Monday night, New Hanover County Commissioners decide the future of New Hanover Regional Medical Center. Since Commissioners announced the potential sale more than a year ago, opponents have argued the county should not let go of its single most valuable asset or control of local healthcare.
Supporters say they’re excited about selling when the organization is thriving and proceeds can go to critical community needs. But questions remain.
Questions such as: why the rush?
"It is not ready. There is no need for this. And it's too big of a decision to have to go like that."
Rob Zapple is one of five county commissioners who will vote on the purchase agreement. He’s been raising questions about the sale since it came up in July of 2019. Even now, he doesn’t understand why the process seems to keep speeding up.
"This rush and this overall sense of -- this has to happen by what's now, even on an accelerated basis, has been accelerated by two more weeks, moving the final vote from the 19th to the fifth. And that just happened last week. No explanation. The image that I keep using is the hospital people feel like they're done; it looks like they're diving for the tape."
Commissioner Woody White says getting it done before the November 3rd election, when a new board is seated, is the most responsible decision the current board can make. The conversation about selling the hospital, he says, dates back more than a decade. To let a newly-elected board tackle it…
"I know what it's like to be a new commissioner. I know the first 30 days, you're trying to figure out where the coffee pot is. The next 60 days. You're trying to figure out where your parking spot is at one of the 10 committees that you sit on. For something this important that's going to impact this community for, for generations, you want people that know what they're doing that have the history and the background."
Opponents believe the rush is because the current board has the votes to approve the sale, and that may not be true after the election.
Once the sale actually closes in March of 2021, the proceeds, estimated at about $1.25 billion, are destined for a newly-created community foundation.
"The core issue is whether this will be a private foundation or it will be in a public or an open foundation."
A private foundation is not subject to open meetings or open records requirements. In other words, the press and the public would not be allowed into meetings nor they would be allowed access to financial documents.
Chairperson Julia Olson-Boseman says that, on that point, she would like to see some accommodation.
"Well, I think that the people certainly certainly have a right to know where the money's being spent. And so I definitely think there needs to be a couple of public hearings every year with the foundation where people do get a chance to go in there and talk."
And who are the people who will sit on the board of this private foundation that is managing public money?
Commissioner White says they will not be politicians.
"The idea was to have your cake and eat it too. By that, I mean have County government appoint some of the people, but have the private endowment private so that it can be apolitical, no politics, nobody grandstanding, no candidates going to speak to the foundation and running a campaign or whether or not we should have a new high school here or there, you just go on down the list…"
All 11 people, says White, will have to live in New Hanover County, and he says, there will be gender and racial diversity.
"There'll be people with community leadership skills, finance, social justice, equity."
Olson-Boseman says she has complete faith in the first slate of board members.
"I trust them. And I know that they're going to do the right thing. So I'm just ready to get politics out of it, ready for money to come and go."
On the other hand, supporters of a public foundation say open meetings and records would provide greater accountability.
But if it’s public, it will be subject to oversight by the Local Government Commission. And if it is, that $1.25 billion will be limited, according to county staff and officials, to a very low return on investment.
Commissioner Woody White explains:
"Chapter 159-30 plainly states what you can and can't do. And it's a maximum of one-and-a-half to 2% because you're investing in municipal-grade, low bonds. You're investing in T-bills, you're investing in guaranteed income products that produce nothing, basically."
That low return as compared to a strategy that would bring in a 5% return, says Chair Julia Olson-Boseman, is significant.
"We're talking about a difference between 20 or 30 million a year and 50 or 60 million. And like, like I said, from the beginning, I don't, I hope we don't even spend any of it for years and we just watch it grow."
Zapple agrees that the county shouldn’t forfeit that higher return, but he argues that the Local Government Commission has the authority to approve an investment strategy that could yield up to 5%.
Olson-Boseman says she’s confident, though, that the foundation is structured so it will be free to invest according to a strategy laid out by an institutional investment manager.
"And if for some reason we do fall under the LGC, then we will be seeking, from the legislature, permission or the authority to do a more aggressive investment schedule like New Hanover Regional."
Commissioner White says he doesn’t believe the LGC would come after the county with legal action.
"The burden is going to be on the LGC to choose to go to court, to enforce that. Now, are they going to do that? I hope not. Because if they do that, it would result in this community potentially losing $30 million a year in money that can be used to help improve people's lives. So why would it do that?"
And about that money, says Commissioner Zapple, the amounts laid out in the purchase agreement don’t add up for him.
"You know, wait a minute, there's an extra $35 million here that the County is committed to that that we're not getting. So where does that $35 million come from? And how is that accounted for?"
Commissioner White says it’s nuanced and there are more elements in this kind of deal that figure into closing costs. For example...
"There are leases that need to be terminated. There are costs associated with new leases, old leases, midterm leases. There are corporations that need to be dissolved and recreated. There are fluctuations day to day in the cash of many, many different accounts in various holdings, foundation, hospital, et cetera."
At closing, all the money in the escrow account gets zeroed out and moved to the community foundation, says White.
Olson-Boseman and White say they’re also excited about what the foundation will mean for the region’s future.
"Particularly right now. Who's suffering the greatest impact from Covid and, and lack of in-classroom instruction? The poor, the minorities."
Exhibit C in the asset purchase agreement lays out where the returns on the investment will go:
"…local teacher fellows program, which was cut years ago, access to scholarships for postsecondary education…This endowment is going to set up a scholarship program. That's just one bucket."
There are also provisions in Exhibit C for eradicating food deserts, expanding access to high quality, fair cost physical and mental health clinics for county residents and investing in an on-demand, cost effective public transit system for dependent and choice riders – as well as other public health and safety initiatives.
But Commissioner Zapple still worries the process is moving too fast and the county is selling an institution it’s taken 53 years to build.
"All this money belongs to the taxpayers of New Hanover County and, early on, or several months ago, it became clear to me in tracking this, there was nobody at the table, either writing the documents or putting the legal brain power or the accounting power whose sole focus was what is best for the County taxpayers."
Once the asset purchase agreement is approved , the state Attorney General’s Office begins its review of the transaction.
The five people named by the county to the new community foundation board are:
- Spence Broadhurst (3-year term / former co-chair of the Partnership Advisory Group)
- Dr. Virginia Adams (3-year term / former member of the PAG)
- Hannah Gage (3-year term / former PAG member)
- Stedman Stevens (2-year term)
- Shannon Winslow (2-year term)
At its regular meeting on Monday, Oct. 5, the New Hanover County Board of Commissioners, will consider and vote on the following:
- Asset Purchase Agreement between New Hanover County, New Hanover Regional Medical Center (NHRMC) and Novant Health
- Use of net proceeds (which is included in the Asset Purchase Agreement as “Exhibit C” and referred to previously as “Exhibit D” in the approved Letter of Intent), which includes establishing a $1.25 billion community endowment to benefit residents and support the community
- Bylaws for a community endowment
- The termination of the lease between the county and NHRMC (if the Asset Purchase Agreement is approved, the current lease agreement between New Hanover County and NHRMC would terminate at closing, because properties and facilities being leased would be sold by the county – making the lease no longer relevant).
The public can attend the commissioners’ meeting, but capacity will be limited due to COVID-19 and social distancing guidelines will be followed. The meeting will be available to view live on NHCTV.com and NHCTV’s cable stations: Spectrum channel 13 and Charter channel 5.
The full agreement, presentations and more are available online at nhrmcfuture.org.