EDINBURG — Financial troubles keep mounting for South Texas’ largest ambulance service provider amid a pandemic that continues to threaten its solvency.

Hidalgo County EMS’ biggest concern right now is finding a bank that is willing to lend it money under a federal program that was designed to help struggling companies keep their employees on staff amid the spread of COVID-19. The issue is, none of the local banks want to do it.

The private company — which, despite its name, is not managed by the county government — filed for Chapter 11 bankruptcy last year and has been operating at a deficit for two months to the tune of more than $220,000 in the red, according to financial reports filed in federal court.

To make matters worse, calls for service recently declined by almost 50% because residents were either adhering to stay-at-home orders or too afraid to go to emergency rooms for fear of contracting the novel coronavirus.

Calls began to drop six to eight weeks ago, but its effects are now just beginning to show, said Omar Romero, the company’s chief restructuring officer.

“We actually started to see it last week, and then this week a little bit more,” Romero said Wednesday. “I was looking at a report the other day that said we went, in one city, from 800 calls a month down to 400.”

And without the $2.6 million loan it requested through the federal government’s Paycheck Protection Program (PPP), the 9-1-1 services it provides to approximately 1.2 million people in South Texas could be affected.

FINANCIAL WOES

Romero believes the company’s troubles are a result of its rapid growth.

“They grew very rapidly, and he did it without going to a bank and getting a credit line and going out and blowing a whole bunch of money,” Romero said about Kenneth Ponce, owner of Hidalgo County EMS. “He just took the risk himself personally and said, ‘Hey, let’s get this thing started.’”

Ponce established the company in 2007 with two ambulances. Today, it’s considered the largest ambulance company in South Texas, operating about 100 ambulances, a communication bus used for disasters, a trailer equipped for mass casualties and employs over 250 highly trained staff members.

Last year, before it filed for bankruptcy, the company also began doing business as South Texas AirMed, which operates two leased fixed-wing air ambulances and a helicopter — all dedicated to emergency transfers. Currently, it’s the only ambulance provider to offer those services south of Laredo, San Antonio and Corpus Christi.

Romero, however, said the company’s investment in its emergency air transport isn’t the root of its financial troubles.

“It really wasn’t the aircraft that had anything to do with the situation. Obviously if it was the aircraft, that would have been one of the first things that, given my position, I would have addressed and cut if those were a financial burden,” he said. “If anything, they do produce revenue. Obviously the reimbursement for flight is significant. So, I mean, those are (a) revenue-producing portion of the company.”

Instead, Romero said, challenges arose from the company’s dealings with the Internal Revenue Service.

“As time went on, (Ponce) unfortunately ended up with IRS issues from payroll taxes that just mounted and mounted on him, which is fairly common in America,” he said. “The easiest way to shore cash up in a business is to not pay the IRS. In fact, I think the IRS’s filing in court says that we owe $2.5 million to the IRS. Only $900,000 of that is tax, the other $1.4 to $1.5 million is penalties and interest.”

COURT BATTLE

In an effort to continue to provide the same level of service, Hidalgo County EMS applied for a PPP loan from its current lender, PlainsCapital Bank, April 3, the first day financial institutions reportedly began to accept loan applications for the federal relief program.

Under federal guidelines, a qualifying company can borrow up to two-and-a-half times its monthly payroll, and the loan could be fully forgiven if the money is used for payroll purposes.

PlainsCapital Bank, however, rejected Hidalgo County EMS’s loan, citing the company’s bankruptcy status. So Hidalgo County EMS appealed to the federal court last month, alleging discriminatory practices by the U.S. Small Business Administration, which manages the program. A federal judge agreed with the ambulance provider, ruling it could apply for a PPP loan.

It’s been more than two weeks since that ruling, and still, Hidalgo County EMS has yet to secure a lender.

Romero said the company has since appealed to every local bank, and none of them have said yes.

“You’d think a local bank — especially in this situation — would sit there and say, ‘Hey, you know what, these are first responders. These are the guys that are going to show up to my house’ … But no,” Romero said. “Honestly, not a single one does.”

His frustration betrays his voice as he lists off at least seven financial institutions that have declined to give the company a loan, including Lone Star National Bank, which Romero said has been helpful, but a conflict of interest exists between both parties.

“My grandfather is one of the original founders of the bank and a vice chairman of the board. So if the bank puts it through, it would look like some form of preference,” Romero said.

National banks pose other challenges.

“A lot of the big national banks have already gotten so inundated with the number of loans that they’ve got that they don’t have room in their portfolio,” Romero said.

He believes a loan to the company would be a safer bet for financial institutions.

“When you lend money in bankruptcy, you get special protection by the court — your debt is a priority,” he said. “And I just don’t see the argument that local banks are making, saying that they’re not protected.”

FUTURE

When asked how long the company can continue to operate at its current capacity without a loan, Romero paused.

“Honestly, that’s a very difficult question to answer,” he said. “I mean, the only thing I can say is that in the event that we don’t get the (loan), the next step would be to meet with our municipal partners and make arrangements to make sure that 9-1-1 services aren’t affected.”

In the Rio Grande Valley, those partners include Edinburg, Pharr, municipalities in the Delta area, as well as a large part of Hidalgo County Precinct 3.

In Edinburg, the company is on a month-to-month contract as both parties come to an understanding, city manager Ron Garza said.

“All I can say is that those (negotiations) are ongoing. We’ve not yet finalized those, and we will be taking those back to the council when done,” Garza said. “But they are meeting all their licensing requirements and they are not out of compliance, so really there’s not much for me to share.”

Romero said there are a lot of misconceptions about the money ambulance service providers make. The average ambulance ride in South Texas will recoup about $300, he said.

“There’s really not a lot left after you (pay) everything,” Romero said. “We only survive and make money off of insurance claims or what people pay out of pocket for service. And let’s face it, we’re one of the most impoverished areas and uninsured areas of Texas, if not the country. So most people can’t pay.”

On top of that, cities here don’t subsidize those emergency services.

“A lot of people don’t realize we have zero-dollar contracts down here in South Texas,” Romero said. “Now up north, in Jim Hogg (and) Jim Wells, those counties have budgets that they put aside for ambulance service. But South Texas, Edinburg doesn’t pay anything; Hidalgo County doesn’t pay.”

And it wasn’t always that way.

“Hidalgo County used to pay about half a million dollars in subsidy for EMS, from what I understand,” Romero said, though it’s unclear how long ago that was.

“It’s just a very difficult position to be in, you know, especially in a situation like we’re going through nationwide — to be first responders and then also to be begging for help.”

And if the same conditions continue, the company may be forced to make tough decisions.

“It’s always going to be viable,” he said about the company, “just, to what level of service can we be out there? You know, instead of having two trucks in one station, we may have to go to one truck (per) station.”

That, in turn, will mean longer wait times for those in need, Romero said.

“The long and short of it is, if we don’t do our jobs, people will die,” he said. “And I just still, to this moment, don’t understand how our local banks are OK with it.”