When after 2011 the state contractually was free to do what it willed
with the 17.22 acres comprising what it had run until 2009 as the New Orleans
Adolescent Hospital, the plan that evolved during this past legislative session,
as constituted in Act 867,
was to lease it to the neighboring Children’s
Hospital in an arrangement that hoped to bring the state $35 million, or
the value at which the state had insured it. In turn, that money, presumed
realized by no later than Aug. 1, 2013 (as the last bills of state government
for the prior fiscal year came due), was to be treated as “one-time” funds
eligible for use.
But now it turns out that the property’s
appraisal is just $20.9 million. There’s some room for debate there when accounting
for a different use – for example, put down some streets and drainage, sell 50
lots of a third of an acre in size with houses to match, and being prime Uptown
property in the shadow of Audubon Park you might get a million bucks a house
and a developer might be willing to fork over $35 million for it as is – but it’s
all hypothetical because the law doesn’t permit that. It only allows for negotiations
exclusively with Children’s until Feb. 1, 2013, and then adds for the next six
months anybody else willing to conduct health care operations to bid, which if
not executed then the property reverts back to the Louisiana State University
System. The one thing it doesn’t allow is sale of the property, even if it were
for health care purposes.
Therefore, the state tied its own hands, and puts the Gov. Bobby
Jindal Administration in a jam. For it to be able to present a balanced
budget, it had to rely upon this money, for which it has
drawn criticism. However, it’s almost impossible to conceive of a business
situation where somebody’s going to want to lease property, for no matter how
long, at 70 percent above its appraisal. Because of its location next to
Children’s, maybe it would have bought the property well above the appraisal
but, again, the law precludes that option.
Thus, the state now has gotten boxed into a bad situation. It’s under
pressure to get a deal on the property or its gets nothing at all, and whatever
it gets leaves a budgetary hole that potentially means further cuts in health
care funding down the road. Yet it’s a situation that could have been avoided
in whole or largely by allowing a sale for any use (and/or the gravity of which
would be reduced without the need for plugging in proceeds from a sale to
finance continuing operations.)
So why did the state constrict its latitude on this kind of deal? The
legislative intent appeared to be to make the property be used as a health care
facility, perhaps partially or entirely devoted to mental health to offset the
loss of beds by the original NOAH closing and the recent Southeast Louisiana
Hospital shutdown (even though the state
and region remain with a comfortable number of beds for psychiatric purposes).
A leasing strategy would give it more control over this.
But why should the state be so concerned about trying to directly
influence the number of beds provided? If the market is there – and because so
much health care spending comes now via government, it can substantially
influence that marketplace to ensure this – nongovernment concerns will supply.
Maybe not at 210 State Street, New Orleans, but somewhere in Orleans, and maybe
where land values are cheaper and transportation more facilitated, lowering
costs to clients. There’s nothing really critical about having to have health
care provided at that exact location on state land. – especially when the state
is doing its best to reduce
ownership and direct supervision of health care provision.
Unless you’re a typical Louisiana politician who equates the power and
prestige of office-holding with the amount of stuff over which you have control.
Or a Children’s Hospital insider to whom this provides a golden expansion
opportunity, even if all you can get is a lease rather than buy arrangement.
That latter concern is permissible, because this private nonprofit entity’s mission
is to provide health care to children and this kind of deal helps that.
But what concern should it be of the state to be a landlord? It should
work for the citizens, to get the best deal possible for them. And restricting
this deal in so many ways which deliberately devalues its return to the
citizenry, when such restrictions are not necessary to ensure the adequate provision
of health care, means this is more about fulfilling egos than serving the
people – with a dash of parochialism with a few legislators trying to respond
to a handful of special interest and constituent desires.
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