UPDATED: Tulare District Moves 3-2 to Pursue Loan for Tower Project

This article has been updated with comments from HCCA regarding the Section 242 loan project under the “HUD Loan Hazy” subheading.

Dr. Benny Benzeevi, CEO/Chairman of HCCA, speaks to the Tulare Local Healthcare District Board of Directors at the board’s regularly scheduled March meeting. Tony Maldonado/Valley Voice

In a contentious meeting, the Tulare Regional Medical Center’s (TRMC) board voted 3-2 along faction lines on Wednesday to allow the company that runs the hospital to not only pursue, but fully execute, a loan to complete the hospital’s beleaguered tower project.

The vote approved a resolution that would allow Healthcare Conglomerate Associates (HCCA) the company which manages TRMC, to apply for, obtain and execute any potential loan. The resolution, numbered as Resolution 851, was not provided to the public online or in pre-printed packets at the meeting.

Senior board members Dr. Parmod Kumar, Linda Wilbourn, and Richard Torrez voted in favor of a resolution to do so; new board members Kevin Northcraft and Mike Jamaica cast dissenting votes.

The two new board members criticized the move as giving HCCA “carte blanche” with regards to the district’s finances, stating the company would effectively be able to pursue and execute any loan “without limitation.”

HUD Loan Hazy

According to the resolution, which the Voice has received, one option the hospital would be “Section 242” HUD Mortgage Insurance and a loan backed by such insurance. However, pre-application documents available on HUD’s website appear to state that it would not provide such mortgage insurance to projects under construction.

An online pre-screening tool advises potential applicants that such loans may not be possible for projects with pre-existing construction:

“OHF permits varying levels of site preparation and construction activity to occur prior to application submission, and between application submission and loan closing. Such construction activity is permitted, in certain cases, because it is to the advantage of the proposed Mortgagor to begin construction prior to loan closing.

However, in order to qualify for financing through HUD’s hospital program, no construction activity or site preparation may be performed without obtaining HUD’s approval first. If construction or site preparation has commenced, unfortunately the project will not qualify for hospital mortgage insurance.”

An internal training presentation made available on HUD’s website from 2011 appears to also show that any early commencement of work would only be allowed after a HUD environmental review.

Hospital officials state that they are working through several possibilities, but that they so far believe that Section 242 options are still on the table.

“We are looking at several borrowing options simultaneously and are diligently working through the many details that each step in the application requires. All indications at present point to us meeting the requirements for qualification. We will update you whenever we formally cross each step, and as pertinent details become available,” a hospital spokesperson told the Voice, responding to requests for comment on the details of the Section 242 process.

“As you know, regardless of which governmental mortgage insurer we work with, the process is extremely complex, arduous, and requires extensive work to accomplish. It is critical that we all understand that we are extremely fortunate to even be in a place where these options are available to us. Clearly, the ideal way to fund public infrastructure is through a publicly supported measure. As this choice is not available to us, the next best approach is through a loan. Fortunately, because of the tremendous success that HCCA has brought to the hospital finances over the past three years, the loan option has become available to us.”

One Possibility

Dr. Benny Benzeevi, HCCA’s CEO/Chairman, publicly gave estimates centered around pursuing a Housing and Urban Development loan, though the summarized resolution available on the agenda would allow the company to apply for a loan from any source.

Assuming the district were able to go forward with a HUD loan, it would total $79,697,401, according to Benzeevi’s presentation at the meeting, which would include paying off existing bonds.

Lenders taking their risks on the hospital would not want to be “the second mortgage,” he stated.

“At this point in time, based on all parameters, we believe that it is doable, we believe that the hospital can carry a loan like this,” he said, “but most importantly, we feel that it is in the community’s best interest to be able to complete the tower and get this thing done.”

Dr. Benny Benzeevi, CEO/Chairman of HCCA, presented a possible HUD loan, with an accompanying cost breakdown. Tony Maldonado/Valley Voice

His slide calculated the individual amounts as:

  • Redemption of existing bonds: $13,707,673
  • Construction cost: $57,700,909
  • Contingency: $2.885,045
  • Capitalized Interest: $1,559,469
  • Upfront HUD Mortgage Insurance Premium: $391,675
  • Governmental fees: $642,580
  • Financing fees: $2,350,050
  • Legal/title/agent fees for bond redemption & environmental study: $460,000

Benzeevi encouraged the board to frame the vote not only as authorization to pursue a loan, but also as a reaffirmation of the board’s commitment to finishing the tower.

The board meeting’s agenda even described the vote as such, stating that the proposed action would be to “[c]onfirm the District’s commitment to completing its Tower project and authorize HCCA to obtain a loan to complete the Tower project from the Federal Department of Housing and Urban Development, CalMortgage or other sources.”

“We want to make sure that the board is interested, in fact, in getting a building done,” Benzeevi said. “We need to move forward with the application, we need to move forward with getting this thing done. It’s taken tremendous work […] to be able to get us to the point where [loans] are even considered as an option.”

After obtaining the loan, Benzeevi stated that he believed the construction would take anywhere from 12 to 15 months.

During the discussion, Tulare Local Healthcare District board members Kevin Northcraft and Mike Jamaica raised concerns regarding the wording of the resolution, which was not made available to the public on the district’s website or in printed packets at the meeting.

“We have a four-page resolution that no one in the public has had access to,” Northcraft said. “It reads in part that it authorizes HCCA to execute and obtain a loan without limitation. So our board would not be aware of what the loan was.”

After the resolution was ultimately passed, Wilbourn personally asked to receive an update on the progress at each meeting.

“I will ask that every time we convene that we get an update: where it’s at, how it’s going, what’s involved, what papers have been filed, what papers haven’t been filed,” Wilbourn said.

Though Wilbourn did not make a formal motion, the contract with HCCA already obligates the company to do so.

 

The Resolution

The resolution, which as of publication time had not been made available on the hospital’s website and was not included in agenda packets at the meeting, has been made available to the Voice and is available at the end of the article.

Resolution 851 allows the company to not only seek a HUD-backed loan, but to concurrently “seek to obtain a commitment and a Loan for an ‘alternative’ type of financing for the project,” which it states includes Cal Mortgage financing.

The resolution also states that “if a HUD Commitment is obtained, and/or if commitments for financing from HUD Lender and/or Alternative Lenders are obtained, the Board hereby authorizes and directs its Authorized Representatives to take any further actions and to execute, in the name of and on behalf of the District, any instruments and documents required by the HUD Lenders and/or the Alternative Lenders to obtain the Loan.”

The resolution further states that the “Authorized Representatives shall have absolute, full and complete power and authority to execute and deliver to the HUD Lender and to the Alternative Lenders any and all documents and instruments required to obtain and consummate the loan.”

The only two “Authorized Representatives” stated in the document are Alan Germany, CFO/COO of HCCA, and Benzeevi.

 

“Talked To Death”

Prior to the vote, Kumar stated that the resolution was not as permissive as Northcraft and Jamaica characterized it.

“If my colleagues state today that we pass this motion, and the money’s there — no, it’s not true at all. This is just a process. They could look in a different direction,” Kumar said. “We are not cutting our hands or our gut or our head off today, by voting for this.”

Wilbourn concurred with his view, stating that time has continued to pass as the hospital pushes up against a 2030 seismic compliance deadline.

“My feeling on this is that this is an application for the HUD loan, this is the investigative part, whether HUD will be able to loan us this money or not,” Wilbourn said. “At this point, for us in Tulare, I can’t see that there’s any other way to come up with the lending for the money to finish the tower.”

“We’ve talked and talked and talked about this,” she continued. “I quite frankly think it’s been almost talked to death. We don’t have the funds to finish the tower ourselves.”

Northcraft said that those statements were inaccurate.

“Dr. Kumar said this is the start of a process. [Wilbourn] said this is an application. Let me read from the second ‘further resolved’ on the second page of this resolution. It gives the authorized representative, which is HCCA, the ability to execute all instruments necessary for a loan, without limitation, all these other things,” Northcraft said. “And it also gives them full and complete power to execute and deliver, to consummate the loan, to obtain and consummate the loan. We are giving full authority to them in this resolution.”

He motioned, with Jamaica seconding, for an alternative — the board would authorize HCCA to reach out and apply to any agency or financier that would lend the Tulare hospital money, but for the final decision to come back to the board.

“This is too important for our community to just wash our hands of it and give up all authority,” Northcraft said . “It would be malfeasance for us to do that. That is our responsibility, that’s our pledge to our community: that we will be stewards of their funds. And this delegates everything away. I just cannot envision that any of you would consider doing that.”

The alternative motion failed 2-3, with Northcraft and Jamaica voting in favor and Kumar, Wilbourn and Torrez casting dissenting votes.

The next Tulare Local Healthcare District meeting will be held April 26 at 4pm at the Evolutions Gym, located at 1425 E Prosperity Avenue in Tulare.

In Depth: Tulare Regional Medical Center

23 thoughts on “UPDATED: Tulare District Moves 3-2 to Pursue Loan for Tower Project

  1. Come on Tulare Citizens/Business People/City Council. Is this not the most obvious “rip off” that could happen right before the ring leader is recalled. Wake up and do something. Call the DOJ, FBI, whoever needs to investigate. Worry about Tulare for a change and put it’s needs over your “good ole boy” group.
    Linda Wilbourn and Richard Torrez don’t have any clue what they are doing. Dr Kumar, on the other hand, is still in the driver’s seat and is going to drive right over a cliff and take all of Tulare with him before he’s ousted. Our town is being mocked and laughed at, it’s embarrassing to tell people that I still live in this town.

  2. Thank you Deanne Martin Soares for kicking me off Citizens Site for speaking the TRUTH. Like I said this is the site for people to express their views and if the views are not like yours it’s no good. This is what I posted with regards to this article.

    I am a taxpayer but why question someone’s identity all the time that doesn’t agree with you? News flash, not everyone feels the way Citizens does. What is your real name? You consistently knee jerk criticize anything the Board does and refuse to admit that HCCA saved our hospital and had done better than any one else in several decades. You also refuse to admit what many in your group were in fact in charge of the hospital when it failed. And, you cyber bully any opposition and threaten to remove them from the page. If you are interested in a real discussion, let’s have it. If you just want to have your point of view, well then, it’s not a community site

  3. Very disappointed as a Tax Payer how Kevin Northcraft was not at all professional. His criticism was unsubstantiated and unfair in his unwillingness to acknowledge HCCA’s amazing accomplishments in salvaging the tower project.

  4. First, I didn’t delete you but I agreed to it. We aren’t going to have a phony profile antagonist with no factual data. Didn’t you also indicate that Dr. Benzeevi doesn’t take a salary?

    We have no desire to get into fights. As I said to you before you are either an employee or non taxpayer. A few people think your profile is being managed by more than one person. I really don’t care.

    What I do care about is that you are trying to spin things away from the facts in this situation. The facts are the following: hospital volume is at an all time low under HCCA, fees to HCCA are off the charts, district is operating in the shawdows and has created many of the messes they are in, like the MEC issue. Cash has dropped $6.6 million in a year, financial and other measures are not being shared, audit is long overdue. When Benzeevi boasts of a second OR crew on call as a highlight of has management it is obvious that we got the short end of stick on this alignment partner situation.

    Now the board gives authority for HCCA to obtain a loan for $79 million by leveraging all the District assets. Which has a whole new level of ramifications. What do you think about that? Do you even understand the meaning?

    On top of that who knows who is funding Southern Inyo, definitely leadership and employees are being shared.

    Now, Emmanuel other than your whining about HCCA saving jobs and saving a hospital that was going to close, how about if we debate some of the real facts, if you have any.

  5. Emmanuel what do you do for a living? I am sure it isn’t business administration or accounting. HCCA is intentional ruining our hospital. They take employee benefit money out of their checks for life ins,long term care, etc. And they get notices of cancelation for no payment. We’re did that money go. But I am sure you think that’s ok too.

  6. This move is a checkmate.
    It is game over.

    Once the district is in so much debt, there will be no money left to pursue investigation and litigation even if you have majority on board.

    The only option left is to have a ballot initiative that Tulare people want to shut down their healthcare district – you wont be able to keep the hospital as a publicly owned entity but you will stop having to pay taxes to keep the district alive.

    Let the hospital be a privately owned one. There is no benefit of keeping it a public entity.

    • do you know, that the HCCA contract states that if the hospital were to do this, or claim bankruptcy HCCA can come in a purchase for pennies on the dollar……I believe this was their plan all along!
      In the amount of $79+ million they are seeking they are wanting to pay off the first bond of $13 + million because then HCCA can start on a 95% profit share…..mostly all that money would be coming from Evolutions.
      HCCA pockets are going to become very deep……then what’s next? Are we going to let the Benzeevi name snake through the rest of the town and council like what’s happened in Moreno Valley?
      They’ve breached their own contract for the last 3 months! We will find the key.

  7. Some of the early accomplishments of team HCCA include erasing about $20M in construction-related liabilities against the district from a defunct tower construction project that was underfunded and poorly managed, enclosing the tower (even though the 85M bond had already been essentially wasted), increasing the workforce, implementing two across the board pay raises in three years (and additional multiple individual pay raises in between to our very hard working employees), providing profits to the DISTRICT for three years straight, all confirmed by two audits and multiple positive credit ratings reviews. This in a hospital that was essentially left for dead, abandoned by the very people who brought it to that condition. Tulare County presently ranks near the bottom of all California counties in health care parameters. We deserve a lot better. Calling our hard working folks names, hurling insults, and creating false facts will not deter team HCCA from staying true to its word to improve the health of our entire community and to build a model that will provide sustainable health care to our community. I urge you all to come together and work with us to achieve that objective. We, as a community, deserve no less.

  8. Benny Benzeevu, you have a serious credibility problem. Three years ago your construction manager estimated that it would cost $35M to complete the tower. In the above comments you state that HCCA has erased $20M in construction liabilities leaving, according to my rstmates, $15M to complete. You have now convinced three very gullible board that you need $79M to complete the project. Ever wonder why the community doesn’t trust you?

  9. Benny you are full of it! Lies lies lies! Linda and Richard you should be ashamed of yourselfs. You know what is being done is wrong. Where is your conscious?

  10. Deanne- please explain the following statement you made, “Cash has dropped $6.6 million in a year, financial and other measures are not being shared, audit is long overdue.” I am new to this and have not decided where I stand with all this, but I have read several times that HCCA is not being transparent and have not released Financials. If this is the xase, than,where are you getting your figures from?
    For everyone else, I found this article:
    http://www.ourvalleyvoice.com/2017/03/28/lies-just-lies/

    • Lupe, I was one of only 3 citizens that went to the 7 am meeting to approve the quarterly financials. I reviewed the financials and there is a $6.6 million drop in cash in one year. Alan Germany was not at the meeting, when questions were asked they got him on the phone to answer. He explained the cash drop as the cost of the IT system. Financial data used to be monthly now dropped to quarterly, many measures used to be reported to the board and the community and it has significantly been reduced. Racheting to profit can only be done for so long and in my opinion the point has been reached. Why people were laid off.

      By the way the biggest lie of all was the threat of closure if the bond wasn’t passed. Read and understand the contract, the only way a loan of $79 million can be done is to too leverage all the assets of the hospital. If that happens it will not be a good thing for the District.

      The citizens group is not putting out lies and we definitely aren’t putting down the staff, if anything the opposite. I encourage you review our website and the Facebook page. VV also has a wealth of data.

  11. Dave- you have posted the most intellegint question so far. Why is it going to take so much money to complete the project?

    • That has been a big part of the issue from the onset. Review the audited financials from 2013 and 2014, amounts vary and only kept getting larger. $19 million one figure, then $35 million, then $49 million with an extra $6 million contingency and now $79 million. All with no back-up documentation that has been supplied to the community or even the board.

  12. First, the name calling has to stop. It get’s nobody anything other than more insults.

    The reality is the following:
    1. Regardless who is in charge, this hospital needs to stay open. This County can not run with 2 hospitals. Fact is you all who keep wanting this hospital to fold will see this- 2 County hospitals to cover roughly 475,000 in the county; ambulance service will be tied up on multiple bed delays delaying services to sick and injured emergencies; this will in turn force long wait times up to 15-20 hour ER waits; which will in turn put the public in jeopardy.

    2. In order for these things not to happen, both sides need to have one purpose, to keep the hospital open and how does the community get this done.

    3. Have HCCA to sign a stipulated contract that HCCA will be 100% liable for any issues that arise from loan agreements. This would release the District from any harm. This would be on HCCA to carry the burden.

    4. Have HCCA at every meeting to update the progress. Make sure HCCA is on the agenda.

    5. Make public ALL of the documents filed or progress talked about. Keep the public aware.

    6. Have a private Atty Firm manage as a 3rd party this contract and construction paid by HCCA. Then all would be legal in theory A lot of big projects have 3rd party firms oversee. The District Board shall pick firm.

    I personally believe if these items listed take place, it will feel as though that ALL are involved and this will get done. Tulare needs this Hospital.

  13. To Tom:
    This all sounds great. You don’t think Tulare Citizens have tried.

    Greene stated in the last meeting not all that is said or presented at the PUBLIC board meeting is available to the public or belongs to the public.
    He basically said it’s being videoed, get your info from there.
    When Benzeevi and Greene both get up and leave for 1/2 of the meeting and spend the rest of the time on their cell phones, I don’t have much confidence in them.
    He was asked directly from Board Member Michael Jamaica why the entire board meeting wasn’t made available on the hospital website. No answer.
    .
    Your comments are genuine and intelligent but HCCA wouldn’t do anything you suggested.

    No one I know wants the hospital to close, they just want honest current financials, a forensic audit and new management.
    During public comment, a couple shared their story of tragic loss and the board president was caught rolling her eyes.
    The only thing that is going to save the hospital is 1)Kumar being replaced and 2) HCCA heading down the road to corrupt a new place.

  14. Another angle is that with previous general bonds paid off, HCCA will not be required to get financial audit — they can do whatever they want under the cover.

    This angle is against the spirit of having a publically funded healthcare district.
    This aspect should be enough to get court to block this authority being given to HCCA.

  15. Deanne do you really expect the people who are reading this to believe that the census is low because of HCCA . When in reality the census is low because doctors,including mine are telling people to go to other facility’s because they’er mad about being released from thier position (MEC) They were not properly performing their duties so why would anyone have them continue ?

    Good job on misleading the Citizens. Do yourself a favor get out a pen and paper and write down all the doctors on the Prior MEC and look at who’s not admitting. I bet your list goes like this.

    Dr Betre- Don’t Admit
    Dr Patel- Don’t admit
    Dr Kamboj-Don’t admit
    Dr Kamboj-Don’t admit
    Dr Smith-Don’t admit
    Dr Orth-Don’t admit

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