HomeMy WebLinkAboutR-83-1127J-83-1089
12/7/83
rr/D-5
RESOLUTION NO
i
N3--1127
A RESOLUTION ALLOCATING $15,000 FROM
SPECIAL PROGRAMS AND ACCOUNTS, CONTIN-
GENT FUND, INI SUPPORT OF THE MIAMI
CHRISTIAN HOSPITAL CONSTRUCTION PRO-
JECT IN CONJUNCTION WITH THE CITY -
SPONSORED FEDERAL GRANT APPLICATION
FOR SAID PROJECT, SUBJECT TO CONDITIONS
THAT MAY BE ESTABLISHED BY THE CITY
MANAGER.
BE IT RESOLVED BY THE COMMISSION OF THE CITY OF MIAMI, FLORIDA:
Section 1. The sum of $15,000 is hereby allocated from
Special Programs and Accounts, Contingent Fund, in support of
the Miami Christian Hospital Construction Project in conjunction
with the City -sponsored federal grant application for said pro-
ject, subject to conditions that may be established by the City
Manager.
PASSED AND ADOPTED this 8th
ATTEST:
/*
�j
PH G. ONGIE, CITY CLERK
PREPARED AND APPROVED BY:
day of
'fa'a 7. *Atx
ROBERT F. CLARK, DEPUTY CITY ATTORNEY
APPROVED AS TO FORM AND CORRECTNESS:
E R. GARCIA-PEDROSA, CITY ATTORNEY
December , 1983.
Maurice A. Ferre
MAURICE A. FERRE, MAYOR
CITY CC>r/:I1ISSION
DEC 8 19831 �•.y
RESOLLINU,i iIu83-112 `
REMARKS.
CITY OF MIAMI, FLORIDA
INTER -OFFICE MEMORANDUM
TO Honorable Mayor and Members
of the City Commission
FROM Howard V. Gary
City Manager ; h
DATE December 8, 1983 FILE
SUBJECT Recommendations --
Christian Hospital
UDAG
REFERENCES City Commission Agenda
December 8, 1983
ENCLOSURES
Cn, December 7, City staff met with the Honorable Claude Pepper,
Mr. Anthony Estevez, and Dr. George Simpson to discuss the
Christian Hospital project for which final approval of Urban
Development Action Grant funding assistance is being sought from
the City and the U.S. Department of HUD.
Subject to the following terms and conditions, I recommend the
City's continuing support of the proposed 150-bed healthcare
facility, including a loan to Christian Hospital, Inc. of $15,000
to fund the completion of the project feasibility study:
1. That the project developer, Christian Hospital, Ltd., agrees
to a goal of 52% Black ownership of the hospital facility. In
his endeavor to meet this minority ownership goal, Dr. George
Simpson, general partner of Christian Hospital, Ltd., will be
provided assistance in securing Black investor -owners through
the Department of Community Development with the assistance
of Miami Capital Development, Inc. Further, that Mr. Anthony
Estevez, the exclusive limited partner of Christian Hospital,
Ltd., will reduce his percentage of project ownership and
equity participation to the extent that Black ownership and
equity participation can be achieved.
2. That Dr. George Simpson, Chairman of Christian Hospital,
Inc., personally guarantee the City's $159000 loan to the
corporation for the project feasibility study.
3. That Mr. Anthony Estevez, limited partner of Christian
Hospital, Ltd., loan Christian Hospital, Inc. $12,500 to fund
the completion of a companion feasibility study for the
project.
4. That the project
developers maintain the obstetrical unit in
the hospital as was
originally planned.
Anthony5 That Mr. .
Estevez put in escrow the
$21,000 currently
owed the City from
his participation in the
Little Havana NSA
y
program until the
issue is resolved legally.
/ J
83-112'7
Upon City Commission approval of the above terms and conditions,
steps will be taken immediately to assist Christian Hospital, Inc. to
secure an extension of the Certificate of Need for the hospital which
is scheduled to expire December 15, and to secure HUD's approval for
an extension of its preliminary UDAG assistance commitment to allow
time for restructuring of the UDAG application.
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N #
December 7, 1983
CHRISTIAN HOSPITAL ISSUES
GENERAL ISSUES
1. Letter from Tony Estevez (attached)
2. Feasibility Study - $15,000 Laventhal 6 Horwith
G/� r Bad precedent - public dollars to private
developer for profit -making deal.
3. Removal of obstetrics unit from hospital. How does
hospital serve the community?
4. Repayment of UDAG dollars to job training instead of
to City.
CONTRACT CHANGES REQUESTED WITH HUD BY
SIMPSON AND ESTEVEZ
1. :'on -profit group to for -profit group.
2. Allowing syndication (contract does not now allow this).
3. Loan to be non -recourse.
4. Decrease project cost from $22 million to $17 million
but keep UDAG the same ($3 million).
5. Contract to allow Tony Estevez to divest 48% of.his
investment at any time.
STAFF AND HUD REQUIREMENTS NOT MET
1. Development budget
2. Operating pro forma showing cash flow between Christian
Hospital Ltd. (profit making) and Christian Hospital, Inc.
(non-profit) .
3. Why still need UDAG in light of $5 million cut in project?
4. Estimate of tax benefits accruing to limited partner
because of this deal.
83-JL12'7
4-L�4'_
CITY OF MIAMt, FLORIDA �^
INTEP-OFFICE MLEMORA.NOUM
To. Mayor
and Members of the
City Commission
FtaoM: Howard V. Gary
4
City Manager
DATE: December 1, 198:; PILE:
SUBJECT Status Reocrz/Recommendations -
Christian Hospital 1DAG
REFERENCES: Discussion - December 8
City Commission Meeting
ENCLOSURES:
The federally funded Urban Development Action Grant (UDAG) program
authorized by Congress in 1976 has provided cities across the
nation with �a vehicle with which to spur economic development,
create new employment opportunities, and increase the tax base
needed tc fund essential services. Thrcueh the UDAG program.
::. ar.c:.ng ,+ pro •ects _, nging :ncuscr:.ai parrs cc luxury
hotels which, absent Jthe program, would have a slim chance of ever
getting off the drawing board.
Generally, UDAG funds, which are loaned to project. developers,
have been used in combination with conventional loans at terms
structured to enable the developers to realize a reasonable return
on Lnvestment. The proposed project :rust result in new employment
opportunities and leverage new private sector capital investment
at least 2.3 =0 1 pri•Jate _`unding to UDAG funding? .
While UDAG funds are provided in the form of loans to the project
A
eveloper. they are awarded to the city as a grant. '"can repayments
are made directly to the city and Funds generated can be used to
finance other eligible community development activities.
In Miami, a S1,000,000 UDAG grant awarded in 1979 has been used to
provide second mortgage loans to the purchasers of 47 new single
family homes in Overtown, Coconut Grove, and Model City.
On July 2, the City received preliminary approval for a UDAG in
the amount of S3,000,000 to provide funding assistance for the
development of a 150 bed acute care hospital on the Shell City
site located ;n the eastern portion of the yodel City neighborhood.
Working with City staff, the Honorable Claude Pepper was largely
resoonsible for securing federal approval of the UDAG assistance
application For this S22,313,000 facility which was sponsored by
Hospi .a_ , _nc. , a local ncn-protc= 1ea_z-h tare group.
83-112'7
Dr. George Simpson, Chairman of the Board of Christian Hcspital,
Inc. has recently advised us of a number of changes in the
cwnership of the proposed facility and its operational capacity
which I believe will have a substantial impact on its feasibility
and HUD's preliminary commitment to provide UDAG assistance, the
terms of which are spelled out in a contractual agreement requiring
execution by the City.
As proposed, the 150 bed hospital was to have been owned and
operated by Christian Hospital, Inc., a non-profit health care
corporationnow operating Christian Hcspital located in
Brownsville. Dr. Simpson has recently indicated that the facility
will be developed and owned by a �for- prcfit limited partnership
incorporated as Christian Hospital, Ld. , with Dr. Simpson as a 270
general partner and Mr. Anthony Estevez as a 98% limited
partner. Ac-:ording to Dr. Simpson, the facility, when completed
will be leased back to Christian Hospital, Inc.
Dr. Simpson has indicated that the reason for changing sponsorship
of the project from a non-profit organization to a for -profit
limited partnership was to allow for syndication of the project.
tax shelter advantages. According to Dr. Simpson, the original
project sponsor, Christian Hospital, Inc., does not have the
necessary equity capital nor the ability to syndicate due to its
non-profit status. It should be noted 'here that svrdication of a
project of this magnitude can generate capital far in excess of
that required for equity and, in fact, often provides a developer
with substantial profit in addition to that generated through
aroect operating income.
In addition, Christian Hospital, Ltd. is requesting the UDAG loan
to be non -recourse which, in the event of default, would hold
harmless the general partner of the partnership, (Dr. Simpson)
from personal liability for the debt. yr. Estevez, as a limited
Gartner, is already held harmless from personal 'iability. In
I
Hr. Estevez is requesting authority to dispose of up to
49/; of his share of the partnership at his discretion.
All of these items are prohibited under the terms of the present
UDAG contract.
Dr. Simpson has also stated that the size of the facility will be
reduced and t;:at obsterical services will no longer be provided as
was originally planned. It is proposed, however, that a 150 bed
capacity of the facility be maintained. These modifications will
reduce the projected cost of the facility by approximately
$4,800,000. However, Dr. Simpson has requested' that the amount of
'-DAG =::riding originally acorcved In= be ntal-ed at 3' M10 CC0.
83-112'7
It should also be Winted out that the ori# na.l proposal called
for UDAG loan repayments to the City to be channeled back into the
project to fund an employee on-the-job training program.
As the sponsorship of the project has changed to for -profit, loan
repayments should be used to fund eligible community development
activities in the Model City neighborhood rather than subsidize
staff costs of this for -profit operation. Syndication proceeds in
excess of those necessary to raise equity capital could be used by
the project oomers to provide on-the-job training.
The proposed modifications to the project will neccessitate major
revisions in the UDAG contract which will have to be negotiated
with HUD. However, before we are in a position to negotiate a new
UDAG contract with HUD, we will require a considerable amount of
detailed information from the sponsors including an operating
proforma from which to judge the financial `easibility of the
project. Staff has spent numerous hours with representatives of
Christian Hospital, Ltd., in an effort to explain and obtain the
information necessary to prepare an amended application. To date,
we have been unable to obtain even the most basic information. As
the certificate of need granted to Christian Hospital, Inc. the
original project sponsor, expires on December 15, prompt responses
to informational requests by staff are of the utmost impor;ince.
�n adai:i-,n cc no respcneizg cc :,ur requireMe nc3 ::or UDAG
processing, the sponsors have been unable to obtain the operating
proforma and feasibility studies necessary to enable the Health
Facilities Authority to make a determination on the feasibility of
issuing tax exempt bonds which will be used to fund a major
portion of the debt financing for the project. This is due to the
fact that they have been unable to pay for the studies. This
raises serious+ questions about the sponsor's capacity to stand
behind an $18,000,000 hospital project. We recommend that the
�:.mited partner, Mr. Estevez, pay the corporation's outstanding
debts to Price - Waterhouse and Laventhoi and Horwath with the
funds due the City resulting from his failure to carry through in
gcod faith a rehabilitation project in Little Havana.
It is recommended that the City of Miami curtail processing of a
UDAG for this facility until the project sponsors are able to
provide the following information. which is necessary to judge its
economic feasibility and overall viability:
Revised feasibility study reflecting deletion of obstetrical
services.
A revised project development proforma
A five year project operating proforma indicating before and
after tax operating income
An ascimate of the syndication proceeds to be raised by li:nitad
oartnershic and --heir orcoosed disposition
Justification for continued UDAG assistance in view of the fact
that the project development budget has been reduced from
approximately $22,300,000 to $17,000,000.
€33-112'7
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Agreement by Dr. George Simpson that he, as general partner of
Christian Hospital, Ltd., will be personally liable in the
event of default b;r the limited partnership on the UDAG loan.
The deadline for this information is December 15, at which time
Christian Hospital, Inc.'s Certificate of ;teed is expected to
expire.
It should be nosed that even if the following items are found
acceptable to the City, the U.S. Department of HUD may choose not
to consider the revised project application.
83-112'7