Sorry, But Councilman Supernaw's Community Hospital Deal Will Eat Millions That Won't Be Available To Continue Providing Fire Engine 17 Beyond Sept. 2021 AND Could Still Leave LB Without Continuing Eastside Acute Care Hospital AND Could Cause City To Lose Its Community Hospital Property Entirely
|(Oct. 20, 2019, 11:30 a.m.) -- On Oct. 18, Councilman Daryl Supernaw's office emailed its latest weekly newsletter that it titled the "Incredible Week Edition." It told recipients that Fire Engine 17 has reappeared at Fire Station 17 (Argonne Ave.) and the City Council has authorized a long-term lease with an LLC that will reopen Community Hospital.
But one day before sending his Council office's newsletter, Councilman Supernaw and his elected colleagues received a disturbing memo from city management. It pointed out that Engine 17 is only temporarily restored through Sept. 2021 and said continuing to provide Engine 17 beyond mean "substantial reductions" to "non-public-safety departments" (items we presume include parks, libraries and the like) and possible consideration of future reductions in LBFD staffing.
Worse still, city management's memo said this is now a federal matter, because the City is cirrently "between $700,000 to $1.2 million short of the total amount of required City funding" to maintain Engine 17 through a federal FEMA grant which ends in March 2023." That means unless the City maintains firefighter suppression staffing at the levels it promised FEMA through March 2023, the City might have to return the grant funds to FEMA.
And as for continuing to provide Engine 17 for LB taxpayers: "Engine 17 is maintained through the end of FY 23 (Sept..2023) the estimated City funding shortfall will be between $2 million to $2.5 million" and "any shortfall will have to be addressed in future budgets."
...To balance the future budgets, there is a significant chance that maintaining LBFD staffing during that time may result in substantial reductions to the non-public-safety departments...[W]e will keep the City Council informed as to whether reductions in LBFD staffing may be appropriate to consider as part of budget balancing in future years..
How did that happen? Of course it's attributable to other Mayor/Council approved spending...and that now includes the Community Hospital LLC lease.
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It's been known for some time that the deal won't reopen Community Hospital as the 150+ bed acute care hospital that LB residents remember; the Molina/Wu/Network (MWN) LLC's version of Community Hospital will offer significantly fewer beds. It's also been known for months that the deal will require LB taxpayers to spend $1-$2 million per year, up to $25 million (we now know over 15 years) for seismic upgrades at the City owned site.
But LB taxpayers recently learned that the lease will also let the LLC lessee cease providing an eastside acute care hospital on the Community Hospital site whenever the LLC wishes. And the lease then enables the LLC to hand LB taxpayers a bill to reimburse the LLC for the LLC's expenses incurred to that point (the LLC's start-up costs plus the LLC's share of any retrofit costs plus the LLC's cumulative net operating loss.)
And if the City can't pay that cumlated multi-million exposure, the City could lose its historic Community Hospital property entirely as the lease lets the LLC (or some other party) buy the Community Hospital property then CEASE providing an acute care hospital on the site.
That outcome arguably collapses the reasons offered for dragging LB taxpayers into the Community Hospital LLC deal in the first place.
These material matters recently became visible in a city management memo accompanying the Council agenda item at this link. They first surfaced at the end of the Friday Oct. 11 business day. A day earlier, Councilmembers Supernaw, Price and Mungo jointly signed a form enabling the Community Hospital LLC lease to appear on the Tuesday Oct. 15 City Council agenda with only four days public notice instead of the more taxpayer-respectful normal eight days public notice.
In the agendizing memo, city management acknowledged that the overall terms of the Lease likely make it financially beneficial for Tenant to terminate the Lease at some point, regardless of whether or not the Hospital is viable." It said the LLC "expressly makes no representation that it can open or operate an acute care hospital. The State's regulatory agencies may identify issues that are insurmountable during the current or future hospital licensing and/or seismic construction planning process. These issues may be outside the Tenant's control or current understanding of the Subject Property...The true cost of detailed construction plans for the seismic retrofit is not known at this point; therefore, a financial plan to address the seismic retrofit component of the project has not been prepared yet. The $50 million estimate to conduct a seismic retrofit (of which the City would pay half) is a preliminary number based on the conceptual seismic plans prepared by the City's architect and confirmed by the Tenant's consultant. Any unexpected high cost of the retrofit, which is at the Tenant's risk, may cause abandonment of the opening of the Hospital as may any difficulty in the Tenant being able to finance the retrofit costs..
LBREPORT.com believes that if the LLC sought these terms from any responsible banker, it would be laughed out of the banker's office..
So what does this have to do with restoring Engine 17? The $1-$2 million annual Community Hospital seismic-upgrade sums would presumably be sufficient to restore Engine 17 through FY 2023 and likely beyond. Now they won't. The Community Hospital deal just ate them.
After making his motion to authorize the LLC lease, Councilman Supernaw said: "I just wanted to say one thing about the concept of risk that's been talked about, and John Keisler mentioned it in his report. I don't know of any real estate transaction that occurs without an element of risk. What I will say about the risk in this deal, is that whatever it ends up being, it pales in comparison to the risk our residents are at for not having an E.R."
If Councilman Supernaw ultimately faces a ballot opponent(s) that he doesn't currently face in his March 2020 re-election cycle, he may have to explain his reasoning to 4th district voters.
In the same March 2020 election cycle, LB voters citywide will decide whether to let LB City Hall permanently impose the Measure A sales tax that it initially said would be used mainly for street/infrastructure items and police/fire services but now acknowledges it intends to spend in part to pay for seismic upgrades for the Community Hospital site.
Oct. 21, 2:50 p.m.: Links citing Oct. 17, 2019 and Aug. 19, 2019 management memos added.
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