West Volusia Hospital Authority,
131 E. New York Ave.,
P.O. Box 509,
DeLand, FLA 32721.

Dear Sirs:

I regret that I shall be unable to address the Board in person on this matter. The Chairman will kindly have this letter and the related hosp0018.txt and hosp0019.txt inserted into the minutes in lieu of a spoken presentation.

To hand the propsed Asset Purchase Agreement dated 11-Aug-2000 between the Authority and the Adventist Acquisition Corporation. This item is not marked as a draft, but is awaiting further discussion and action by the Board of the West Volusia Hospital Authority.

Most of the Board members have been involved for several years; you will therefore be unsurprised to hear that I would like to see the hospital either sold for a fair price and on fair terms to a private entity, or operated under a fair management agreement with a private entity. The years of Authority operation have not been kind to my finances, nor has the operation been acceptable. The Board has heard the same from many people, and it is to be hoped that the Board will take prompt and responsible action.

By way of background, I would remind the Board that the facility was valued at approximately $27 million at the time of the lease to Ormond. Since that time, Ormond has either maintained the facility so that we have not lost value, or in the alternative has suffered it to be wasted, for which damage they would be liable to the Authority. Additionally, we have supplied $10 million in direct subsidies exclusive of our indigent care payments; these subsidies exceed the debt which Ormond undertook to defease. The value of the facility can under no circumstances be less than $27 million today, and may be greater. Your attorney will, upon request, read for you and interpret the last sentence of §155.40(4), F.S.

There are some flaws in the contract material presented, which if left uncorrected could make the difference between an agreement beneficial to the public and a regrettable disaster. Let us examine the basic agreement first; the riders concerning hospital operation and indigent care will be discussed separately.

The mortal flaw in this agreement is a purchase price which is unfair, unreasonable, and inequitible to the public. As contemplated in §2.2,

the purchase price hereunder (the ‘‘Purchase Price’’) shall be an amount equal to the total of (i) the unpaid debt allocated to the Hospital by Memorial Health Systems, Inc., a Florida not-for-profit corporation, in the Closing Balance Sheet, [...] and (ii) the amount necessary to terminate the existing defined benefit ‘‘mirror’’ plan for employees of the Hospital (the ‘Plan’’). Buyer shall pay the Purchase Price by assuming the unpaid debt and by paying the amount necessary to terminate the plan as described above.
This means, in effect, that the hospital shall be given away. Let us examine the two components of the purchase price.

The amount necessary to terminate the existing ‘‘mirror’’ plan should be zero. Assuming always that the Hospital has fully funded the retirement plan, and that none of the money due in the retirement plan has been lost or converted, there should be no money owing and no liability. The consideration, therefore, is zero. Only in the event that the retirement plan has not been properly funded would this amount be non-zero, and in such a case the Authority would expect Ormond to prompty rectify any short-fall.

Payment of the ‘‘unpaid debt’’ also fails to constitute reasonable consideration. None of the debt whose payment is contemplated is debt of the Authority; any debt of the hospital is purely the debt of its operating corporation and is not secured in any way by the facilities.

That ‘‘unpaid debt’’ does not appear to be legally binding upon any public entity in the State of Florida, because it was incurred, if at all, out of the Sunshine. Your attorney will, if asked, read to you the opening sentence of §286.011(1), F.S., and can cite case law regarding actions taken outside of public meeting. While it is possible that Memorial Health Systems owes money, I believe they are unable to bind the public by their private meetings and resolutions. This issue is currently the subject of some controversy.

Further, it would be unfair and inequitable to charge the public with such debt. At no time was the public invited to know about or be heard concerning the debt, its terms, and the intended and actual use of the proceeds. The Hospital must in fairness be prohibited from charging the public with debt without giving them a meaningful opportunity to be heard.

Another ruinous flaw in the contract concerns employee pensions and the funding of the same. I would also call to your attention §2.3 (Employee Defined Benefit Plan) in which the Authority may provide further funding for employee pensions. As noted above, there should be no short-fall in the pension plan as it stands. Thus, the calculations hereunder can only be for hypothetical future service. It is not proper for the Authority to use its faith and credit to pay for service not rendered, especially when such payment is to the benefit of a private corporation.

Since the plan from Memorial is a full replacement for FRS, I submit that any employees desirous of serving time will be able to do this with other government entities; those entities, participating in FRS, will complete the time required. In the alternative, it is certain that Adventist will desire to retain the most qualified staff, and will therefore offer sufficient financial incentive either directly or through their retirement plan. In either case, the employees are protected; there is no need to expose the taxpayer to the possibility of questionable action.

It should also be noted that the contractual provision for the Authority to pay for Adventist’s accountants seems unreasonable. In truth, agreeing to pay (without limitation) those fees and costs determined and charged by Adventist suggests a questionable delegation of the Authority’s power.

In short: the agreement calls for the Authority to receive nothing (which is less than the fair market value of the facilities) and to pay substantial amounts of money, determination of which shall be made by a private corporation not answerable to the public. These flaws should be corrected prior to closing.

Thank you for your attention to this matter.


Tanner Andrews

Posting of this letter is a paid political advertisement provided by Tanner Andrews, P.O. Box 1208, DeLand 32721, independent of any campaign or committee. This material is also on display at the offices of the West Volusia Hospital Authority. No candidate has approved this material.

from @(#)hosp0017.txt 1.0 14-Aug-2000

proc with @(#)hmac.ta2 1.1a 01-Jun-2000