Budget Hearings: How Will City Hall "Account For" $15 Million Discrepancy?

[Brian Essi]

I have now waited a month for a response to my email to Councilman Anderson requesting to meet and discuss moving forward and accounting for a $15 million discrepancy in "accounting for" Lakewood Hospital money and assets. (see emails below in RED)

According to Councilman Anderson in his September, 2016 LO article, City Officials placed a $20 million value on the former hospital site when they claimed "the negotiated deal accounts for all $128 million" on the LHA balance sheet: http://lakewoodobserver.com/read/2016/0 ... ods-future But Mr. Anderson later acknowledged the hospital site was worth $15 million less when he wrote: "$5.13 million – Anticipated proceeds of the future sale of the 5.7 acres of land under the current hospital building for redevelopment."

I wrote Mr. Anderson (and copied all elected officials and the finance director): This $15 million taxpayer loss is in addition to the nearly $30 million of taxpayer money given away for the heretofore unsubstantiated "operating losses" "transition costs" and "wind down costs.”

In the ongoing Budget Hearings, the following document was presented by public officials:

CITY OF LKWD Actual_Projected Revenues 12152015 to 10122016 per Master Agreement (2).pdf

(54.04 KiB) Downloaded 100 times

Note the footnote at the bottom of this document indicates: "the properties that will begin to be reported on the city's financial starting in 2016 which will include the hospital building and land..."

As part of the Budget Hearings, I would hope that public officials can explain what value they will report on the "city financial", i.e. 2016 CAFR.

I would encourage fellow citizens to attend the final Budget Hearing this Monday to see if any explanation will be offered.


From: Brian Essi
To: David Anderson <David.Anderson@lakewoodoh.net>
Cc: Sujata Sulzer ; Sarah Betzel ; Kevin Butler <Kevin.Butler@lakewoodoh.net>; "Petrus, Jeannine" <Jeannine.Petrus@lakewoodoh.net>; "Schuster, Keith" <Keith.Schuster@lakewoodoh.net>; "Pae, Jennifer" <Jennifer.Pae@lakewoodoh.net>; Ryan Nowlin <Ryan.Nowlin@lakewoodoh.net>; Sam O'Leary <Sam.OLeary@lakewoodoh.net>; Tom Bullock <Tom.Bullock@lakewoodoh.net>; Cindy Marx <cindy.marx@lakewoodoh.net>; "O'Malley, Daniel" <Daniel.OMalley@lakewoodoh.net>; John Litten <John.Litten@lakewoodoh.net>; "Summers, Mike" <Mike.Summers@lakewoodoh.net>
Sent: Thursday, November 17, 2016 9:42 AM
Subject: Re: Meeting Re: Accounting for Public Money

Dear Mr. Anderson,

Once again, I had hoped to meet with you face to face by now.

In your email of October 20, 2016 (below) you wrote regarding proceeds resulting from the Master Agreement:

"$5.13 million – Anticipated proceeds of the future sale of the 5.7 acres of land under the current hospital building for redevelopment."

However, in your September 27, 2016 Observer article (still on line) you wrote:

" 20.0 Value of hospital site (land still controlled by the City and will be sold in the future for redevelopment”

Please note that in my experience, extracting the $20 million number from the approximately $38 million book value of hard assets reported on the LHA 9/30/15 financial statements was very unusual and in conflict with any accepted or known financial, economic or accounting principle.

Nevertheless, the difference in your own words and numbers represents nearly $15 million that you and City Hall have failed to account for when selling the public asset, Lakewood Hospital, to the Clinic and benefitting other private interests. This $15 million taxpayer loss is in addition to the nearly $30 million of taxpayer money given away for the heretofore unsubstantiated "operating losses" "transition costs" and "wind down costs.”

As a citizen and taxpayer of Lakewood, I remain very concerned as to the future well being of Lakewood and its citizens as a result of these significant losses.

Now that the political process is mostly over, can we get down to business and meet to discuss these matters and work together for the citizens and taxpayers of Lakewood?

Please let me know if and when you are willing to meet.

Sincerely,

Brian J. Essi
Lakewood Resident
Cell 216-346-3434





From: "Anderson, David" <David.Anderson@lakewoodoh.net>
To: Brian Essi
Cc: Sujata Sulzer ; Sarah Betzel ; "Butler, Kevin" <Kevin.Butler@lakewoodoh.net>; "Petrus, Jeannine" <Jeannine.Petrus@lakewoodoh.net>; "Schuster, Keith" <Keith.Schuster@lakewoodoh.net>; "Pae, Jennifer" <Jennifer.Pae@lakewoodoh.net>; "Nowlin, Ryan" <Ryan.Nowlin@lakewoodoh.net>; "O'Leary, Sam" <Sam.OLeary@lakewoodoh.net>; "Bullock, Tom" <Tom.Bullock@lakewoodoh.net>; "Marx, Cynthia" <cindy.marx@lakewoodoh.net>; "O'Malley, Daniel" <Daniel.OMalley@lakewoodoh.net>; "Litten, John" <John.Litten@lakewoodoh.net>
Sent: Thursday, October 20, 2016 1:28 AM
Subject: Re: Retraction Expected.

Mr. Essi -

I apologize for not being available to meet. As I communicated to you, I was in Chicago until late Sunday, was at Council Monday until late, had a meeting last evening, had life group (church) this evening and have another meeting tomorrow evening along with my wedding anniversary and my third child's birthday. Please refer to the points below regarding the December 21, 2016 Master Agreement. You do not describe the complete story in your interpretation of the master agreement/contract.

Construction of the Family Health Center, real estate matters and financial obligations:

$8.2 million - Clinic purchase of the 850 Columbia Road complex. $6.8 million (net proceeds of $6.64 million) received in 2016 and $1.4 to be received in 2018. (December 2015 Master Agreement Section 5.4)

$1.56 million - Clinic purchase of Medical Office Building and land “for fair market value purchase price determined by a mutually agreed upon appraiser” for the construction of the Cleveland Clinic’s $34 million, 62,100 square foot Family Health Center and Emergency Department. The Cleveland Clinic paid the City of Lakewood the sum of $1.56 million in 2016. (December 2015 Master Agreement Section 5.1)

$7 million – for the demolition and redevelopment of the Lakewood Hospital building and 5.7 acres of land under the building. $500,000 received in 2016 and $6.5 million to be received when the Family Health Center opens which is anticipated to be in 2017. (December 2015 Master Agreement Section 6.2)

This does not include additional lease payment due to the City of Lakewood under the new agreement/contract. (I have my number for this and am triple checking this with others.)

Other important aspects:

$900,000 – Anticipated net proceeds of the sale of City of Lakewood owned but Lakewood Hospital Association residential homes on St. Charles and Belle. This is a conservative estimate and should be considered as a liquidation of a long standing City asset as well as an elimination of a financial liability. (December 2016 Master Agreement Section 5.6)

Curtis Block Building – A former Lakewood Hospital Association property will be sold to the City of Lakewood, along with the residential mentioned above, for $1. It is anticipated that the City of Lakewood will position this building for redevelopment while maintaining its original character. (December 2015 Master Agreement Section 5.6)

$5.13 million – Anticipated proceeds of the future sale of the 5.7 acres of land under the current hospital building for redevelopment. The Cleveland Clinic paid approximately the equivalent of $900,000 per acre for the land under the site for the new Family Health Center. The Hospital building and land under the building remain owned by the City of Lakewood and will be so until the time for the property to be sold to a developer in a market driven transaction.

Elimination of an up to $90 million liability in terms of repairs and upgrades needed to make the former hospital site safe and competitive. Add the elimination of the Medical Office Building from the City's portfolio which took away another monetary liability.

I feel that a fair deal was negotiated for Lakewood and one that reinvests Lakewood Hospital Association assets into the delivery of 21st Century health care and Emergency Room services in Lakewood for decades to come while eliminating serious financial liabilities off of the backs of Lakewood residents.

Yours in service,

David W. Anderson
Council Member, Ward 1

216-789-6463
From: Brian Essi
Sent: Wednesday, October 19, 2016 12:54 AM
To: Anderson, David
Cc: Sujata Sulzer; Sarah Betzel; Butler, Kevin; Petrus, Jeannine; Schuster, Keith; Pae, Jennifer; Nowlin, Ryan; O'Leary, Sam; Bullock, Tom; Marx, Cynthia; O'Malley, Daniel; Litten, John
Subject: Re: Retraction Expected.

Dear Councilman Anderson,
I had hoped to meet with you face to face by now. My article is complete and accurate.
It has been a week since you made false claims about my article: “State Auditor Report Confirms Cleveland Clinic Paid $9.6 Million, A Fraction Of Hospital Value, For Lakewood Hospital”

You have offered no evidence to counter any of the facts in my article that was based on verified documents.

Anderson’s First False Claim: “First off, the City of Lakewood did not sell the hospital.”

The Facts: It’s a fact that the hospital was sold to the Clinic—proof comes directly from the State Auditors’ Report, LHA's audited financial statements, the Master Agreement, and the Ohio Secretary of State’s records. The Clinic bought the hospital’s holding company, LHA, including all goodwill and property used in the operation of the hospital. LHA is now a wholly owned subsidiary of the Clinic and has been since December 22, 2015. The Clinic is operating their ER--it is not ours anymore. The Clinic paid just $9.6M. The only thing they didn’t buy in the sale that was used in operation of the hospital was the “mothballed” gutted building.

Anderson’s Second False Claim: “Secondly, the 2015 CAFR, which is sited [sic] by Mr. Essi as a base for his false headline, only recorded the cash transactions that occurred on or prior to December 31, 2015. Lakewood did not take back the properties (back on the City’s books from when these went off in 1987) until early 2016.”

The Facts: The State Auditor's Report together with documents from the Zupka CPA that worked for the State Auditor were posted last week and verify what I wrote in my article. Those verified accounting documents confirm that Mr. Anderson’s second claim was false. It is a fact that he properties were taken back in 2015 and 2016 and were included in the 2015 CAFR. It is a proven fact from the verified documents that Clinic paid only $9.6M.

David Anderson owes a retraction and an apology to Lakewood voters.

And it should come before November 8th.

Sincerely,

Brian J. Essi
Lakewood Resident





From: "Anderson, David" <David.Anderson@lakewoodoh.net>
To: Brian Essi
Cc: Sujata Sulzer ; Sarah Betzel ; "Butler, Kevin" <Kevin.Butler@lakewoodoh.net>; "Petrus, Jeannine" <Jeannine.Petrus@lakewoodoh.net>; "Schuster, Keith" <Keith.Schuster@lakewoodoh.net>; "Pae, Jennifer" <Jennifer.Pae@lakewoodoh.net>; "Nowlin, Ryan" <Ryan.Nowlin@lakewoodoh.net>; "O'Leary, Sam" <Sam.OLeary@lakewoodoh.net>; "Bullock, Tom" <Tom.Bullock@lakewoodoh.net>; "Marx, Cynthia" <cindy.marx@lakewoodoh.net>; "O'Malley, Daniel" <Daniel.OMalley@lakewoodoh.net>; "Litten, John" <John.Litten@lakewoodoh.net>
Sent: Thursday, October 13, 2016 9:49 AM
Subject: Re: Retraction Required

It was a comprehensive agreement, Mr. Essi. You continue to not provide the complete picture. Your article is blatantly false. Correct it, apologize and let's move on.

Sent from my iPad

On Oct 13, 2016, at 9:44 AM, "bjessi@sbcglobal.net" <bjessi@sbcglobal.net> wrote:

Dear Mr. Anderson,

I'm sorry but everything I have written is true and backed up by documents.

Please note CCF will not pay the $7M demo payments, they come from money that belongs to the city. I did include that in the online version that contains those details--just like the LO did with your story.

Also, the rent is being paid by LHA and it not part of the "sale"-- it is rent for the use of the building we still lease to LHA according to the amended lease references in the Master Agreement and signed by the city. I think the auditors will verify that that building is currently booked at zero?

So my article is factually correct.

Thank you for engaging with me, but let's stick to facts.

Please address the facts.

Brian Essi
Lakewood Resident

Sent from my iPhone

On Oct 13, 2016, at 8:30 AM, Anderson, David <David.Anderson@lakewoodoh.net> wrote:

It is now 8:23 a.m. and, let me check, yes, the City still owns the hospital building and the 5.7 acres of land under it.

Your blatantly false headline reads, "State Auditor Report Confirms Cleveland Clinic paid $9.6 Million, A Fraction of Hospital Value, For Lakewood Hospital."

We did not sell the hospital building or land.

Your version did not include $7M of demolition payments or the increase in lease payments.


Sent from my iPad

On Oct 13, 2016, at 2:33 AM, Brian Essi <bjessi@sbcglobal.net> wrote:

Councilman Anderson,

I'm sorry, but you are mistaken once again and it is you that now owes me an apology and retraction.

Throwing numbers around without supporting documents does not make the numbers facts--let's play fair--all of my numbers are grounded to the LHA or city financial statements or specific provisions of the Master Agreement.

According to the CAFR, which was prepared with the participation of Mayor Summers and his administration including Jenn Pae: The Master Agreement disposed of "The City-owned Lakewood Hospital" (CAFR, page 47) in a “sale of Lakewood Hospital to the Cleveland Clinic” (CAFR, pages 42 and 44). The full CAFR can be found at https://ohioauditor.gov/auditsearch/Rep ... yahoga.pdf Jenn Pae, Mike Summers and the State Auditors have characterized the hospital as having been sold--I am just quoting the CAFR so if it was not sold, your beef is with Summers, et al.

The net proceeds from the sale of 850 Columbia Road complex and proceeds from the sale of the Medical Office Building and the parking garage were both included and reported in the 2015 CAFR as follows:

I.
The 2015 CAFR (and the recently release records below) show the city received $9.6 million from CCF for Lakewood Hospital, which includes:

1.
$ 6,644,731 sale proceeds Columbia Road property (Per CAFR).
2.
$1,400,00 promissory note from CCF for sale of Columbia Road (Per CAFR)
3.
$1,576,000 for sale of Detroit/Belle land sold to CCF (Per CAFR).

Total Received from CCF: $9,620,731.

This $9.6M is documented in a portion the work paper below and is the only amount that CCF is required to pay under the Master Agreement--as is documented in my analysis in the paper and the Master Agreement all other money comes from the City owned hospital, not CCF. Any claim to the contrary is simply misplaced and untrue.
The seven residential properties ($971K) and the community health center ($700K) were also returned and reported in 2015.

Further, the photo below is a working paper from State Auditor's Independent CPA firm and was sent to me by Jenn Pae herself on September 29, 2016 with an email that was prepared by the State Auditor's CPAs. I have forwarded this to you today. This public record shows that all properties (except the Curtis block and empty shell of the building) were booked as "Total Revenues" to the Lakewood Hospital Fund in 2015. The email and notes of the State Auditor's Independent CPA firm reference that the sale proceeds of the FHC site (Belle and Detroit) were sold on February 22, 2016, but were accrued and reported on the 2015 CAFR.

I hope this clarifies matters for you.

I await your retraction and clarification.

Sincerely,

Brian J. Essi

[cmager]

If these people don't love the City of Lakewood, and love doing good for the City of Lakewood, they need to be gone. There are plenty of competent and passionate people who do love Lakewood.

p.s. I love Anderson's seven (7) reasons as excuses for not meeting with you. That he doth protest too much when a simple "Regrets. I've been out of town and have had church and family obligations. Shall we meet tomorrow for coffee?" just belabors his pattern of avoidance. Don't make BS excuses! Why is the man in public service?

[Brian Essi]

Finance Committee Meeting at 6:00 pm tonight.

http://www.onelakewood.com/event/financ ... eeting-18/

Note the agenda item:

"Budget Implementation of the Master Agreement"