Measuring The Damage

[Mark Kindt]

The Losses Can Be Quantified

The losses associated with the liquidation, closure, and now demolition of Lakewood Hospital can be quantified based on public-source documents.

The city administration and the local civic leadership implemented the closure of our largest employer for staggering job losses and refused to negotiate with an esteemed local public health care system that would have saved 900 jobs.

In December of 2015, the city administration and city council made the radical decision to force the closure of Lakewood Hospital and relocate more than 1,600 jobs out of Lakewood.

Here's what the Job and Wage Loss looks like:

Job and Wage Loss.jpg (164.31 KiB) Viewed 8572 times

[Mark Kindt]

Hospital Gone For $1.00

We can use public information and our calculators to answer the question of whether the City of Lakewood made anything at all on the liquidation, closure, and demolition of Lakewood Hospital.

First, we will review the hospital building and land that the City owns and has agreed to sell to a developer for $1.00.

Because Lakewood Hospital is an "off-book" asset, it doesn't exist in any of the published City of Lakewood Comprehensive Annual Financial Reports.

However, I am using publicly-available documents to show that the range of loss to the City of Lakewood on these "off-book" assets is significant and undeniable.

I am going to walk us step-by-step, spreadsheet-by-spreadsheet, so that you can dispute my calculations and my conclusions. You will be astounded.

Losing Lakewood Hospital 1.jpg (140.89 KiB) Viewed 8564 times

[Jim O'Bryan]

Mark

Pretty wild.

All through the run up to the skimming of the hospital, all we heard from Mayor Summers and Supporters was how great this would be for Lakewood! Hundreds of millions of dollars in investment, that would spur a new birth. When anyone dare to ask them, "but what about..." belittled, trolled, attacked, followed even attempts at shutting down people and businesses. ALL to run the lie down the resident's throats.

Today, the upside has completely disappeared, and now City Hall stumbles and bumbles through various mediocre ideas, instead of just stopping and doing at least one part of this correctly, honestly and transparently. Once again we sit here watching well meaning elected officials met and get ensnared by the Tar-Baby known as "One=Lakewood." A name in itself born out of greed and infamy, and should be put on the shelf, like WE, and the Stars and Bars.

Thank you for keeping track of just how bad, morally and business wise this regime at City Hall is.

.

[Mark Kindt]

Mark

Pretty wild.

All through the run up to the skimming of the hospital, all we heard from Mayor Summers and Supporters was how great this would be for Lakewood! Hundreds of millions of dollars in investment, that would spur a new birth. When anyone dare to ask them, "but what about..." belittled, trolled, attacked, followed even attempts at shutting down people and businesses. ALL to run the lie down the resident's throats.

Today, the upside has completely disappeared, and now City Hall stumbles and bumbles through various mediocre ideas, instead of just stopping and doing at least one part of this correctly, honestly and transparently. Once again we sit here watching well meaning elected officials met and get ensnared by the Tar-Baby known as "One=Lakewood." A name in itself born out of greed and infamy, and should be put on the shelf, like WE, and the Stars and Bars.

Thank you for keeping track of just how bad, morally and business wise this regime at City Hall is.

.

Believe you me, there is considerably more to post on this sad topic.

[Mark Kindt]

The Emperor Has No Clothes

Let me be quite clear about this.

The City of Lakewood took a complete bath on the liquidation, closure, and pending $1.00 sale of its invaluable, heritage, publicly-owned hospital.

This is fully reflected in the city's own documents and accounting.

I am going to demonstrate that the City of Lakewood essentially got zero, zip, zilch, nada, nothing for its viable award-wining hospital.

The actual financial return to the City of Lakewood for the liquidation, closure, and sale of Lakewood Hospital is a brutally negative figure.

It's an unmitigated financial disaster. Especially, in light of the context of all of this.

The city administration and civic leadership have liquidated, closed, and are now demolishing the City's largest "off-book" asset -- Lakewood Hospital with more than 1,600 well-compensated employees.

At the same time, they fully understand that the City has an "off-book" liability as high as $275,000,000 -- An unfunded federal mandate for sewer/storm-water infrastructure upgrades.

[Mark Kindt]

Lost Jobs, Lost Wages, Lost Assets, and Lost Revenues

This table illustrates how much the City of Lakewood lost in terms of future lease payments and future employee income tax revenue.

I have credited the City with the value of their estimated future tax revenues from the new Family Health Center.

Losing Lakewood Hospital - Lost Revenues.jpg (130.37 KiB) Viewed 8295 times

[Mark Kindt]

The City Took A Complete Bath

The City didn't just lose jobs and wages, the range of losses for its assets and revenues is major.

Range of Loss: $21,220,467 to $36,020,467

Keep in mind, that these losses do not include any of the lost business-value of the hospital as a going-concern or the financial and economic benefit that it spun-off locally.

[Mark Kindt]

The Demolition Payment

The single largest payment to the City of Lakewood for the closure of Lakewood Hospital are the payments for remediation, demolition and site preparation -- they total $7,000,000.

The only significant new value for the City directly related to the Hospital is the demolition payment.

(In fact, the other payments were smaller and predominately related to non-Hospital assets. I will address these non-hospital issues in a coming post.)

The City intends to convey the former hospital site to its developer for a purchase price of $1.00. The developer directly benefits from this multi-million dollar remediation, demolition and site preparation.

In the attached spreadsheet, I have assumed a range of costs that are reasonable and are less than some public statements made by public employees managing this project.

I have skewed my assumption in favor of the City.

[Mark Kindt]

The City Took A Complete Bath II

Lakewood is probably unique in Ohio history as the only city to choose to demolish an award-winning community hospital when it had a major proposal to maintain continuity in hospital operations from a highly-qualified health care system.

Our city fathers accepted demolition payments totaling $7,000,000 to do so. Those funds will be spent, at no cost to the developer, to benefit the developer by demolition, remediation and preparation of the Lakewood Hospital site.

If the City carefully manages the use of those funds, it might have a net "gain" on these costs.

However, never forget that this "gain" is illusory, since it comes from the liquidation and demolition of major public assets in return for relatively nominal amounts.

Crediting the City with this potential "gain" does not take the liquidation of the hospital out of the red. The range of loss is still substantial.

Range of Loss: $16,720,467 to $43,020,467

[Mark Kindt]

Gone For Good

Other Ohio cities are fighting to save local hospitals. New hospitals are opening in other cities in Northeast Ohio. Metro Health System is expanding to other counties.

After 100 years in the hospital business, The City of Lakewood has definitively decided to bail on hospital-based healthcare for our city.

So just how much was that business worth -- $1.00 or $100,000,000?

And, just how much did the City get for it?

Be patient. This may take some effort. At a minimum, there is enough data from public source documents to calculate the liquidation value of its hospital business.

[Mark Kindt]

Gone For Good

Other Ohio cities are fighting to save local hospitals. New hospitals are opening in other cities in Northeast Ohio. Metro Health System is expanding to other counties.

After 100 years in the hospital business, The City of Lakewood has definitively decided to bail on hospital-based healthcare for our city.

So just how much was that business worth -- $1.00 or $100,000,000?

And, just how much did the City get for it?

Be patient. This may take some effort. At a minimum, there is enough data from public source documents to calculate the liquidation value of its hospital business.

We can safely say, that even as a liquidated business, Lakewood Hospital had total dollar values in excess of $100,000,000 in business value.

The Master Agreement and ancillary agreements liquidated and closed the hospital and the value of that liquidation is contained section-by-section in that document.

Losing Lakewood Hospital - Liquidation Value.jpg (184.81 KiB) Viewed 7966 times

[Mark Kindt]

Even In Liquidation -- A Major Public Asset

Even in liquidation, closure, and wind-down, we can see that Lakewood Hospital was a substantial public asset.

Here I have added the county auditor's value of the hospital to complete the value picture.

Losing Lakewood Hospital - Liquidation Value With Hospital Building Value.jpg (204.44 KiB) Viewed 7941 times

[Mark Kindt]

Measuring The Damage

When Mayor Summers announced the Letter of Intent in January (2015) and touted it as a $120,000,000 investment in Lakewood, he may have misspoken.

Now that all the numbers are in, we can see that exactly the opposite was occurring -- the great sound of WHOOSH! as jobs, revenues, and assets fled the city.

[Mark Kindt]

So Here's The Rub

An Off-Book Asset:

Once you add the value of the physical assets, bed licenses, and the non-hospital real estate that were related to the Master Agreement, the liquidated value of Lakewood Hospital approaches $200,000,000 in value.

An Off-Book Liability:

The city administration has also advised the public that we face an off-book liability for $274,000,000 for sewer/storm-water system upgrades.

As we drill down further, we will learn that the city administration received pennies on the dollars for the value of its $200M off-book asset and most of that value was transferred to its selected developer for $1.00.

Though pretty nerdy, I promise you that you will find this just as fascinating as I did.

[Mark Kindt]

The City Took An Even Worse Bath Than Anyone Ever Imagined

Lakewood Hospital had a liquidation value of nearly $200,000,000.

The city administration's non-real estate distribution on this value was around $400,000. It could be more, but that depends on how much the remediation, demolition, and site preparation of the former hospital property will actually cost.

(While a variety of real estate parcels are also on the move, the value of those parcels needs to be addressed separately, since the gain in value may be illusory under the concept of "wash" transactions. We will examine the real estate separately, some of which has been incorrectly characterized as "early termination payments".)

Estimated Net Gain To City on Hospital Liquidation.jpg (157.45 KiB) Viewed 7763 times