challenge, she said.
The city must hold two readings of another ordinance before the annexation becomes official.