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September 4 - 17, 2020
wilmingtonbiz.com
Greater Wilmington Business Journal
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public document that outlines details on the proposed deal, including conditions for the purchase, Novant’s pledge to maintain and expand the presence of UNC Health and UNC School of Medicine at NHRMC and a long list of measures that would impact hospital employees and patients. Before a final vote, people will be able to see a copy of the definitive agreement, and the county will hold a public hearing, as required by state law. Because New Hanover County owns NHRMC – a rarity, with the local health system being the third-largest in the U.S. still owned by a county – the proceeds form what several officials have called a “once-in-a-generation opportunity.” As described in the letter of intent, Novant is offering to pay $1.5 billion to the county for NHRMC. It also offered to let the county keep any NHRMC cash the hospital still has on hand after debts and other liabilities are paid off, which in September was estimated to be about $400 million – a figure that would be updated after a closing. (Aside from the money to the county, Novant also offered to give $50 million to the existing NHRMC Foundation and spend $3.1 billion in routine capital expenses and strategic master plan projects on NHRMC over the next decade.) But while the issues surrounding the potential sale of the hospital and Novant’s proposals as its next owner have been combed through during months of talks, presentations and community meetings – both in-person and online because of COVID-19 – the county’s plan to spend potentially $1.9 billion in proceeds has received less public discussion. A spending plan first appeared publicly in early July when hospital trustees voted for negotiating with only Novant. The trustees’ resolution became part of the approved letter of intent, and county commissioners have said the recommendations – which set aside money for the hospital, county reserves, a mental health and substance abuse fund and a new $1.25 billion community foundation – came from individual talks with county staff and briefings. Several said that’s why the plan was never sussed out in county commissioners meetings or work sessions, which would have been public. Next month when the deal with Novant is voted on, the spending
plan for the proceeds and how the new foundation will be set up also will be on the table for approval. “There’s four different escrows, for lack of a better word, where the money will end up being placed if in fact the [hospital] trustees and the county commission approved the definitive agreements,” New Hanover County Manager Chris Coudriet said. Here are more details about what’s been released so far on that spending plan – the caveat being that negotiations might have changed some things since mid-July when the letter of intent was approved; some details still appear not to be worked out as of Sept. 1; and the wild card remains politics as tensions have risen recently among the five county commissioners who are expected to vote Oct. 19 on the future of the hospital ownership as well as the proceeds.
COMMUNITY FOUNDATION: $1.25 BILLION The lion’s share of sale proceeds would go to an independent, tax-exempt foundation with the intent of funding community efforts. “The design is for the principal of that money to not be touched, just the investment income off of it,” Spence Broadhurst, one of the cochairs of the Partnership Advisory Group, said in an online talk with the public Tuesday. The letter of intent identified four areas the fund, or interest earnings on the endowment, would be spent on. Those are education (from K-12 schools through higher education); health and social equity (addressing food deserts, for example); community development (such as a workforce housing trust fund and open space preservation); and community safety (including next-generation 911 services and updating law enforcement training). “That’s what the foundation will focus on, and so there will be an 11-person board ultimately that is the governance structure for that and will also make the final choices on what actually … to invest those dollars [on],” Coudriet said. Despite the debate over how the foundation will be set up, that group would not likely be appointed until next year after the sale’s closing takes place – assuming the deal is approved – under the county staff’s plans now for the foundation’s framework, said Jessica Loeper, the county’s chief communications officer. In the interim, five people would
be picked initially by the county as the new foundation is established, Coudriet said. Among that group’s responsibilities likely would be picking which investment management firm will handle the fund “because there is work that would need to be done prior to the assets coming to the foundation,” Loeper said. The makeup of the 11-person foundation board has caused some sticking points so far for the county commissioners. In the letter of intent, it is proposed that the board be made up of six people picked by the hospital board and five people picked by the county commissioners. Under what the proposal county staffers are working on, the board would not be self-perpetuating, meaning that any future vacancies would go back to the county commissioners or hospital board to decide on new members, Coudriet said. Commissioner Pat Kusek, in a recent OpEd for the StarNews, said there was a push to make all of the foundation appointments come from the county commissioners, citing three of the five votes necessary to make the change. She argued that having more appointments from the county commissioners would hamstring the foundation’s ability to invest in sources outside the fiscally safe ones as outlined in state law and could limit the endowment’s earning potential. “The whole way that foundation was structured to begin with was to be able to only take off the amount that it earned every year to be used for purposes that the foundation board members would approve,” she said in an interview this week, pointing to the difference a 1% and 4% return would mean on a billion-dollar endowment. But enough commissioners – including Woody White and Jonathan Barfield – said they share Kusek’s logic and would not vote for a change in the proposed board makeup so there does not appear to be support for that change. “I’ve had individual discussions with commissioners about all types of options on the board,” said commissioners chair Julia Olson-Boseman. “One of [the options] was 11 members from the commissioners, but ultimately the majority of commissioners didn’t believe that was the right way to go. So the majority of commissioners to the best of my knowledge believe that five should be appointed by commissioners and six by the trustees because we want to
