In The News › Jefferson Parish Charter Proposition 10 would lock away hospital lease proceeds

Jefferson Parish Charter Proposition 10 would lock away hospital lease proceeds

By Ben Myers | The Times-Picayune

November 21, 2014

Charter Proposition 10 on the Dec. 6 ballot in Jefferson Parish is two measures in one. One determines what happens with the money from the sale or lease of the parish-owned hospitals. The other protects the autonomy of boards overseeing the hospitals and the Jefferson Economic Development Commission.

The Parish Council is negotiating with LCMC Health to lease West Jefferson Medical Center. East Jefferson General Hospital is also available for lease, but generating little interest. The charter amendment would lock the lease revenue into a special trust fund, inaccessible for expenditure under any circumstance. As much as 80 percent of the interest could be spent for the “purposes for which the hospital district from which the funds were derived was established.”

In other words, the eligible interest income can go toward health care on either side of the Mississippi River, depending on which hospital is being sold or leased. But it’s not altogether clear what exactly qualifies as health care spending.

Councilman Ben Zahn said the proposition is “very ambiguous and confusing” on that point. And Parish President John Young questioned the reason for capping interest spending at 80 percent. “I don’t know why you wouldn’t want to be allowed to spend at 100 percent,” Young said.

Councilman Chris Roberts said the 80 percent figure was established with input from the hospital boards to ensure the principal grows with inflation.

The Bureau of Governmental Research found Proposition 10 too restrictive. Preserving one-time windfalls is a good idea, but locking away the entire principal could prevent necessary capital spending, Executive Director Janet Howard said.

A better approach, Howard said, is to limit spending to a percentage of total assets in the fund, that is, principal and interest combined. For example, Anchorage, Ala. limits spending from its municipal trust fund to 5 percent of assets, and voters must approve any spending beyond that.

“You can’t run the fund into the ground, but you are able to go beyond what is strictly generated by income, so that allows you to meet other needs,” Howard said of the Anchorage-style approach. “There are other ways of doing this.”

Young countered making the principal off limits is “more in line with conservative fiscal policies.” And Councilwoman Cynthia Lee-Sheng said parish officials and voters could always revisit the charter if a need arises to spend some of the principal, to build a clinic, for example.

“If we want to do a big building, we wouldn’t need to touch that money so soon to do it,” Lee-Sheng said. “Of all industries, I think health care is one of those where we really don’t know what’s going to happen. Would I be comfortable locking it away for 50 years? No.”

Advanced negotiations are now underway to lease West Jefferson to LCMC Health, but the cash proceeds will vary widely depending on whether LCMC assumes the hospital’s debt. LCMC is offering $225 million for a debt-free deal or $66 million otherwise, according to an analysis of the offer that consultant Joshua Nemzoff provided to Parish Council last spring. Nemzoff, who is helping to lead negotiations on the parish’s behalf, said this month that both options are still on the table.

Hospital Corp. of America, the favorite of the East Jefferson General board, withdrew its offer to lease that hospital nine months ago.

BGR also objects to Proposition 10 because it applies to the “sale or lease of any or all of the assets” of hospital service districts. Howard said this could include equipment that needs to be replaced, not just the real estate.

“You don’t want to be in the position where, because of some charter amendment, the proceeds from the sale of the first piece have to go into a trust fund, as opposed to being used to cover some other equipment need,” Howard said. “That would have serious ramifications for the ability to operate and fund a hospital.”

Roberts, however, said that lessees will be expected to cover equipment upgrades.

“Doubtful the parish is going to supplement the lease holders’ business cost,” Roberts said.

The other aspect of Proposition 10 relates to the hospital’s governing boards and JEDCO. It would explicitly incorporate into the charter the way those bodies currently function, which is apart from the parish government administration while subject to certain oversight by the Parish Council.

BGR highlights the divisiveness that resulted from efforts to lease the hospitals and warns that codifying the status quo in the charter “could unnecessarily impede desirable reforms.” “The troubled, contentious and politicized negotiations for the leases of the two parish hospitals suggest there may be serious problems with the current governance structure of the hospital districts,” the report states.

The proposition would ensure the administration has no control over the hospital boards, other than the authority to appoint one member to each. The Parish Council “shall serve as the governing authority” of the boards, while the administration would have no authority over “any aspects of the financial administration.”

Without commenting directly on the charter language, Young expressed reservation about his impotence in the leasing process. “The Office of the President would have liked to have more influence,” he said.

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