Is The City Misleading Us About The Carnegie Deal?

[Bill Call]

Mark Kindt has an excellent analysis of the deal here:

http://www.lakewoodobserver.com/forum/v ... =7&t=24720

I thought I would add my opinions on the spread sheet prepared by the City in a separate post.

Here it is:

The spread sheet released by the City to analyze the cash flows of the Master Agreement contains some fundamental flaws. If the spreadsheet is an attempt to analyze the entire Master Agreement it is incomplete. If the spreadsheet is an attempt to analyze the proposed development of the Hospital site it is misleading.

It is more an attempt to confuse the people of Lakewood and Council about the economic benefits of the Hospital deal than an accurate description of what is lost and what is gained.

1. The spread sheet includes the $8,044,731 proceeds from sale of the Columbia Road property in its analysis of the disposition of the Hospital property. If you wanted to determine the profit you made on the sale of a house in Lakewood would it be accurate to include the proceeds of the house you sold in Florida?
2. The City’s analysis of the Columbia Road property also fails to report that the City received about $5 million less than the assessed value of the property and received NOTHING for the business and other assets at the Columbia Road property.
3. The spread sheet includes $7,500,000 for the demolition costs as revenue. That money will be coming from existing City assets and is not a gift, donation or special gain. It is important to remember that all of the assets of the LHA were City assets.
4. The spread sheet does not take into account the fact the City will donate $6,000,000 in real estate to Carnegie Development. That cost should be included in the analysis.
5. The spread sheet total revenue is computed by the City as $23,481,126 for the period 2015 through 2018. The actual revenue should be estimated at $2,436,395 for the period 2015 through 2018.

At least the City attempted to analyze the economic impact of the Carnegie deal. The City has claimed that it did not perform any analysis of the ENITRE Master agreement, no analysis of the Metro proposal and no analysis of the economic impact of the Hospital closure.

On December 31, 2014 Lakewood Hospital had $117,312,000 in Cash and investments on its balance sheet.

The City should provide a spread sheet showing the disposition of those cash and investments. City Council should demand a detailed analysis of the disposition of those assets.

In other posts I wrote about the excess administrative fees the Cleveland Clinic charged Lakewood Hospital. The LHA Board came right out and said they didn’t care about those fees. Does Lakewood City Council?

In 2015 revenue for the Cleveland Clinic was $6,428,938,000 and administrative service costs were $167,587,000 or 2.6% of revenue.

In 2015 revenue for Lakewood Hospital was $100,214,000. In 2015 The Clinic charged Lakewood $24,456,000 for administrative services or 24.4% of revenue. I’m I the only one that thinks that odd?

Not that long ago Lakewood Hospital was profitable and had $140 million in revenue. What affect did excessive administrative fees have on the profitability of Lakewood Hospital? What affect will administrative fees have on the residual cash available to the City?

Does anyone on Council know what the Clinic is charging Lakewood to “administer” the Lakewood emergency room?

Is there one person on Council who is willing to ask the Ohio Attorney General to audit this deal?

What is the City afraid of? If everything is above board wouldn’t Mayor Summers DEMAND a State audit?

It is too late to save the Hospital. It is not too late to save City assets. There is no reason to rush through thru the Carnegie deal. The City will have the funds to demolish the Hospital without the Carnegie deal.

City Council should oppose this deal, demand a State Audit of the LHA and the Master Agreement, prepare the land for development and then demand that the City seek a better deal.

If we learned one thing from the Hospital debacle it’s that Mayor Summers and his team choose the result they want and then massage the numbers. Why not start with real numbers and then seek the best result?

[Mark Kindt]

Thank you Mr. Call for your time and effort on this. I could not have said it better myself.

The reported financial benefits of the hospital deal are an illusion and depend upon the pretense (naked falsehood really) that the city did not own the hospital.

This is an abuse of public fund accounting that deserves a full investigation and audit.

[Stan Austin]

Bill-- I am a simple person. My math skills were compromised in 8th grade with the "New Math" which Mr. Borzy tried to drill into us. I therefor defer to your accounting and analytical skills. I present this question: Is Lakewood better off financially by letting the carcass of the Hospital and the land it stands on laying fallow instead of offering millions of dollars to another entity so they can make money without investing or risking any of their own?
Stan Austin

[Jim O'Bryan]

Bill-- I am a simple person. My math skills were compromised in 8th grade with the "New Math" which Mr. Borzy tried to drill into us. I therefor defer to your accounting and analytical skills. I present this question: Is Lakewood better off financially by letting the carcass of the Hospital and the land it stands on laying fallow instead of offering millions of dollars to another entity so they can make money without investing or risking any of their own?
Stan Austin

Stan

If I may jump in for a moment.

Had Lakewood locked the doors on the hospital and walked away we would be over one hundred million dollars ahead.

And yes it would be better to let it sit, then to rush into another bad deal by the same bad actors that had to misrepresent every aspect of this nightmare.

Another gran idea would be to make sure none of the players in this whole nightmare of lies and deceit had any input on what is done with it. Start fresh.

The single worst idea at every aspect of this was the one City Hall took, and continues to take.

We now find out after 3 years of lies, and their 10 years of planning that we gave up our hospital for, an ice cream store, a coffee shop, and maybe a pet store. With offices that on best case scenario break even after 15 years of 100% occupancy.

This is a total nightmare.

.

[Bill Call]

I present this question: Is Lakewood better off financially by letting the carcass of the Hospital and the land it stands on laying fallow instead of offering millions of dollars to another entity so they can make money without investing or risking any of their own?
Stan Austin

If the City simply took control of the Cash the City would have about $55 million in cash. Deduct demo cost of $8 million for the Hospital and City owned property West of Belle and you have cash of about $47 million. The City would own all the land on Belle and Detroit which is probably worth $7 million. Add $10 million (minimum ) for the Columbia Road property and you get a total of about $64 million.

Of course that still leaves the equipment and odds and ends.

One odd end is the City's beneficial interest in the Lakewood Hospital Foundation. The entire $33.5 million was transferred to a new, regional foundation that is totally independent of the City and its people. The negotiations that led to the loss of the Foundation is still a secret. The value of the Foundation was $33.5 million.

Those values are the values if the City just shut down the hospital.

But there were other options that would have preserved the Hospital, the Foundation, the cash flow, the assets, the jobs, the economic activity and more. What's the value of that?

I have attached an early Metro Proposal that Mayor Summers refused to respond to. If you look at it keep in mind that Metro named a negotiating team and offered a lease, purchase or any other option as possibilities. What is the value of that lost opportunity?

metrohealth-proposal-to-lha-2013-14-2.pdf

(2.89 MiB) Downloaded 161 times

One of the items I have harped on is the $24 million in administrative fees charged by the Clinic. Around 2011 or so those fees were about $15 million on $143 million in revenue. That's about 10% of revenue. Around the time the plan was hatched to "decant" the Hospital those fees were raised to $24 million without explanation.

[Mark Kindt]

Here is the Metro Health System slide-deck that describes the $100,000,000 ten-year investment in Lakewood Hospital.

Who in their right mind would walk away from this?

The decision of the LHA Step-Two Committee (Summers, Haber, Gable, Gorton, Tabbaa) not to even start negotiations with Metro was an epic fail.

Their own consultant was telling them that the Clinic had nothing much to offer (Quoth Subsidium: "no material advantage to the community").

[Nadhal Eadeh]

Mark Kindt has an excellent analysis of the deal here:

Is there one person on Council who is willing to ask the Ohio Attorney General to audit this deal?

What is the City afraid of? If everything is above board wouldn’t Mayor Summers DEMAND a State audit?

It is too late to save the Hospital. It is not too late to save City assets. There is no reason to rush through thru the Carnegie deal. The City will have the funds to demolish the Hospital without the Carnegie deal.

City Council should oppose this deal, demand a State Audit of the LHA and the Master Agreement, prepare the land for development and then demand that the City seek a better deal.

Ditto. From increases in healthcare spending to hospitals being built around northeast Ohio, Lakewood got a horrid deal. Consensus is growing that members of council should have called for an audit of the Summers hospital deal months ago.

Who on city council has the political courage to call for an Attorney Generals audit?

[m buckley]

Mark Kindt has an excellent analysis of the deal here:

Is there one person on Council who is willing to ask the Ohio Attorney General to audit this deal?

What is the City afraid of? If everything is above board wouldn’t Mayor Summers DEMAND a State audit?

It is too late to save the Hospital. It is not too late to save City assets. There is no reason to rush through thru the Carnegie deal. The City will have the funds to demolish the Hospital without the Carnegie deal.

City Council should oppose this deal, demand a State Audit of the LHA and the Master Agreement, prepare the land for development and then demand that the City seek a better deal.

Ditto. From increases in healthcare spending to hospitals being built around northeast Ohio, Lakewood got a horrid deal. Consensus is growing that members of council should have called for an audit of the Summers hospital deal months ago.

Who on city council has the political courage to call for an Attorney Generals audit?

Hey Dan O'Malley,
Care to weigh in on this?

[Mark Kindt]

Mark Kindt has an excellent analysis of the deal here:

http://www.lakewoodobserver.com/forum/v ... =7&t=24720

I thought I would add my opinions on the spread sheet prepared by the City in a separate post.

Here it is:

The spread sheet released by the City to analyze the cash flows of the Master Agreement contains some fundamental flaws. If the spreadsheet is an attempt to analyze the entire Master Agreement it is incomplete. If the spreadsheet is an attempt to analyze the proposed development of the Hospital site it is misleading.

It is more an attempt to confuse the people of Lakewood and Council about the economic benefits of the Hospital deal than an accurate description of what is lost and what is gained.

1. The spread sheet includes the $8,044,731 proceeds from sale of the Columbia Road property in its analysis of the disposition of the Hospital property. If you wanted to determine the profit you made on the sale of a house in Lakewood would it be accurate to include the proceeds of the house you sold in Florida?
2. The City’s analysis of the Columbia Road property also fails to report that the City received about $5 million less than the assessed value of the property and received NOTHING for the business and other assets at the Columbia Road property.
3. The spread sheet includes $7,500,000 for the demolition costs as revenue. That money will be coming from existing City assets and is not a gift, donation or special gain. It is important to remember that all of the assets of the LHA were City assets.
4. The spread sheet does not take into account the fact the City will donate $6,000,000 in real estate to Carnegie Development. That cost should be included in the analysis.
5. The spread sheet total revenue is computed by the City as $23,481,126 for the period 2015 through 2018. The actual revenue should be estimated at $2,436,395 for the period 2015 through 2018.

At least the City attempted to analyze the economic impact of the Carnegie deal. The City has claimed that it did not perform any analysis of the ENITRE Master agreement, no analysis of the Metro proposal and no analysis of the economic impact of the Hospital closure.

On December 31, 2014 Lakewood Hospital had $117,312,000 in Cash and investments on its balance sheet.

The City should provide a spread sheet showing the disposition of those cash and investments. City Council should demand a detailed analysis of the disposition of those assets.

In other posts I wrote about the excess administrative fees the Cleveland Clinic charged Lakewood Hospital. The LHA Board came right out and said they didn’t care about those fees. Does Lakewood City Council?

In 2015 revenue for the Cleveland Clinic was $6,428,938,000 and administrative service costs were $167,587,000 or 2.6% of revenue.

In 2015 revenue for Lakewood Hospital was $100,214,000. In 2015 The Clinic charged Lakewood $24,456,000 for administrative services or 24.4% of revenue. I’m I the only one that thinks that odd?

Not that long ago Lakewood Hospital was profitable and had $140 million in revenue. What affect did excessive administrative fees have on the profitability of Lakewood Hospital? What affect will administrative fees have on the residual cash available to the City?

Does anyone on Council know what the Clinic is charging Lakewood to “administer” the Lakewood emergency room?

Is there one person on Council who is willing to ask the Ohio Attorney General to audit this deal?

What is the City afraid of? If everything is above board wouldn’t Mayor Summers DEMAND a State audit?

It is too late to save the Hospital. It is not too late to save City assets. There is no reason to rush through thru the Carnegie deal. The City will have the funds to demolish the Hospital without the Carnegie deal.

City Council should oppose this deal, demand a State Audit of the LHA and the Master Agreement, prepare the land for development and then demand that the City seek a better deal.

If we learned one thing from the Hospital debacle it’s that Mayor Summers and his team choose the result they want and then massage the numbers. Why not start with real numbers and then seek the best result?

There is a City of Lakewood spreadsheet floating around reporting that the City has received $23,481,126 in revenues from the Master Agreement as of April 2018.

Subsidium (the consultant that the Mayor used) in its own estimates reports the net present value of the existing lease at $9,372,580 (as of 2015) and estimates employee income tax revenues at $936,000 per year.

The LHA lease had another decade to run (2016-2016). $o, $936,000 time 10 equals $9,360,000.

So that means that under the Master Agreement, the City gave up about $18,732,580 in revenues coming from its ownership and LHA's operation of the Hospital.

These are NOT my numbers. They are from the Subsidium slide-decks presented to LHA.

If we adjust the City spreadsheet to reflect these loses we can see that the City has "made" $4,748,546 under the Master Agreement as of April 2018.

Once the City gives the hospital property away (another $5M or $6M), we can see that the Master Agreement had no value to the City of Lakewood or its taxpayers.

This continues to support the argument that the entire transaction was always a pass-through to private third parties and NOT to the financial benefit of the City of Lakewood.

Now let's subtract the funds for site demolition, site remediation and site preparation ($1M to $7M) and it all just becomes more red ink.

So using the City's own numbers and even its false assumption that it did not really own the hospital, we can see that the transaction to liquidate and close Lakewood Hospital always benefited other private parties.

There is also some other phony-baloney accounting underway. So as long as LHA is in place, but entirely controlled by the Clinic under the Master Agreement, the asset values of Lakewood Hospital never return to the City's books. Even the closed hospital building isn't being carried on the city's book (see One Lakewood Place FAQ).

There is an immense loss that has occurred but one that never hits anyone's accounting as a loss. THIS IS WHY THE AUDITOR OF STATE NEEDS TO EXAMINE THE ENTIRE TRANSACTION IN DETAIL.