City Of Lakewood's Deal(?) With Clinic, GOOD FOR LAKEWOOD?
Posted: Fri Jan 23, 2015 9:34 am
Chart at bottom of the page, please read till there.
As we go into this discussion, and it will cover many, many things, we should remember one more time. Even with the best forecasts the value placed on Lakewood Hospital over the course of the rest of the contract (13 years) is about $150 million dollars. This was put out as best case scenario for financial benefits to the City of Lakewood.
What The Cleveland Clinic has offered are expenditures of about $120 million dollars on a new facility plus Other Payments. Keep that in mind. The poorly written contract we have now dates back to 1996 and would allow the Clinic to pay about $13 million and call it even. The Cleveland Clinic has made a fair offer in my opinion.
In 1995 The Cleveland Clinic approached the City of Lakewood wanting to build a $60 million dollar state-of-the-art hospital on the tract of land from the Railroad track south to Franklin on Belle and St. Charles. At the time, the effort was made to save Lakewood Hospital which is controlled by the community and a deal was struck with the Clinic taking over Lakewood Hospital.
At that time everyone knew of the Clinic's Avon development possibilities.
Some say that contract marked the end of Lakewood Hospital. What it did was partner Lakewood with the Clinic, a leader in health care for 30 years. However, the contract did not spell out tightly what was expected.
At that time the Cleveland Clinic signed a contract in good faith with the Lakewood Hospital Board Association fully aware of their plans, and fully ready to fulfill the contract, or sue to get out of it. There is no law suit by either side. This would be a mutual contract negotiation.
So let's look at "The Great Future Of Health In Lakewood" and let's cut through the glare and spin as painted by the City of Lakewood’s $20,000 one-time fee crisis management team, and look at the actual words in bold of the contracts with a short explanation after each one.
Right now the deal is $120 Million, the 4 parties in the contract are: 1) City of Lakewood, owner of the property, and owner of the Hospital., 2)The Lakewood Hospital Board, which overseas “The Hospital” which rents the land from the City of Lakewood, and Sub-leases it to 3) The Cleveland Clinic, which has a 30 year contract to run The Hospital, and 4)The Lakewood Hospital Foundation-- which provides financial support to the Lakewood Hospital Board Association, raising money for a number of things, including but not limited to making sure the Cleveland Clinic does not lose money on the deal*. They also provide funding for capital improvements to the property and fundraising for hospital and civic programs dealing with health. *
Part of the agreement with the Cleveland Clinic is that they are guaranteed against losing money running the hospital through the Hospital Board, backed up by the City of Lakewood, and the Lakewood Hospital Foundation.
Now that we have a brief overview of the players,
Let's look at the numbers:
The Clinic's capital commitment would be approximately $34 million for the
design, construction and equipping the FHC $32,000,000.
Purchase of 2.5 Acre real estate parcel $2,000,000
This is the new emergency center to be built on the corner of Marlow and Detroit, in the space the city has not allowed to be rented or developed since 2008, holding it for a building to be built by the Clinic.
Together it equals $34,000,000. However the $2 million for land, is merely the city of Lakewood liquidating assets worth at least $2 million dollars. So it adds nothing to the bottom line, it merely makes money available to spend on something. This is the only money the City of Lakewood is getting.
The $32,000,000 is money the Cleveland Clinic is spending on a state-of-the-art emergency center. This is a Cleveland Clinic building on Cleveland Clinic Land. While having the facility is nice, and it is development in Lakewood, it certainly should not count as anything to offset the $150,000,000 loss to the city.
PAYMENTS - These are payments to a private foundation, NOT the City of Lakewood. The Foundation is currently The Lakewood Hospital Foundation, but the mayor has said, it will be renamed and repurposed after the deal goes through. This is the "the New Non-Proftit Tax-exempt Entity" referred to in the contract below. It could range from health, to economic development, or anything.
Private Foundations like the Cleveland Foundation do not answer to residents or city halls. They can pay their staff as they see fit, and spend money how they see fit, as long as it goes towards the running of the foundation, or in a related field to what it was set up to address. Example: a Health Foundation could legally fund a baseball field or running track as they are healthy. A Health Foundation could fund a building for health-related technology.
The Clinic will make a payment(s) to a non-profit tax-exempt entity in the amount of $24.4 million $24,400,000
The Clinic will make sixteen (16) payments to the New Non-Proftit Tax-exempt Entity that total, in the aggregate, $8 million. $8,000,000
and for 15 additional years on the anniversary of the effective date of the 2015 Definitive Agreement $7,500,000
Once again, the City of Lakewood is losing a potential $150 million over the next 13 years. The Clinic is paying an additional $39,900,000. While these are generous payments, they are not to the City of Lakewood and can hardly count against the city’s loss.
Sale 850 Columbia Road, in cas shall be paid by the Clinic to LHA in consideration of the property known as 850 Columbia Road = $8,200,000
Again, if this is liquidating assets that belong to the city, the money should go to the City of Lakewood. If owned by Lakewood Hospital Foundation the money should go to them.
However, they should not be counted in this deal against the $150 million the City of Lakewood would have gained over the final 13 years of the contract had the hospital kept operating.
This TOTALS = $82,100,000
WHICH IS NOT A BAD PLACE TO BE AT THIS POINT, BUT THE CITY ONLY HAS $2,000,000 and that came from liquidating assets worth $2 million dollars.
So if you are keeping track, in an effort to make up a $150 million loss to the City of Lakewood, they have recovered $0,000,000.00
Also in the deal…
Value of wind-down cost to be borne by the Clinic = unknown
The Clinic will not charge us to move, and will cover all claims up till them moving.
Value of payroll tax agreement with City of Avon = unknown
While this could be some money, it is not negotiated yet, and could be nothing.
Other Value of future FHC employee income taxes = unknown
While this could be some money, it is not negotiated yet, and could be nothing.
I read somewhere mention of Lakewood City Employees are retaining their Tier 1 level insurance through the Clinic. This is also has value, but I am not sure how much.
TOTAL = unknown
Another thing that has come to light since this process started: The level of secrecy and misinformation around it.
First no one had to ever lie, they simply could have said, we cannot disclose. However they did disclose all over the place, just not to everyone, just friends. Over a year and a half ago, a member of the
Lakewood Hospital Foundation said, “The hospital is closing, this could open some good opportunities.”
Two and a half years ago, City Council put a blanket Executive Session over the entire Hospital Board. Executive Session is when a committee breaks away from public discussion and goes into private discussion. Most of the time talking about contracts or personnel.
There are two trains of thought on this. One shared by Law Director Kevin Butler is that all they were talking about was contractual issues, they should have a blanket exemption. Depending on the type of organization, and their connection to the public and City Hall it could be true. However most government lawyers I have spoken with say that is illegal, and could be a sunshine law violation. This is why they are called "legal opinions," and why we have lawyers.
As the time line on this can be constructed in bits and pieces from 1996, to 2008, 2010, and 2015 it underlines that many people knew what was going on. In 2012/2013 the discussions went underground and the outcome was pretty well known. I have been told the contract as leaked to me back in November had been around since early September.
To me at this point there are three major questions.
1) Is this a good deal for the City of Lakewood?
2) Why is the Foundation getting the money?
3) How long have they been planning this behind our backs? To sell off valuable city assets for a pocket of magic beans, while friends of the mayor wander off with our golden calf?
Stay tuned.
.
As we go into this discussion, and it will cover many, many things, we should remember one more time. Even with the best forecasts the value placed on Lakewood Hospital over the course of the rest of the contract (13 years) is about $150 million dollars. This was put out as best case scenario for financial benefits to the City of Lakewood.
What The Cleveland Clinic has offered are expenditures of about $120 million dollars on a new facility plus Other Payments. Keep that in mind. The poorly written contract we have now dates back to 1996 and would allow the Clinic to pay about $13 million and call it even. The Cleveland Clinic has made a fair offer in my opinion.
In 1995 The Cleveland Clinic approached the City of Lakewood wanting to build a $60 million dollar state-of-the-art hospital on the tract of land from the Railroad track south to Franklin on Belle and St. Charles. At the time, the effort was made to save Lakewood Hospital which is controlled by the community and a deal was struck with the Clinic taking over Lakewood Hospital.
At that time everyone knew of the Clinic's Avon development possibilities.
Some say that contract marked the end of Lakewood Hospital. What it did was partner Lakewood with the Clinic, a leader in health care for 30 years. However, the contract did not spell out tightly what was expected.
At that time the Cleveland Clinic signed a contract in good faith with the Lakewood Hospital Board Association fully aware of their plans, and fully ready to fulfill the contract, or sue to get out of it. There is no law suit by either side. This would be a mutual contract negotiation.
So let's look at "The Great Future Of Health In Lakewood" and let's cut through the glare and spin as painted by the City of Lakewood’s $20,000 one-time fee crisis management team, and look at the actual words in bold of the contracts with a short explanation after each one.
Right now the deal is $120 Million, the 4 parties in the contract are: 1) City of Lakewood, owner of the property, and owner of the Hospital., 2)The Lakewood Hospital Board, which overseas “The Hospital” which rents the land from the City of Lakewood, and Sub-leases it to 3) The Cleveland Clinic, which has a 30 year contract to run The Hospital, and 4)The Lakewood Hospital Foundation-- which provides financial support to the Lakewood Hospital Board Association, raising money for a number of things, including but not limited to making sure the Cleveland Clinic does not lose money on the deal*. They also provide funding for capital improvements to the property and fundraising for hospital and civic programs dealing with health. *
Part of the agreement with the Cleveland Clinic is that they are guaranteed against losing money running the hospital through the Hospital Board, backed up by the City of Lakewood, and the Lakewood Hospital Foundation.
Now that we have a brief overview of the players,
Let's look at the numbers:
The Clinic's capital commitment would be approximately $34 million for the
design, construction and equipping the FHC $32,000,000.
Purchase of 2.5 Acre real estate parcel $2,000,000
This is the new emergency center to be built on the corner of Marlow and Detroit, in the space the city has not allowed to be rented or developed since 2008, holding it for a building to be built by the Clinic.
Together it equals $34,000,000. However the $2 million for land, is merely the city of Lakewood liquidating assets worth at least $2 million dollars. So it adds nothing to the bottom line, it merely makes money available to spend on something. This is the only money the City of Lakewood is getting.
The $32,000,000 is money the Cleveland Clinic is spending on a state-of-the-art emergency center. This is a Cleveland Clinic building on Cleveland Clinic Land. While having the facility is nice, and it is development in Lakewood, it certainly should not count as anything to offset the $150,000,000 loss to the city.
PAYMENTS - These are payments to a private foundation, NOT the City of Lakewood. The Foundation is currently The Lakewood Hospital Foundation, but the mayor has said, it will be renamed and repurposed after the deal goes through. This is the "the New Non-Proftit Tax-exempt Entity" referred to in the contract below. It could range from health, to economic development, or anything.
Private Foundations like the Cleveland Foundation do not answer to residents or city halls. They can pay their staff as they see fit, and spend money how they see fit, as long as it goes towards the running of the foundation, or in a related field to what it was set up to address. Example: a Health Foundation could legally fund a baseball field or running track as they are healthy. A Health Foundation could fund a building for health-related technology.
The Clinic will make a payment(s) to a non-profit tax-exempt entity in the amount of $24.4 million $24,400,000
The Clinic will make sixteen (16) payments to the New Non-Proftit Tax-exempt Entity that total, in the aggregate, $8 million. $8,000,000
and for 15 additional years on the anniversary of the effective date of the 2015 Definitive Agreement $7,500,000
Once again, the City of Lakewood is losing a potential $150 million over the next 13 years. The Clinic is paying an additional $39,900,000. While these are generous payments, they are not to the City of Lakewood and can hardly count against the city’s loss.
Sale 850 Columbia Road, in cas shall be paid by the Clinic to LHA in consideration of the property known as 850 Columbia Road = $8,200,000
Again, if this is liquidating assets that belong to the city, the money should go to the City of Lakewood. If owned by Lakewood Hospital Foundation the money should go to them.
However, they should not be counted in this deal against the $150 million the City of Lakewood would have gained over the final 13 years of the contract had the hospital kept operating.
This TOTALS = $82,100,000
WHICH IS NOT A BAD PLACE TO BE AT THIS POINT, BUT THE CITY ONLY HAS $2,000,000 and that came from liquidating assets worth $2 million dollars.
So if you are keeping track, in an effort to make up a $150 million loss to the City of Lakewood, they have recovered $0,000,000.00
Also in the deal…
Value of wind-down cost to be borne by the Clinic = unknown
The Clinic will not charge us to move, and will cover all claims up till them moving.
Value of payroll tax agreement with City of Avon = unknown
While this could be some money, it is not negotiated yet, and could be nothing.
Other Value of future FHC employee income taxes = unknown
While this could be some money, it is not negotiated yet, and could be nothing.
I read somewhere mention of Lakewood City Employees are retaining their Tier 1 level insurance through the Clinic. This is also has value, but I am not sure how much.
TOTAL = unknown
Another thing that has come to light since this process started: The level of secrecy and misinformation around it.
First no one had to ever lie, they simply could have said, we cannot disclose. However they did disclose all over the place, just not to everyone, just friends. Over a year and a half ago, a member of the
Lakewood Hospital Foundation said, “The hospital is closing, this could open some good opportunities.”
Two and a half years ago, City Council put a blanket Executive Session over the entire Hospital Board. Executive Session is when a committee breaks away from public discussion and goes into private discussion. Most of the time talking about contracts or personnel.
There are two trains of thought on this. One shared by Law Director Kevin Butler is that all they were talking about was contractual issues, they should have a blanket exemption. Depending on the type of organization, and their connection to the public and City Hall it could be true. However most government lawyers I have spoken with say that is illegal, and could be a sunshine law violation. This is why they are called "legal opinions," and why we have lawyers.
As the time line on this can be constructed in bits and pieces from 1996, to 2008, 2010, and 2015 it underlines that many people knew what was going on. In 2012/2013 the discussions went underground and the outcome was pretty well known. I have been told the contract as leaked to me back in November had been around since early September.
To me at this point there are three major questions.
1) Is this a good deal for the City of Lakewood?
2) Why is the Foundation getting the money?
3) How long have they been planning this behind our backs? To sell off valuable city assets for a pocket of magic beans, while friends of the mayor wander off with our golden calf?
Stay tuned.
.