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Health district sells hospital
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Health district sells hospital
By Laura Hagar Rush, Sonoma West Editor, [email protected] Dec 4, 2019
The long and byzantine struggle over Sebastopol’s hospital came to an end this week when the Palm Drive Health Care District sold west county’s only hospital to American Advanced Management Group (AAMG) and Sonoma Specialty Hospital (SSH) for $2 million in cash.
Escrow is scheduled to close on Wednesday, Dec. 4.
The settlement was hammered out during five closed-door sessions between representatives of the Palm Drive Health Care District (PDHCD) and representatives from AAMG and SSH. Board President Dennis Colthurst was the lead negotiator for the health district, though most of the board members took turns on the negotiating team at one time or another.
At the district’s Nov. 25 board meeting, PDHCD Executive Director Alanna Brogan presented the terms of the sale to the board.
The major takeaway, listed among other points on a handout she gave board members, was this: “This deal clears all debt owed to AAMG/SSH for operations and provides $2,000,000 in cash to the district.”
All of that money will go toward the district’s bankruptcy obligations.
Board members unanimously approved the negotiated terms and authorized Colthurst to sign the final settlement document for the sale of the hospital to AAMG.
In which $4 million becomes $2 million
Voters with long memories might be wondering why the hospital, which has an adjusted appraised value of $5.2 million, sold for only $2 million.
In the run-up to this years’ special election for Measure A, the district led voters to believe that it would be getting $4 million in cash, plus a $1.2 million promissory note. Measure A offered AAMG an exclusive lease-with-an-option-to-buy, and voters approved it by more than 75% of the vote.
How did that $4 million in cash end up as $2 million? That’s what the rest of Brogan’s presentation dealt with.
“A big part of these negotiations was settling how much we owed AAMG and SSH for their time operating the hospital under the management agreement,” she said.
That management agreement, which was signed in August 2018, contained a fateful clause that put the district on the hook for AAMG’s operating losses until AAMG signed the lease for the hospital, which took place in April of this year.
Brogan said the decision to pay off the debt is what turned the district’s earlier estimate of $4 million into $2 million.
“At the time (of the election),we were not considering paying off the debt we owed AAMG/SSH because we had 5 years to pay it. However, in the final settlement agreement, the board decided it would save money on ongoing interest by paying this debt off. So that is done, and we no longer owe AAMG/SSH anything.”
By avoiding paying the 5% interest on their debt to AAMG over five years, the district saved roughly $1 million.
Nailing down just how much the district owed to AAMG was tricky, however.
During negotiations, AAMG claimed that their operating losses as of April 1 of this year were $7,109,465 — a figure almost three times higher than the figure the company reported in mid-April, which was in the $2 million range. As a compromise, the district negotiated the $7 million figure down to $4,455,633, a number that Brogan said was closer to the one that AAMG gave as an estimate in the original management agreement.
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Re: Health district sells hospital
$2 million seems like quite a deal and a shame Sonoma County did not see an opportunity to purchase an almost ready made facility for both temporary/transitional step like housing and services in a one-stop-shop location. I immediately envisioned, life skills classes, physical and mental health need services, space for employment assistance, daycare, pet care, plus an existing commercial size kitchen, laundry etc. The County just today released available funding award bidding towards affordable housing projects. I believe for the exact amount this facility just sold for. How did we miss ?
Issue Date: December 4, 2019
Application Due Date: January 24, 2020, 2:00 pm
The Sonoma County Community Development Commission (Commission) requests applications for eligible capital and affordable housing projects to receive funding from the following sources:
- Community Development Block Grant (CDBG) – FY 2020-2021 Estimate: $1.2 million
- HOME Investment Partnerships (HOME) – FY 2020-2021 Estimate: $605,000
- HOME CHDO Set-Aside – FY 2020-2021 Estimate: $120,000
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Posted in reply to the post by Barry:
Re: Health district sells hospital
I don't care WHAT happens to that damn hospital as long as they stop taxing US for it. Both property tax and sales tax.
Re: Health district sells hospital
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Posted in reply to the post by BlueBayou:
$2 million seems like quite a deal and a shame Sonoma County did not see an opportunity to purchase an almost ready made facility for both temporary/transitional step like housing and services in a one-stop-shop location..... The County just today released available funding award bidding towards affordable housing projects. I believe for the exact amount this facility just sold for. How did we miss ?
another question, which may answer the first -- how 'almost' is almost? how much spending would be required before the space could be used?
I don't know whether it's the case here, but often there are minimum standards that must be met before a building can be turned into uses like that. To me, that's part of the problem; I mean, it looks bad when a shelter collapses in an earthquake and all, but there has to be some kind of middle ground where buildings that might not be acceptable for commercial use can be part of the solution to a pressing problem. The cliche "don't let the perfect be enemy of the good" applies here. It can't be taken to the extreme where we drop all standards of safety but it's equally true we can't refuse to take advantage of whatever imperfect resources are out there. Tough problem, like everything about this issue.
Re: Health district sells hospital
The opportunity was dismissed because of public pressure for medical services. Plenty of citizens asked about housing services at this former publicly owned facility. This is just one example of the economic segregation which is the general will of the community of sebastopol.
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Posted in reply to the post by BlueBayou:
$2 million seems like quite a deal and a shame Sonoma County did not see an opportunity to purchase an almost ready made facility for both temporary/transitional step like housing and services in a one-stop-shop location....
