On Wednesday, August 21st, a special meeting was held for the Tax Equity and Fiscal Responsibility Act (TEFRA) hearing for California Northstate University’s (CNU) proposed hospital. More specifically, this hearing was to determine the approval or disapproval of CNU’s issuance of $900 million in bonds. To do so, the CNU recently changed from a for-profit to a non-profit (501c3) a few weeks prior. Notably, this was required in order to seek this type of financing from the City of Elk Grove. The Elk Grove City Council ultimately approved the issuance of $900 million in bonds.
TEFRA stands for the Tax Equity and Fiscal Responsibility Act. CNU is choosing to pursue this type of financing in order to make the hospital a reality. Nonetheless, the Elk Grove community is divided regarding the construction of this hospital. Statements from the community were both in favor of the hospital and against the building of the hospital. Members of NEST are adamantly opposed to the building of the hospital citing neighborhood concerns and the fact that some businesses now located in buildings on land owned by CNU will have to move.
Important to note, the room was filled to the brim and out the door. Of the few meetings we have attended, this was one of the fullest. Clearly, the issue of whether California Northstate University is actually going to build this hospital is of great concern to a lot of local residents.
Brandon Merritt, Finance Analyst for the City of Elk Grove, spoke about the process of TEFRA. Merritt detailed some of the specifications and the process of gaining funding through TEFRA. Ultimately, the hearing’s purpose was not to go over the full details of TEFRA.
After the specifications from Merritt, the floor was opened to public comment. This went only for nearly 2 hours which consisted of communities members as well as businesses speaking for and against the proposed hospital. With a filled room, the community was torn. Both sides have valid reasons for the hospital and justification against the hospital. Ultimately, it’s going to be a hard battle for CNU to gain 100% of the communities’ buy-in.
Small Business Owners that spoke in the hearing were vocal about CNU. “They have never reached out to us,” said one business owner. In response, CNU stated they will work with the business to assist in relocation and pay the expenses for relocation. Ultimately, this is good news for the small business owners at the proposed hospital locations as this is on the public record. The obvious concern is that a the local businesses currently located in buildings on land owned by CNU might go out of business or be forced to close since they have to move.
Some of the community is still waiting on CNU’s outreach to the community. It seems like CNU has not reached out at all even with CNU’s stance in building with the community.
Phyllis Baltz of Dignity Health and President of Methodist Hospital Sacramento stated that they are trusted as well as proven in terms of being a medical provider in the Sacramento County area. Additionally, Baltz reaffirmed that the new Dignity health hospital will be built and serve Elk Grove. Baltz also spoke about the timeline of the Dignity Health hospital of phase 1 will be about 7 years out.
In terms of the OSHPD process, it generally takes around 6 to 7 years for approval. Baltz stated that CNU is targeting in 2020. “CNU is targeting a spring 2020 start of construction for the Hospital Project.”
Dr. Cheung, CEO of CNU, spoke in the response to one question at the hearing on why becoming non-profit. Dr. Cheung stated that in becoming a non-profit, the money goes back into the community instead of Wall Street. “Taxable versus non-taxable.” Ultimately, the bond will provide Elk Grove more money instead of going to other entities by reducing the interest rates. Notably, this is savings according to Dr. Cheung. “It’s around $27 million a year in interest expense of the bond.”
One speaker, Cano, from the community was very vocal about the growth of Elk Grove. “It is only going to get bigger and the population is only going to grow. Like it or not, that’s the reality. You can leave anytime”
Elk Grove City Council Approves Request
In the end, the Mayor and the Council decided in favor of approving CNU’s request for up to $900 million in tax-exempt bonds. This will have no impact on taxes, the city of Elk Grove, or its community. “There is no fiscal impact as a result of the recommended actions.”
City Council Member Stephanie Nguyen approved this step stating that she didn’t want to go through this in the future. “Rather than dealing with this 7 years from now, I will approve it to see where it will lead to.”
City Council Member Steven M. Detrick approved this step stating he wants to see how this plays out. “If they can get their financing and move it forward, fine. If they can’t do it, then that will kill the project itself.”
Vice Mayor Pat Hume wasn’t happy with approving this step of the process. “This was a very difficult decision and not one I was happy to be put in.”
Mayor Steve Ly is definitely concerned about CNU’s engagement with the community and businesses. “It’s so critical in moving forward.” Finally, Ly moved the recommendation forward.
City Council Member Darren Suen, who is representing District 1 in which in proposed hospital is to be built, was not present during this hearing.
In the end, this TEFRA approval does not mean approving the CNU hospital has cleared all hurdles. More specifically, it only means that it allows the possibility of a hospital to be built. It is only one step that CNU is moving forward with.
As with all meetings for the Elk Grove City Council, this meeting was recorded and available to the public. The meeting recording can be found here: http://elkgrove.granicus.com/MediaPlayer.php?view_id=14&clip_id=1757