Is The City’s Community Bulletin, Issue No. 5 Misleading?
Citizens of Lakewood have received Community Bulletins in their water bill that contain information about the new Master Agreement between the City and the Cleveland Clinic. Is that information accurate?
Let’s examine the statements made in Issue No. 5.
The following is the relevant content of Issue No. 5 followed by my comments.
CITY OF LAKEWOOD…will receive
- $19.7 million in cash, including $7 million in rehab demo fund, $8.2 million for sale of Columbia Rd facility, $2.88 million in lease payments through June 2018 and $1.7 million in land sale to Cleveland Clinic.
The Clinic has agreed to pay $7 million in rehab/demo funds, however, the Clinic will only pay if the CITY EXPENDS 100% OF ALL OF THE HOSPITALS $84 MILLION IN CASH AND INVESTMENTS. (SOURCE?) Since the City anticipates having money left over to fund a new Foundation then the City must also anticipate that the Clinic WILL NOT pay the $7 million.
The City will receive $8.2 million for the Columbia Road property over a number of years. However, the property was appraised at nearly $15 million and the City had an offer from another interested party for a lot more than $8.2 million. The Columbia Road facility was also home to a business that once generated substantial profits for the Hospital. Why did the City give the Clinic such a sweet deal?
The City will receive $2.88 million in lease payments. However, the Master Agreement states that the lease payments are considered WIND DOWN COSTS and that all wind down costs will be paid by the LHA. Since ALL of LHA assets are City assets the City will pay itself the $2.88 million in lease payments.
- Between $40 million and $80 million in potential development at the former Hospital site.
Well, I am a little suspicious of an estimate of $40 to $80 million. That’s a big range.
The City has been planning the Hospitals closure for 5 years and they still have no plans for the Hospital site. The City has agreed to preserve the Curtis Building and to give the Clinic the use of the current ER parking lot. The land that is left will be shoe horned between the Hospital façade to the North and the parking lot to the South. How much development will actually take place in the little space that is left?
- Full ownership of the Community Health Center on Belle, nine rental homes, the Curtis Block and ownership of the Hospital site.
The City already owns all of those things. This is worth repeating. The LHA was just the tenant.
The 1996 Lease and Definitive Agreement were quite clear:
ALL OF THE ASSETS OF ANY KIND INCLUDING CASH, INVESTMENTS, BUILDINGS, IMPROVEMENTS, EQUIPMENT, LICENSES AND EVERTHING ELSE WERE TO BE RETURNED TO THE CITY AT THE END OF THE LEASE TERM.
The original agreement also required the LHA and Clinic to return the Hospital in substantially the same condition as an ongoing concern. Did they do that? No.
LAKEWOOD HOSPITAL ASSOCIATION
- Is contributing $24.2 million toward the community wellness foundation… and $7 million toward rehab and demolition and $8.2 million for the sale of Columbia Road.
The LHA is contributing nothing. All of the assets of the Hospital belong to the City. LHA is just the tenant.
- Will invest $36 million of its own money for the development of the land and building at the southwest corner of Belle and Detroit for a 3 story 62,000 square foot medical office building will a full service emergency department.
That is true. However, the new building will be about 33% smaller than the current office building at that site. One floor will house the Clinic's Family Residency program, the second floor will house the LGBT Clinic and the first floor will house the emergency department, lab, pharmacy and medical offices.
The City will have to pay for the demolition of the current parking garage and the City will have to pay $2.5 million to build a new parking facility for the Clinic.
- The Clinic is contributing $8 million to the new community wellness foundation, assuming $7 million in transition costs and paying $2.88 million in lease payments.
The Clinic owes at least $10 million in lease payments.
The Clinic will not pay $7 million in transition costs unless 100% of the Hospital's assets are depleted.
Since the lease payments are considered wind down costs the $2.88 million will be paid for by the City and NOT by the Clinic.
What they are NOT telling you:
From the Master Agreement Section 3.3 (d):
"All of LHA’s property of every nature and description, and any and all personal property, equipment and fixtures at the Hospital, shall be transferred to the Clinic.” WITHOUT COMPENSATION TO THE CITY.
The agreement includes a restrictive covenant on the current Hospital Site that states that no Care System Provider will be permitted to operate or manage health care on that site. We already know that the Mayor and the Clinic worked to exclude other health care providers from the process. Now we know that they also want to prohibit other health providers from operating in the City. The Mayor has said that he "only wants to deal with the Clinic" and that he "wants the Clinic to succeed,"!aka make money.
The only way to insure that the Clinic "makes money" is to keep out the competition.
According to the Master agreement the Hospital had profit of nearly $6 million in 2014.
One of the items not included in the transfer of assets is the City’s beneficial interest in the Lakewood Hospital Foundation. The assets had a value of $33.5 million at the end of 2014.
The Lakewood Hospital Foundation has been repurposed to support healthcare and development throughout Northeast Ohio. Why is an important City asset being converted to a new regional institution?
At 12/31/2014 the Hospital had cash and long term investments of $84 million. That does not include the value of real estate, equipment, fixtures and licenses valued at $42 million and the City’s beneficial interest in the Lakewood Hospital Foundation valued at $33.5 million.
That accounting does not include the value of 1,500 high paying medical jobs in a region where the only growth industry is the medical industry.
What does the City really receive for the Hospital and its assets? What did the City really lose?
Bill Call, Lakewood resident, CPA, Treasurer of Save Lakewood Hospital