2015 State Auditor’s Report Reveals City Received Only $11.3 Million from “Sale" of Lakewood Hospital to Clinic
Posted: Fri Oct 07, 2016 7:13 am
Attached are (1) the City of Lakewood Comprehensive Annual Financial Report for 2014 (CAFR), https://ohioauditor.gov/auditsearch/Rep ... yahoga.pdf (2) a recently disclosed State Auditor’s/Independent Auditor’s work-paper and (3) a September 29, 2016 email from Jenn Pae and the independent auditor’s answering selected questions I posed to Jenn Pae.
Per the CAFR: "The City-owned Lakewood Hospital" (CAFR page 47) and the Master Agreement was a “sale of Lakewood Hospital to Cleveland Clinic” (CAFR pages 42 and 44). Those are the City of Lakewood’s and the State Auditor’s words, not mine. So there is no denying that the city-owned hospital was “sold” to CCF. Yet Summers testified in January, 2016 “we weren’t selling this hospital” Summer TR page 155; line 14.
Here is what the 2015 CAFR (and the attached accountant’s work paper) shows the city received from the “sale of Lakewood Hospital” to CCF:
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).
4. $ 971,600 for return of 7 residential properties (per CAFR).
7. $ 700,000 for return of control of health centre 1450 Belle (per CAFR).
Total Received by the City per the CAFR: $11,292,331.
The CAFR reports the entire $11.3 million for the “sale” of the hospital as “Total Revenues” to the “Lakewood Hospital Fund” even though the city of Lakewood held legal title to these parcels of real estate comprising that revenue since before the 1986 Lease (except Columbia Road). In this regard, the treatment of the surrender of the properties to the city as a “sale” of the hospital and then recording them as “revenues” to a hospital fund is most peculiar.
The Reported Value of the Curtis Block. The CAFR also mentions “Curtis Block” (corner of Marlowe Avenue and Detroit Avenue) transferred February 22, 2016” (CAFR page 47) However, there is no value reported on the CAFR for this “transfer.” It is probably negligible in the bigger picture of the “deal.”
Reported Value of Hospital Site. So far, the City and Finance Director Pae have not produced records nor answered questions concerning how the value of the former hospital site (the soon to be gutted and empty shell formerly known as Lakewood Hospital) is being reported on the CAFR. It is believed, based upon the September 29, 2016 Pae email that the amount on Lakewood’s books for this property is ZERO, but clarification by Pae is pending. Mr. Anderson claims, without any support that this 5.7 property is somehow worth $20 million. However, this single purpose building and the 5.7 acres it sits on are subject to a non-compete that make the building worthless for intended use and the land is subject to surface parking lot rights of the Cleveland Clinic. Given that the value of the unencumbered land on the west side of Belle sold for less that $900K per acre appraised as if AFTER demolition, it is hard to imagine the encumbered and still standing Hospital Site could fetch $900K—that might put the 5.7 acres at $5M, but that’s a stretch
Have LHA/CCF already Breached the Master Agreement? Not mentioned in the CAFR is that under Section 6.2 of the Master Agreement the city was to receive $500K of the $7 million on February 22, 2016. The independent auditor was not given that information and Ms. Pae has so far not revealed whether LHA honored that contractual term.
So while we wait for Councilman Anderson, Director Pae and Mr. Butler to decide whether they will share public records with the public, and answer vital questions about their heretofore secret government activities, we can make the following statement:
From what Mr. Anderson claims as $128 million dollars of “net assets”, so far the city has received only $11.3 million. That’s about 9 cents on the dollar so far.
Per the CAFR: "The City-owned Lakewood Hospital" (CAFR page 47) and the Master Agreement was a “sale of Lakewood Hospital to Cleveland Clinic” (CAFR pages 42 and 44). Those are the City of Lakewood’s and the State Auditor’s words, not mine. So there is no denying that the city-owned hospital was “sold” to CCF. Yet Summers testified in January, 2016 “we weren’t selling this hospital” Summer TR page 155; line 14.
Here is what the 2015 CAFR (and the attached accountant’s work paper) shows the city received from the “sale of Lakewood Hospital” to CCF:
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).
4. $ 971,600 for return of 7 residential properties (per CAFR).
7. $ 700,000 for return of control of health centre 1450 Belle (per CAFR).
Total Received by the City per the CAFR: $11,292,331.
The CAFR reports the entire $11.3 million for the “sale” of the hospital as “Total Revenues” to the “Lakewood Hospital Fund” even though the city of Lakewood held legal title to these parcels of real estate comprising that revenue since before the 1986 Lease (except Columbia Road). In this regard, the treatment of the surrender of the properties to the city as a “sale” of the hospital and then recording them as “revenues” to a hospital fund is most peculiar.
The Reported Value of the Curtis Block. The CAFR also mentions “Curtis Block” (corner of Marlowe Avenue and Detroit Avenue) transferred February 22, 2016” (CAFR page 47) However, there is no value reported on the CAFR for this “transfer.” It is probably negligible in the bigger picture of the “deal.”
Reported Value of Hospital Site. So far, the City and Finance Director Pae have not produced records nor answered questions concerning how the value of the former hospital site (the soon to be gutted and empty shell formerly known as Lakewood Hospital) is being reported on the CAFR. It is believed, based upon the September 29, 2016 Pae email that the amount on Lakewood’s books for this property is ZERO, but clarification by Pae is pending. Mr. Anderson claims, without any support that this 5.7 property is somehow worth $20 million. However, this single purpose building and the 5.7 acres it sits on are subject to a non-compete that make the building worthless for intended use and the land is subject to surface parking lot rights of the Cleveland Clinic. Given that the value of the unencumbered land on the west side of Belle sold for less that $900K per acre appraised as if AFTER demolition, it is hard to imagine the encumbered and still standing Hospital Site could fetch $900K—that might put the 5.7 acres at $5M, but that’s a stretch
Have LHA/CCF already Breached the Master Agreement? Not mentioned in the CAFR is that under Section 6.2 of the Master Agreement the city was to receive $500K of the $7 million on February 22, 2016. The independent auditor was not given that information and Ms. Pae has so far not revealed whether LHA honored that contractual term.
So while we wait for Councilman Anderson, Director Pae and Mr. Butler to decide whether they will share public records with the public, and answer vital questions about their heretofore secret government activities, we can make the following statement:
From what Mr. Anderson claims as $128 million dollars of “net assets”, so far the city has received only $11.3 million. That’s about 9 cents on the dollar so far.
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