Monday, October 19, 2009

What If....

What if the Wishard project referendum fully disclosed :

the cost of the project (maximum of $703,040,000),
the term of the bonds (maximum of 30 years),
revealed that the bonds would be secured with property taxes,
the lease arrangement with the Indianapolis-Marion County Building Authority,
that there would be two or more buildings whose function related to medical care,
that there would be one or more garage and/or parking lot,
that there would be a power plant built,
that the maximum annual payment would be $54,807,604,
which could end up with a maximum increase in the property tax rate of $0.1474 per $100 of assessed value,
and that the tax increase would be outside the property tax caps (so homesteads would pay up to 1% of gross assessed value PLUS up to $0.1474 per $100 of net assessed value)
that the total debt owed by all taxing units in Marion County secured by property taxes is $2,160,112,176,
that the maximum interest rate for the bonds would be 6.1.%,
that the maximum interest to be paid over the life of the bonds would be $830,478,858,
and that none of the preceding included the $120 million to be obtained through the Build America bonds (which is used to pay down interest) or the $150 million that Health & Hospitals has stashed away already for the project ???

What if they included in the referendum the very information they were required to publish in the public notice? Required to publish because it is pertinent information for the voters?.... What if they included that information in the actual referendum question?

At the end of the day I must assume that the reason they chose to be relieved of the onus of full disclosure in the referendum question, is that they were worried the public would reject their project due to the property tax guarantee for the repayment of the bonds.

Matt Gutwein, CEO of Marion County Health and Hospitals, Corp., says that they fully intend to repay with ongoing revenues, but are proposing bonds secured with property taxes because the interest on that type of bond is lower. That would be true if the bond buyers are reluctant to believe that the ongoing revenues are a sure thing for the next 30 years. Which of course begs the question, if savvy investors would reject the notion of an ongoing profit for Wishard, why should a savvy voter believe it?

But, anyway, what if full disclosure was the approach the Wishard folks had taken. What would the discussion then be? Well, I think it would be a closer scrutiny by the public of the cost figures, the proposed assortment of buildings, the amount of financial support Wishard should be getting from the IU School of Medicine, and how costs could be trimmed to simultaneously accommodate the needs of our County Hospital and be frugal with taxpayer dollars. Important points when you are the one who must repay the bonds with taxes you pay on your property. Not so important if you consider it all 'free'.

If H&H were to switch entirely to revenue bonds to finance the project, then no referendum would be needed. Looking at it the other way, if the outcome of the referendum is 'No', then H&H can still build its new Wishard campus, it just would have to switch to revenue bonds.
The County Hospital purpose fulfilled by Wishard is a very important one. It is an obligation, in my view, to be sure everyone can get access to medical care regardless of ability to pay. And, I do think it should be in decent facilities.

Here are the questions I would raise if the property tax issue were either fully disclosed or taken off the table:

What is the expected cost of each building?

Given the per square foot cost of the power plant is $1335.55, how much do you need that building? Will it generate efficiencies? If so, how long before the cost to build is recouped through the efficiencies? Would IUPUI or IU Medical School share in the utilities produced by the plant? If so, why are they not helping to pay for it? Would the plant generate energy through a green technology?

The 'faculty office building' -- who is it for? IU School of Medicine faculty? If so, why isn't IU helping to build that building?

In any case, why doesn't IU School of Medicine chip in for the cost of the new hospital or even pay an ongoing access fee for using it as a teaching hospital? They certainly gain from having new facilities to teach in and the faculty certain pull down added income by using the hospital and offices for a private practice on top of their teaching and/or research duties. IU School of Medicine charges tuition - why should they get the use of a teaching hospital for free?

Would you disclose the latest cost per square foot of comparable hospitals that were used for your projected costs?

How many beds would the new facility have and how many does the current facility?

Will the parking garage be just for patients and doctors, or would parking by University and/or School of Medicine personnel also be allowed. If the latter, why aren't those institutions chipping in for the cost of increased parking on their campus?

How does the Wishard role as the County Hospital include an outpatient facility? Perhaps I need an explanation of what indigent care is required and what care is provided for profit by Wishard. How much of the outpatient facility is for profit, and how much to fill a need that the other medical enterprises in town cannot fill.

Will the furniture and equipment in the current facility be moved to the new facility? Or, will it all be junked and all brand new equipment and furniture provided by the project? How much of the total cost is represented by new furniture and equipment?

And last but not least, the project you are proposing would increase the total Marion County debt secured by property taxes, by a whopping 33%. Is it wise to have so much debt or for so much of it to be encumbered by just one project?

Those are the questions that would come to me about this project if Gutwein and Co., weren't out there selling a referendum legally required because of bonds secured with property taxes, all the while saying they will not raise property taxes to repay the bonds. I think we deserve honesty from our government, even if it means they won't get their pet project built. At the end of the day, it isn't their government or their project, it is ours.


Downtown Indy said...

What if they low-ball the .1474 per $100 and an 'emergency' arises where they 'have to' do another referendum because they need even more?

There's nothing preventing them from going back to the trough again and again over the 30 years to ask for more, more, more!

If we let this current referendum pass, we should expect it to come back to haunt us and our children over and over.

Had Enough Indy? said...

Well, as things stand now, the Mayor would get to duck, because it is only the Council that approves the MuniCorp budgets. So, the Council would have to pull money from another budget OR H&H would have to return for a referendum. But, in Indiana, debt of a governmental unit MUST be paid.

The other what if... revolves around H&H's actual ability to pay off these bonds. They have only been profitable for some 5 years and that due to the nursing home business and the higher reimbursement rates due to Wishard being the only alternate for the indigent and uninsured. That middleman position is shaky and has been labeled by Mitch Roob as something of a scam on the federal government (see Advance Indiana for more detail).

Let's go one further and say that the profitability of Wishard maintains for some decades to come. Don't laugh, let's just pretend for the moment. The fact that this referendum will authorize $54 million per year from property taxes OVER the tax caps will be irresistable to some future Mayor and Council. I can easily imagine them forcing H&H to pull that new money out of our pockets, then turn around and give the City a Payment in Lieu of Taxes. Easy money - mostly because few citizens will even know it happened.