Friday, September 25, 2009

The More You Learn About The Wishard Referendum . . .

Sometimes when you're ahead in a discussion you need to know when to just sit down and stop talking. That's advice Health & Hospital Corporation CEO Matt Gutwein is going to learn the hard way. The well-spoken advocate for the $754 million hospital referendum to be voted on at a special election in November is starting to get tripped up with the facts as he takes his "razzle and dazzle them" show on the road to neighborhood group meetings around the county. While Gutwein is typically faced with softball questions at these meetings, he has recently been facing tougher questions. Take for example his recent appearance before the Marion County Alliance of Neighborhood Associations. McANA President Cathy Burton asked a straightforward question of Gutwein. "If you're not raising property taxes to fund the new hospital, then why are you required to obtain voter approval at a referendum," she asked. How Gutwein answered the question and what he avoided saying proves my point that the HHC is lying to the voters when they tell them that no property tax increases will be required to pay off the bonds on the new hospital.

Gutwein explained to Burton that the referendum is required because the HHC is issuing general obligation bonds. Bingo! A governmental body can't issue general obligation bonds unless it is pledging to the bondholders that it has taxing authority to levy sufficient property taxes from property owners to repay the bonds with interest. Indeed, the little-noticed public notice that ran in the Indianapolis Star this week makes this abundantly clear. The notice reads, in part:


All or any portion of the Health and Hospital Corporation’s payments of principal of and interest on the General Obligation Bonds and/or rental payments under the Lease may be payable from ad valorem property taxes collected by the Health and Hospital Corporation on all taxable property within the geographical boundaries of Marion County, Indiana. The proposed General Obligation Bonds and Revenue Bonds (collectively, the “Bonds”) shall be issued in an original aggregate principal amount not to exceed $703,040,000. The maximum term of each series of the Bonds will be 30 years, and the Bonds will bear interest at a rate or rates estimated not to exceed 6.16% per annum. Dated this 25th day of September, 2009.THE HEALTH AND HOSPITAL CORPORATION OF MARION COUNTY By: Dan Sellers, Treasurer (S - 9/25/09, 10/2/09 - 5543528) - 09/25
Gutwein couldn't leave well enough alone when answering Burton's question. He distinguished this bond issue from the CIB's problems in paying the costs to operate Lucas Oil Stadium. Gutwein claimed the CIB relied on revenue bonds to pay for the new stadium and that it faced difficulty in paying for the costs because it relied on a stream of revenues that was insufficient to cover the costs. That statement was patently false. The State of Indiana, not the CIB, financed the construction of Lucas Oil Stadium. While it is true it relied upon revenue bonds funded by new taxes on food and beverages, which are being collected on a regional basis, those tax revenues have proven to be more than adequate to fund debt service on the stadium. The CIB merely leases the stadium from the State and because it entered into a one-sided agreement with the Colts that essentially gives up all stadium revenue-generating opportunities to the team, it lacks any income to pay for the operating and maintenance expenses, which are considerably higher for LOS than the RCA Dome.

Proponents of the CIB bailout always assured the public they wouldn't raise property taxes to shore up the CIB's finances. As I previously explained to the readers of this blog, the CIB has no present authority to levy property taxes without council approval so that was never a real option. This is not the case with the HHC. It has the authority to levy property taxes, which means it can issue general obligation bonds backed by property tax levies. Gutwein has repeatedly claimed that the HHC plans to rely upon discounted Build America bonds rather than traditional general obligation bonds. The urgency for approval, he says, is necessary to take advantage of the short window offered to local governments by the federal government to issue more affordable bonds in a tight financial market. The public notice claims the Marion Co. Building Authority and not the HHC plans to issue both general obligation bonds and revenue bonds as part of the proposed $703 million in borrowing, which also contradicts Gutwein's claims; the HHC will lease the new hospital property from the building authority. Gutwein specifically claimed at the McANA meeting that no revenue bonds were being issued, which is contradicted by the public notice. Other than property taxes, HHC really has no credit-worthy revenue streams to pledge for revenue bonds. It appears the revenue bonds will be secured by unspecified lease payments the HHC will be required to make to the building authority.

Pressed by tough questions at a public meeting in Speedway last week, Gutwein made more contradictory statements according to the Speedway Navigator. It turns out that only a small fraction of the bonds will be issued through the Build America discounted bond program. The Speedway Navigator noted Gutwein's previous claim that the HHC has $150 million in cash reserves to put towards the project, but it says Gutwein indicated that only $120 million of the more than $700 million bond issue will be represented by Build American bonds. More than $600 million of the bond debt will be represented by those general obligation bonds, repayment of which is based on a pledge to levy sufficient taxes from Marion County property taxes to cover the debt. The HHC will need a minimum of $38 million annually to cover the debt service on the bonds.

According to Gutwein's presentation in Speedway, Wishard spends about $25 million annually on maintenance and operating expenses on the existing Wishard campus. Gutwein doesn't detail what those annual expenses will be on the new hospital, but he leaves the public with the impression that the costs will be considerably less with a new building. Marion County taxpayers have learned the hard way with the Central Library and Lucas Oil Stadium, however, that new buildings can actually cost more to maintain than the older buildings.

Gutwein continuously repeats a claim that the HHC has been so successfully operated that it has been able to reduce its current property tax levy. That claim is contradicted by HHC's Treasurer, Dan Sellers. As he noted in a transmittal letter dated August 4, 2008 concerning the HHC's 2009 proposed budget, the legislature mandated the property tax reductions as part of the property tax relief measures contained in the 2008-09 state budget. As he further notes, the State of Indiana paid $40 million in property tax replacement revenues to the HHC out of the state's general fund. The City-County Council's passage of the controversial 65% increase in the local option income tax in 2007 provided an additional $6.7 million in revenues in the 2009 budget.

As of 2007, the HHC had long-term liabilities totalling more than $253 million. Instead of purchasing the 26 nursing homes the HHC acquired in recent years as a new line of business, the HHC financed their purchase through lease agreements with Eagle Care, Inc. of Indianapolis. Much of the HHC's long-term debt is represented by these capital leases. The HHC does not operate any of the nursing homes. Instead, it leases them to American Senior Communities, a for-profit nursing home company, which runs all of the facilities. If the HHC issues more than $700 million in new bonded indebtedness, it appears it will violate a state law limiting the HHC's legal debt limit, which is 0.67% of the assessed value of Marion County property. According to the 2007 audited financial statements for HHC, its legal debt limit was a little more than $299 million. As of 2007, the HHC had used up about $45 million of that debt limit with a legal debt margin of $255 million. It is unclear to me how the HHC can issue this much additional debt without running afoul of the state debt limit. I could not find any language in the massive state budget bill adopted in June that provided for the hospital referendum that increased the legal debt limit for the HHC. Are the bonds being issued through the Marion Co. Building Authority to avoid the statutory limit?

As I've started looking at the audited financial statements the HHC belatedly made available via the Internet, I'm finding a lot of contradictory information. These financial statements from my initial read provides no comfort to Marion Co. property taxpayers that the HHC will ever be able to finance the construction of this new hospital without raising property taxes. For all intents and purposes, the bonds that will be sold to investors carry with them the assurance that property taxes can and will be collected to satisfy the debt obligation. I don't know why Marion County property taxpayers should make any different assumption, notwithstanding the claims of Gutwein and all of the other proponents of this project to the contrary. It's a real scam on the voters of Marion County that the language that will be put in front of them at the referendum is a question that omits the fact that it's a hospital that is being constructed, the amount of money that is being borrowed and the fact that property taxes can be levied to pay for the bonds. The fact that the HHC went to such great lengths to mislead voters on this project should serve as a wake-up call to all concerned taxpayers.

UPDATE: The City-County Council may not be off the hook on the Wishard Hospital bond issue. Another Indiana statute, as fellow blogger Paul Ogden points out, may require the building authority to obtain council approval to issue the bonds and lease the new facilities to HHC. See the language at the tail end of this statute:

IC 36-9-13-22
Powers and duties of board of directors
Sec. 22. (a) Except as provided in subsection (b), the board of directors of a building authority, acting in the name of the authority, may:
(1) finance, improve, construct, reconstruct, renovate, purchase, lease, acquire, equip, operate, maintain, and manage land, government buildings, or systems for the joint or separate use of one (1) or more eligible entities;
(2) lease all or part of land, government buildings, or systems to eligible entities;
(3) govern, manage, regulate, operate, improve, reconstruct, renovate, repair, and maintain any land, government building, or system acquired or financed under this chapter;
(4) sue, be sued, plead, and be impleaded, but all actions against the authority must be brought in the circuit court for the county in which the authority is located;
(5) condemn, appropriate, lease, rent, purchase, and hold any real or personal property needed or considered useful in connection with government buildings or systems regardless of whether that property is then held for a governmental or public use;
(6) acquire real or personal property by gift, devise, or bequest and hold, use, or dispose of that property for the purposes authorized by this chapter;
(7) enter upon any lots or lands for the purpose of surveying or examining them to determine the location of a government building;
(8) design, order, contract for, and construct, reconstruct, renovate, and maintain land, government buildings, or systems and perform any work that is necessary or desirable to improve the grounds, premises, and systems under its control;
(9) determine, allocate, and adjust space in government buildings to be used by any eligible entity;
(10) construct, reconstruct, renovate, maintain, and operate auditoriums, public meeting places, and parking facilities in conjunction with or as a part of government buildings;
(11) collect all money that is due on account of the operation, maintenance, or management of, or otherwise related to, land, government buildings, or systems, and expend that money for proper purposes;
(12) let concessions for the operation of restaurants, cafeterias, public telephones, news and cigar stands, and vending machines;
(13) employ the managers, superintendents, architects, engineers, consultants, attorneys, auditors, clerks, foremen, custodians, and other employees or independent contractors necessary for the proper operation of land, government buildings, or systems and fix the compensation of those employees or independent contractors, but a contract of employment may not be made for a period of more than four (4) years although it may be extended or renewed from time to time;
(14) make and enter into all contracts and agreements necessary or incidental to the performance of its duties and the execution of its powers under this chapter;
(15) provide coverage for its employees under IC 22-3 and IC 22-4; and
(16) accept grants and contributions for any purpose specified in this subsection.
(b) The building authority in a county having a consolidated city may not purchase, construct, acquire, finance, or lease any land, government building, or system for use by an eligible entity other than the consolidated city or county, unless that action is first approved by:
(1) the city-county legislative body; and
(2) the governing body of the eligible entity involved.

24 comments:

Had Enough Indy? said...

Just as an aside - the CIB can indeed raise property taxes as long as it has the approval of the City-County Council (IC 36-10-9-8) which is the same situation as H&H, IMCPL, IndyGo and the Airport Authority. Thus far it has declined to do so.

My attitude is that if Gutwein and company are selling the new Wishard as not using tax revenues for repayment of bonds, they should be willing to put that in writing. If the purchasers of their bonds are not willing to buy the bonds based on another revenue stream guarantee, then that should be a warning to the taxpayers of Marion County.

Paul K. Ogden said...

Terrific post, Gary. No one analyzes issues like this better than you.

Unfortunately if tthey're allowed to proceed to the election with that question, I don't think there is any way to stop this.

The fact that HHC is being so deceptive raises red flags.

Advance Indiana said...

Pat, What I intended to say was that the CIB did not currently have authority to levy a property tax for any purpose acting on its own. The HHC doesn't need council approval to levy taxes. It has already been given that approval.

Downtown Indy said...

Oh what a tangled web we weave, when first we practice to deceive.

It's a blessing to have both Gary and Paul shining light on this.

Advance Indiana said...

Don't forget Pat Andrews. She's done yeoman's work in helping unravel these issues.

Carl E Moldthan said...

LET’S ALL FOCUS:

My name is Carl Moldthan and during the past two months I have looked at HHC’s budget, the CAFR’s for the past five years, their tax stream, the Special Funds they receive from Medicaid, the nursing homes they own and virtually everything anyone can think of. The truth is as I will explain:

Wishard owns 37 nursing homes which they receive approximately $17 million a year in revenues. They also receive, as of 2008 $51 million from Medicaid’s special funds called Upper Payments Limits (UPL). These UPL funds make up the gap between Medicaid and Medicare for nursing home residents. As an example, a normal Indiana nursing home receives approximately $3,400 to $3,900 per month, per patient. However, HHC receives on average approximately $8,200 per patient, per month. These extra funds give HHC an advantage over other nursing homes because they can do improvements and repairs that other nursing homes cannot afford. This is one reason why HHC should NOT own nursing homes.

It is these extra UPL monies that are supposedly going to pay for the Bond Issue. In the real world these funds could be considered or identified as revenues. However, because they CANNOT guarantee these funds HHC must back these bond issues with General Obligation Bonds, thus the referendum. It makes no difference who is going to lease this or that building to or from whom. I can assure you that this has been planned for 7 years and HHC is not going to allow a mistake to take them down. The only method of bring them down is stopping the bond issue.

There are several things that can bring this bond issue to the point where we have to pay for it but the main two are:
1. Voters stop the BOND ISSUE.

2. If enough nursing homes in other cities complain to their respective Congressman, US Senator, State Senator or Representative there will be a huge hue and cry to close the loophole that allows HHC to own these nursing homes that is assuming that it is legal in the first place. This would cut their stream of UPL money thereby ending the revenue stream and starting a huge property tax increase on all of us. The sad thing is that this tax may NOT BE INCLUDED in the Property Tax Cap by the time we have to start paying for it. The cost to an average taxpayer who owned a house valued at $150,000 would be an extra $175 per year. “Do you feel lucky, well do ya taxpayer?”

3. The Medicaid money received for these nursing homes could be shut off tomorrow without notice by Medicaid. This type of Medicaid has been under investigation by the GAO and Congress for the past 8 years. The reason for the problems is the fact that so much money can be obtained and UPL money amounts are uncontrollable. Congress has referred to UPL as a SCAM. When it involves this type of money one has to ask the important “What If” questions. What if 10 other communities learn about the EASY method of building a new hospital and instead of $42 million per year (BOND COST PER YEAR) Medicaid is paying out $420 million a year? Medicaid would put a stop to this immediately and again the Taxpayers of Marion County would have to pay.

There are several other things that can happen but these two are the most probably. I like to think back to 1983 when then Mayor Hudnut promised that the 2% Food and Beverage tax would disappear after the $75 million Dome was paid for. Now, 25 years later we still owe $69 million on the Dome which if you’ve looked lately isn’t there, and the Food and Beverage tax is at 7%.

“Well, do you feel lucky, well do ya taxpayer?”

We all need to focus on one thing and that is beating the bond issue. The who, what or where doesn’t matter, the ONLY thing that matters is stopping the BOND ISSUE. If you have any question you can reach me at carlfire@sbcglobal.net.
Thank you for your time.

Carl

Advance Indiana said...

Carl, I've raised this concern before, but you do a wonderful job of laying out how it works. It is my contention that it's a fraud on the federal government. The HHC doesn't own these nursing homes. They simply lease them from Eagle Care with the commitment to make minimum capital improvement expenditures. The HHC doesn't operate them. They have operating agreements with American Senior Communities to operate them. It is simply a fiction for the HHC to claim these as their nursing homes and qualify for these extra payments as you so adeptly explain. Somebody is going to catch on at the federal level to what is happening and stop these additional payments for these nursing homes that are really for-profit, privately-run nursing homes. Obama plans to cut out $600 billion in Medicare & Medicaid expenditures he describes as waste, fraud and abuse. If there ever was something that qualified as fraud, it's the Medicaid bilking scheme concocted by the HHC to fund the construction of this new hospital.

iPOPA said...

AI:

I'm not writing this for public consumption because I'm still doing information gathering, and I am not sold that existing revenues will dry up in the way you describe.

But there were a few things Matt said during a presentation I saw that puzzled me.

He stated that certain type of new medical technology requires 17' ceilings instead of the 11 1/2' ceilings they have now (can't remember the equipment type and I'm not certain on the measurements). But I remember thinking, "Does that mean they don't use this equipment now" or if so, where is it housed?

Also, he showed three photos of a rusted pipe and somewhere with water leaking around wiring. I found it hard to believe three photos can make you say, "Yep, gotta trash it."

But here's the main thing that bothered me. Do you know who gets the old Wishard complex? IUPUI in a land-swap deal.

Now, this may be my interpretation of Matt's body language, but there was this feel when he talked about IU taking the building of "sorry about you, suckers!" The crowd kind of laughed when he said something that I'll paraphrase as "that's not our problem."

So, now I'm thinking, okay, if this building is as terrible as made out, who was the dumbass at IU that thought it would be cool to have a building requiring 34 million per year in maintenance? And how is that going to affect a tuition rate that Luke Kenley had to (try to) wrestle to the ground? In other words, even IF HHC can cover, won't there will still be a cost because of this project that will be born by either tuition hikes, or other taxes raised to finance IU?

artfuggins said...

The fact is that while some may complain on this or other blogs, no one is out there on the firing line urging the voters to defeat this. It will easily pass without any concentrated effort to defeat it.

artfuggins said...

Another issue. When IPS had a bond referendum, no employee of IPS including the superintendent could be involved in the advocating the passage of the bond and no resources of the district could be used to for the promoting of it. Why then, is Gutwein and others of HHC out there 24/7 with power points, flip charts etc campaigning for the passage of this? Is there a different law regarding the involvement of school employees vs. employees of HHC???

Advance Indiana said...

Chris, It's another example of Matt talking on too much. On the one hand, he brags that the hospital has received the highest possible level of accredidation, and that the care provided at Wishard ranks higher than almost any hospital in the country. If you read their financial statements, they just completed a major remodeling of their operating rooms. IU indeed plans to use the better buildings that make up the 17-building complex; others will be torn down to make room for future expansions. I have stated in the past, and I stand by this claim. Indianapolis has a powerful construction industry cartel that controls the movers and shakers in this town. To achieve their financial goals, government has to bring a new project on line every three to four years. This project is set to replace the J.W. Marriott project, which replaced Lucas Oil and the convention center project, which replaced the Central Library project and so on. Clarian has had some major projects interspersed there as well. When Clarian lost all of the money in the market crash and had to cancel some of its projects, it put added pressure to go forward with this project perhaps even sooner than originally planned.

art, I and others who have raised questions are more than willing to speak at public forums or speak to the media about the downsides of this project. Not a single neighborhood group, news media source, WCTY or any other organization of which I'm aware has afforded equal time to the opposing side. Abdul, for example, knows there is opposition to the referendum but he bars any opponents from appearing on his radio show. When callers phone his show, he cuts them off and speaks derogatorily about them. He then asks what happened to the revolutionaries. Greg Garrison at WIBC will only allow one side to be heard. The TV stations and the Indianapolis Star will only allow one side to be heard in their news stories. It's an indication of just how powerful this cartel is.

Paul K. Ogden said...

Art,

The fact is when HHC-MC was allowed to write a rigged referendum questiion (that did not mention building a new hospital or how much money they were borrowing) the election was essentially over. Further they were allowed to do it in a special election when regular voters aren't going to go to the polls.

I'm surprised that people think the actual wording of the question or when the election is held doesn't matter, that all you have to do is get out your people. The number one way to rig a poll result is to write a biased question which they have done.

This election is going to set precedent for other referendums. That's a problem. You can't have a fair election without a fair question. They don't want a fair election.

Downtown Indy said...

The only place I've seen ceilings approaching 17ft in a modern hospital is the atrium at the front entrance.

Whatever might require it (if anything), it would NOT be for 99% of the facility. It would be quite bizarre to have ceilings that high throughout. Sanitation, heating and cooling would be prohibitive. Unless, of course, they can manipulate the UPL payment system to double their revenues.

Carl E Moldthan said...

In answer to iPOPA comments:

Thank you for your comments and I’ll try and address each one as best that I know. The medical technology exists that requires higher ceilings but there are literally hundreds, maybe thousands of hospitals out there that had or have the same problem. I think it is save to bet that not all of them built new hospitals to solve this problem. I’ll bet Methodist had the same problem and solved it without building a new hospital. There are numerous ways around this new equipment and I venture to say they are using them now. To build a new garage just because someone came out with a new machine that is 17 foot tall would be as ridiculous as this is. Wishard is a teaching hospital so if they can’t solve this problem maybe they shouldn’t be a teaching hospital.

When I saw the rusty pipes my first thought was, "what are you doing with the extra funds you have been getting since 2002." They have and in fact brag that they have money saved from up to 6 years ago. If these pipes still exist in the shape the pictures indicate I think there should be criminal charges brought against them for neglect of their duties.

To be perfectly honest I have no knowledge of the land transfer because it does not have anything to do with the bond issue. However, you should know that IU up until 2007 had total and I mean total control over Wishard under their contract with Wishard. IU controlled all of the buildings as seen by this section of their contract, “3.3 Property ; Control and Operation. The University may exercise control over and have possession of the Hospital, parking areas and all of the Corporation's owned or leased real and personal property (including but not limited to fixtures and equipment} used in connection with or located in the Hospital, but excluding undeveloped land and those portions of the Bell Flower building which are used for the Corporation's Public Health Division.” They also had total control over employees such as hiring, firing, promoting and demoting anyone and everyone as indicated here: "3.4.4 Supervision and Control. The University shall have day-to-day supervision and control over all employees, including those on the medical staff as well as those not on that staff, who perform responsibilities at the Hospital. The University's authority shall include, without limitation, the power and right on the Corporation ' s behalf to select, retain, promote, demote and terminate such employees." As you can see this is not HHC’s hospital it belongs lock, stock and barrel to IU School of Medicine. The contract they signed in 2007 gives IU the same power but it is written in a very dossal language. To be honest this hospital is not being built for Wishard or HHC, it is being built for the IU School of Medicine.

The bottom line is Matt knows this money to pay the bond issue will not last but he is on a mission and to hell with the truth. Remember what your dad used to tell you, “If it looks too good to be true, it usually is”. This is too good to be true.

Thank You
Carl

Downtown Indy said...

Garrision has skin in the game.

His wife has some fairly high-level position at Wishard, doesn't she?

I think the guy is losing it.

He really did a bizarre number this week when the topix was people taking photos of trains and getting arrested because the 'might' be terrorists. He was actually ok with it and blathered on about recent terror suspects being arrested and we have to be careful - blah, blah blah.

Can you IMAGINE what he's be saying if somebody with a gun have been arrested for legally carring it? Hoo boy!

But he's strangely OK with trampling other parts of the constitution simply because a person has a camera and snaps a photo. There was some question as to whether the person was trespassing, but that's not what they were accused of. I don't know if they were in fact trespassing though.

People get stopped/harassed/detained AND arrested for simply taking a picture. A while back a guy was taking picture around the CC Building and threatened with arrest by the MCSD staff!

Garrison took one caller who covered the basic insanity of this form of 'anti-terrorism' pretty well but he was fairly quickly dismissed by Greg because we live in a time when you just have to be 'careful.' Bah! Like terrorists are out there being so open and obvious in their surveillance. Give me a break!

Downtown Indy said...

Well, Google answered my question:

Phyllis Garrison, Privacy Officer

iPOPA said...

Carl & all:

Thanks for your thoughts. I think regardless of how plausible or compelling you find the case for a new hospital to be, at the end of the day, all the opponents' to this care about is not taking a tax hit, right? So we can question the phrasing of the referendum, the availability of other sites, whether the building is REALLY in a falling down state, and the amount of bonds being issued under the federal government's stimulus, but at the end of the day, doesn't this all come down to the question of how likely it is that Wishard loses the profitability of their nursing homes, that the Medicaid reimbursement they receive is altered, and/or to the extent 1 & 2 happen, that Wishard isn't able to scale back programming in some way that covers any other revenue losses?

The point Matt made that was compelling to me is that, unlike the CIB, all of Wishard's money isn't in buildings. If Wishard takes a financial hit, they have places they can save money. (Of course, in fairness, one might wonder whether the cuts would come from Wishard's many health centers spread throughout the county or whether public education campaigns would be sacrificed). But if the only concern is taxes, I don't see any of the things you predict as actually happening, and we're talking about 1% of Wishard's total budget.

Also, I reject categorically the notion that a construction industrial complex has somehow overwhelmed Matt's reasoning. He is an independent thinker and brilliant at that. It might simply be, that in addition to the maintenance cost issue, etc., he wants a new facility knowing that it will make it easier to recruit and keep physicians and staff, and if he's confident in the revenue stream, I'm going to trust him and let IU worry about the crumbling building problem. The fact there will be an ancillary benefit in job creation is just a bonus.

My only reservation, in fact, is the time horizon. I think it might be easy to say Wishard won't raise taxes knowing that those bonds will still be being paid off long after you've left stewardship of Wishard. In this regard, for the benefit of those who aren't as inclined to trust Matt, I wish there were a way to get he and the rest of the Wishard employees, plus any other supportive organizations or individuals, such as the Mayor, to sign documents PERSONALLY guaranteeing that any shortfall will be paid from their own pockets. Then we'd know precisely how confident they are in their revenue streams/budget cutting capabilities.

Advance Indiana said...

Chris, Matt couldn't possibly make the kind of cuts that would be necessary to make up that kind of a shortfall. In his presentation, he brags about all of the efficiencies and cost-saving moves he's made under his tenure to get the HHC back in the black. Recall that the HHC ran deficit year after year until just a few short years ago. In one year, that deficit exceeded $70 million. Creating "new lines of business", Gutwein says, has enable the HHC to operate in the black and create a revenue stream to pay for the new hospital. The fact is that if the revenue stream were adequate and reliable, it would be pledged to sell revenue bonds and not general obligation bonds backed by property tax levies. Nobody would buy those bonds based on that nursing home revenue stream. I'm convinced the federal government will catch on to that scheme soon enough and put a stop to it. If they don't, then they're not managing federal Medicaid dollars properly. Wishard has no trouble attracting talent. It is a teaching hospital and the deal with IU for sharing staff has them well-covered on that point. I'm not against building a new hospital simply because of the potential for a tax increase. There are too many hospitals in this area. We have two hospital buildings within miles of Wishard that are much newer and sitting vacant. If you believe in ObamaCare and believe some version of it will be passed, then what does that mean to Wishard. It means a dramatic change because most of the uninsured will be insured. They can go to St. Vincent, St. Francis, Community Hospital or any other hospital with insurance. The fact is that Wishard will face competition it has never experienced before. It wants a brand new shiny hotel because it knows what the future holds. It believes many of its potential patients will go elsewhere once health care reform goes through and that they might reconsider if there is a new hospital. It also points up the problem of having too many hospitals centralized in the center city. The indigent population is now dispersed in the neighboring townships with fewer and fewer still residing in Center Township.

Carl E Moldthan said...

To iPOPA:

To your first point “all the opponents' to this care about is not taking a tax hit, right?” I have to say YES, one of the largest if not the largest tax increase in this cities or maybe Indiana history.

To your second point: Profitability and Government is like oil and water. The government can lose money precisely because it’s not their money there losing. Besides according the Indian State Board of Accounts they know of no other government agency that runs, owns, operates or controls a private business. Since when does Indiana allow Government to own and operate private businesses? How does Government do at operating a business? Look at the Lucas Stadium, that thing should be bringing in millions a year but all their “profits” go to the Colts.

As to point three: “But if the only concern is taxes, I don't see any of the things you predict as actually happening, and we're talking about 1% of Wishard's total budget.” HHC’s 2008 Certified Annual Financial Report (CAFR) shows a graph which indicates the following: Property Taxes, 39%, Medicaid Special Revenue (DSH) 36%, Unrestrictive Investment earnings 2%, Charge for Services 13%, Grants and Contribution total 7% and Other Taxes 3%. So the taxes as you state at 1% are more like 39% and if you include Medicaid and other taxes the total would be 78%. This is from HHC’s own CAFR’s report 2008. When I met one on one with Matt Gutwein (CEO) and Dan Sellers (CFO) they both told me that they had changed Accounting Companies for the 2008 CAFR which I have found often done before a Bond Issue is tried. After the change of accountants you seem to find “change in accounting treatment” throughout the document. This makes it almost impossible to compare one CAFR to another.

Point Four: “It might simply be, that in addition to the maintenance cost issue, etc., he wants a new facility knowing that it will make it easier to recruit and keep physicians and staff, and if he's confident in the revenue stream, I'm going to trust him and let IU worry about the crumbling building problem.”

Let me take a deep breath, WOW. The only recruiting that will be done will be done by IU School of Medicine (IUSOM). This entire project is being done for one reason and one reason ONLY, IUSOM wants a better teaching facility. Anyone who can’t see that is either stupid or blind. There are ONLY 37 county hospitals in the state of Indiana out of 92 counties and 168 hospitals in Indiana. The four other large counties; Lake, Vanderburgh, Allen and St Joseph’s don’t have a county hospital yet they do quite well. I have visited these counties often and have not seen bodies lying in the street.

Wishard is still here for one reason a one reason ONLY for IU to use the people in Marion County to help them pay to educate their doctors. Last year Wishard paid IUSOM $61 million plus to train doctors in and at our hospital. In total Wishard’s wages for 2008 were $300 million and that’s all we could identify. That’s over a quarter of a BILLION dollars.

I had a conversation with my retired doctor (an IU Grad) and I asked him, “Who needs who more between IU and Wishard?” His answer was, “There is absolutely no doubt that IU needs Wishard more than Wishard needs IU”. He went on to say without Wishard, IU would have to move or find another place to train their students. IU should be paying us for the right to train doctors at OUR HOSPITAL. Your trust in Matt is defiantly misplaced.

Point Five: Find a politician who guarantees anything other than his/her reelection and I’ll stand up a shout. If you’ll notice our city-county councilors and Mayor are 100% in support of this project. Did any of them ask any hard questions, ask them if they did.

There are alternatives. Close Wishard and sent patients to other area hospitals and pay for their care with the money already out there. When I asked Matt about this he said that the other hospitals would stabilize the patients and sent them out the door. And you trust this man?


Carl

Advance Indiana said...

The 2008 audited financial statements are not on HHC's website. I take it you got it through a public records request, Carl.

Carl E Moldthan said...

I have emailed the 2008 CAFR to you. Yes, I received it about 2 weeks ago. It is interesting reading. I have also sent you a copy of HHC's 100R (2008-09) which is a list of all employees and the salary they make. It is also very interesting.

Thank You

Carl

iPOPA said...

Matt said the 1% was the total annual budget that would be devoted to the debt financing. He never implied, nor did I intend to, that only 1% of the HHC budget was from tax dollars. His point was that HHC could swing this precisely BECAUSE it would only be 1%, and a good portion of that would be saved through reduced maintenance costs.

Had Enough Indy? said...

iPOPA -- the significant number is not what percentage of the H&H budget would be devoted to paying back the bonds -- but, of an approximate $1B budget, $54M comes in at 5.4%, not 1%.

The more important issue is that Gutwein has consistently been on the road selling the idea that these bonds will not result in an increase in property taxes. He never mentions that property taxes will secure these bonds. NEVER

Right now H&H is taking in somewhere between $25M and $30M in property taxes. They will be securing these bonds with new property tax promises up to $54M. If the bond buyers don't feel comfortable enough that H&H non-tax revenue is sustainable enough to secure the bonds (unlike the Airport Authority), then, why should the voter be comfortable that we will not be paying an additional $54M per year in property taxes.

The bottom line is that, despite what Gutwein says in public, property taxes ARE on the hook for repaying these 30 year bonds.

Now - if you like, trust Gutwein to use current profits for so long as he runs H&H. How about the next guy or gal? Trust them? How about the Councils and Mayors for the next 30 years? Trust them not to pull that money out of your home and pocket?

It becomes a fundamental issue of doing what you say you are doing. Until they reissue the public notice that property taxes will secure these bonds, I will vote against the referendum. The public has every right to be told what the risks are up front - before November 3. Gutwein is not relating the whole picture and that is manipulation, pure and simple.

I have read your blog and you are not easily bamboozled. I think this might be an exception to that trend.

(Matt) Gutwein has been great insofar as he has turned a perenial tax-dependent entity (nationwide, not just here)and decreased the amount of tax support required. So, for all of their one hundred years plus of operating, we have had maybe 5 with a profit. But, what if... it cannot be sustained? Then a positive vote on the referendum means an increase in property taxes - and as AI notes, it will be outside the tax caps.

The public should vote on the reality, not the promises....

Advance Indiana said...

Pat, Actually Gutwein has misrepresented the property tax savings he has been able to achieve as HHC CEO. The fact is that the property tax reform law forced those reductions and replaces them with state revenues. Also, Gutwein never mentions the nearly $7 million a year the HHC gets from the 65% increase in the local option income tax.