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HomeMy WebLinkAboutcc min 1986/08/28 MINUTES OF THE CITY COUNCIL CONFERENCE OF THE CITY OF CHULA VISTA, CALIFORNIA Thursday, August 28, 1986 Council Conference Room 5:00 p.m. City Hall ROLL CALL MEMBERS PRESENT: Mayor COX; Councilmembers Malcolm, Moore, Campbell, McCandliss MEMBERS ABSENT: None STAFF PRESENT: City Manager Goss, Assistant City Manager Asmus, City Attorney Harron 1. REPORT ON SCRIPPS MEMORIAL HOSPITAL'S REQUEST TO THE CITY OF CHULA VISTA FOR A DEFEASANCE OF THE FIRST MORTGAGE HOSPITAL REVENUE REFUNDING BONDS, SERIES 1977, AND ACQUISITION OF THE CITY'S REVERSIONARY INTEREST AS PART OF SCRIPPS' PROPOSED ACQUISITION OF BAY HOSPITAL MEDICAL CENTER (City Manager) City Manager Goss reviewed the summary statement which he submitted to the Council noting in general: Scripps has agreed that the City will have the first right of refusal to purchase the hospital in the event they sold it prior to the year 2010; the City would receive 10% of the net profits of this sale; Scripps will pay the City ~100,000 upon close of the transaction to take over Bay Hospital with a payment of an additional $20,000 per year for 6 years beginning after the close of the transaction; Scripps agrees to a services component and is offering ~550,000 this will be spread over a 6-year period with any unused portion credited to subsequent years for a maximum of 6 years; the services under this component would be provided through what staff has termed a "focused line of credit" which means that the City will have this line of credit for use of specific services such as physical examinations for City employees, health education for City employees and senior citizens, screening clinics for blood pressure, glaucoma, eye examinations and so forth; Scripps will operate Bay Hospital as a general acute care hospital for 5 years with an automatic 5-year renewal; Scripps will commit to an average expenditure of ~400,000 per year for maintenance of the hospital; Scripps will use all of the revenues in excess of expenses generated from the operation of Bay Hospital to operate in and enhance the services of the facilities of Bay; Scripps commits to establish a Community Advisory Board. Minutes - 2 - August 28, 1986 Council Conference City Manager Goss stated he strongly recommends the approval of this agreement in concept so that Scripps can move forward in obtaining the City's reversionary rights to Bay and conclude its transaction in acquiring the facility. City Manager Goss added the final agreement can be docketed for the meeting on September 4 following the Redevelopment Agency meeting. Scripps will have to take this approval of the agreement back to their Board and will act on it prior to the expiration date of September 18. Mr. Paul R. Syrowik, Attorney Gary, Ames, Fry, on behalf of the City, stated the value of the reversionary interest was quite broad but well within the range of the value which "reasonable" people could decide on the worth of this interest. The terms of the agreement are acceptable and favorable to the City. Mr. Ames Early, President and Chief Executive of Scripps, stated the negotiations that have taken place have been long and tough and they stand in agreement with the City Manager's recommendation. The entire Scripps Board met yesterday and the future of this health care facility was discussed. The Board discussed the entire spectrum of .the health care facility including revenues, the indigent and uncompensated cares, the need for capital and new equipment which all adds up to Bay Hospital being "a good picture but a bad scene." The Board will meet again the week of September 8 for a final agreement as to whether or not they do want to assume operation of the Bay Hospital. Mr. Early declared the Board has "stretched the last inch" in regard to the burdens of the reversionary interest. Councilwoman McCandliss noted that on page 12 of the agreement the use of the terminology "the master fee schedule" and in the summary, the term is "a master fee schedule." She therefore questioned whether the ~ity would negotiate a fee schedule or whether Scripps has its own master fee schedule. City Manager Goss stated the City will be using the Scripps master fee schedule. Councilwoman McCandliss asked that it be made available to the City Council. As to the role of the Advisory Board, Councilwoman McCandlis~ indicated this could be a "token group" which she does not want to see happen. She would like to have assurances built in that the Advisory Board has access to all of the information available to the Corporate Board and received at the same time. She further requests there be a more definitive explanation as to the role of the Advisory Board. Minutes - 3 - August 28, 1986 Council Conference Mr. Early commented that the Corporate Board consists of eight (8) individuals containing a broad business component; some are businessmen, others attorneys and so forth. As to the Advisory Board, they serve within the foundation of the structure. It is Scripps'intention to maintain a very close touch with this Board and can assure the Council that it will by no means be a "shadow Board." In answer to Councilman Malcolm's question regarding the intent of Scripps to acquire Bay Hospital, Mr. Early stated their intent is to acquire the facility in order to add to their system concept. The trend for hospitals today is to get together and "chain" and Scripps will be chaining with Voluntary Hospitals of America. Councilman Malcolm then questioned what Scripps plans for Bay Hospital after the (five) 5 year period of time. Mr. Early declared that Scripps has no intent to sell Bay Hospital; however, things do change in the hospital field - all health care changes and ~ith new things are happening daily in hospital cares, provisions must be made for these changes. Councilman Malcolm noted the agreement states that within 10 years, Scripps can do anything they want with the Bay facility and that the revenues derived from the hospital within the first few years will be put back into the hospital for new equipment and so forth. This will certainly increase the value of the hospital; however, the agreement states that Scripps may be able to sell the hospital prior to the year 2010 and if so, the City will receive 10% of the profit. Mr. Malcolm questioned that if Scripps truly does not intent to sell the facility, why was this statement put into the agreement, and why would the City receive only 10~ on the dollar and Scripps 90~ when the facility will be worth much more after the 5 year period of time. Councilman Malcolm indicated this clause should be changed. Mr. Early responded it is not inconceivable that the hospital could be sold at some later date. Councilman"Malcolm remarked that in that event, the City should have the "golden parachute" which would be an incentive for Scripps not to sell the facility. Further discussion with Councilman Malcolm, the Council and members of the Scripps Board involved "the reversionary interest which does not have a value today due to the debts of Bay Hospital; the value that will be added to the hospital will be from Scripps; if the facility is sold, it will be sold as a business and not as a real estate deal; the Arthur Young study indicated the hospital facility is worth ~8 million; the Councilmembers want to evaluate market value; there should be some prohibition in the agreement from having Scripps sell the hospital; discussion on how the ~98,000 per year would be used for "services." ~inutes - 4 August 28, 1986 Council Conference Councilman Malcolm noted his displeasure with continually giving money to senior citizens' services stating the City Manager should be concerned with spending some of this money toward the youth of the City. Councilman Malcolm further stated he does not agree with staff's statement on the reversionary interest since filing a bankruptcy does not lose anything of itself and that he was not overly happy with the agreement since the City is, in essence, giving away a 920 million asset and he will not give up that reversionary interest lightly. He suggested the City Council appoint two members as a sub-committee (and that he be one of those members) in order to meet with the firm of Miller & $chroeder to discuss their options and to see whether or not they would be willing to contribute an amount of money to the citizens of Chula Vista to help bail Bay Hospital out of the situation it now finds itself. In that way, the City will not be placing all the burden on Scripps Hospital. Councilman Malcolm added that since the City is not getting cash value anywhere near what the facility is worth, it would be wise for the Council to close all avenues in picking up just monies that are due. MS (Malcolm/Moore) to approve this transaction, in concept, and appoint the Mayor and Councilman Malcolm to discuss with Miller & Schroeder possible participation. Councilman Campbell stated he is abstaining from voting on this issue today. He is a member of the Board of Directors of Community Hospital and because Community Hospital was a potential participant, he discussed his role with the City Attorney. The City Attorney advised him he had no possible conflict of interest; however, because of appearance's sake, Councilman Campbell stated he would abstain. Councilwoman McCandliss asked to have included in the motion (1) that the City Council receive copies of Scripps' fee schedule; (2) that some definition be made as to the role and standing of the Advisory Board; and (3) to incorporate into the agreement some of the intent of Scripps as to the profit for sale of the facility. Councilman Malcolm stated he would include this in his motion, Councilman Moore agreed to the second. Mayor Cox questioned Mr. Early as to what interaction will occur between by Scripps Hospital and Community Hospital when they take over the operation of Bay Hospital. Although competition is good, there are areas of specialized services along with the purchasing of that equipment which will be quite expensive so therefore, he questioned what type of role Scripps would envision as to its coordination with Community Hospital. Minutes - 5 - August 28, 1986 Council Conference Mr. Early stated he met with Bob Hansen, Administrator of Community Hospital, and their view now is that Scripps wants to be as much "neighbor" as possible. They are open to consideration of any kind of agreements or arrangements that would make sense and value to the community. The motion to approve the agreement in concept passed unanimously. 2. ORAL COMMUNICATIONS None. 3. CITY MANAGER'S REPORT a. City Manager Goss submitted a progress report on the Raso house at 165 Murray Street. 4. MAYOR'S REPORT None. 5. COUNCIL COMMENTS a. Councilman Campbell stated he doesn't have any great confidence that the Raso deal will be consummated to everyone's satisfaction and because of that, he asked that staff give a status report to the City Council frequently, perhaps even once a week, and to follow through personallyon this construction by going to the house and observing the modifications. Councilwoman McCandliss stated she had planned to talk to Mr. Raso's architect and suggested perhaps the City M.anager have staff contact him also. Councilman Moore indicated the Council doesn't need any more "footprint" problems. b. City Clerk Fulasz reported the meeting of September 9 is a State holiday and she was advised by the City Attorney that the City Council cannot meet that evening. The City Charter specifies that if a holiday falls on a meeting day, 'the Council shall meet the following business day. However, the following business day is the meeting of the Planning Commission and they have 3 large public hearings so therefore, need the Council Chamber. MSUC (Cox/Campbell) to cancel the meeting of September 9, readvertise the public hearings scheduled for that day to the meeting of September 16 and if needed, a Council meeting can be called for September 10 at 4 p.m. ADJOURNMENT AT 6:35 p.m. to the meeting with the City Manager on Saturday, August 30 at 8 a.m.; the regular meeting of Tuesday, September 2, 1986 at 4 p.m. and the City Council tour on Saturday, September 6, 1986 at 8 a.m. /City Clerk 0868C