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Things They Need to Tell Us Before They Lease Community Hospital

By: Gerrie Schipske, Author of “Historical Hospitals of Long Beach”

Before everyone gets too excited over the announced possibilities of a new operator of Community Hospital, taxpayers need to be aware that the City of Long Beach owns the deed to the property on which Long Beach Community Hospital sits. 

The actual deed has a restrictive covenant that only allows the property to be used for a “public hospital.” This is because the taxpayers paid for the land and then raised millions of dollars through bonds to pay for the construction and expansion on several occasions. Also, the City even gave money directly to keep the hospital operating. The City holds title to the property.

Historically, the hospital has been operated by the Long Beach Community Hospital Association and then Healthwest, UniHealth, Catholic HealthCare, the Community Hospital Foundation and most recently Memorial Medical.

Memorial is ending its lease because it cannot (or will not) retrofit the hospital to meet state earthquake standards. Unless the property is appropriately retrofitted, it cannot be used for surgical and acute care services such as an Emergency Room. The property can be used for other medical services such as rehabilitation, assisted living, mental health care.

In order to keep the facility open in some capacity, the City, will have to lease to another operator. According to the June 19th Council agenda, the City has apparently selected a newly formed Limited Liability Corporation – a privately held for-profit entity. The entity has already proposed that the property can be used as a “geriatric center.” At best, without a substantial and costly retrofit, the eastside will most likely get an “urgent care” and a very large senior healthcare facility.

The City should hold a public hearing before the lease is signed, as is required of “general law” cities, so that the public can understand the full truth about the changes that are being contemplated to Community Hospital.

These changes might be the best for the property with its location being on an earthquake fault, but taxpayers need the City to protect its interests as well:

  • ·         The title to the property clearly states that the property is to be used for a “public hospital.” Any other use that does not allow all the public (such as those not considered “geriatric” age) to access the property may violate the deed.
  • ·         The property is owned by the City and taxpayers and it cannot be leased to this for-profit group for the proposed $1 dollar a year, as doing so would be “a gift of public funds.”
  • ·         The City must negotiate a “fair market rate” for use of the property by a for-profit corporation. To do so, the City must obtain a “fair market appraisal” of the property from a neutral party.
  • ·         The new lease to a for-profit will give rise to a “possessory interest tax,” which is a property tax on the tenant’s leasehold that is billed directly to the tenant. It should be expressly stated in the lease itself that possessory interest taxes apply so that the city does not become liable for such taxes under the possessory interest tax laws.
  • ·         The approval of a lease by the City is a “project” and requires compliance with the California Environmental Quality Act (CEQA). This is particularly true because the City is the local entitlement permit-issuing authority and should comply with CEQA for any improvements outlined in the lease before approving the lease itself so that a CEQA claim cannot be based on the city committing to a project (by signing the lease) before completing the CEQA process for the contemplated improvements.
  • ·         The City must ensure that the lease would not be hypothecated in any way to fund the costs of construction or to secure any construction loan, nor would there be any enforceable lien on the property resulting from the proposed lease agreement or the proposed construction or any future improvements on the property.
  • ·         California Labor Code Section 1720(b)(3), requires the payment of prevailing wages for any construction contemplated by the lease because rent that is less than fair market rent can be considered payment of public funds and triggers prevailing wages. The City needs to include this in the lease so that it does not become liable for such payments.
  • ·         The City failed to require the former operator, Memorial, to retrofit the facility to maintain acute care services like an E.R. It must insist that the new operator do so by 2020.

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