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HomeMy WebLinkAboutResolution 17-075 Resolution 17-075 Resolution Authorizing the Formation of Brookings Health System Investment Authority, an Industrial Development Corporation Associated with the City of Brookings, D/B/A Brookings Health System Whereas, the Mayor and Council of the City of Brookings (the "City"), have received and duly considered a request for permission to incorporate an industrial development corporation to be associated with the City to be known as the "BROOKINGS HEALTH SYSTEM INVESTMENT AUTHORITY" (the "Corporation"); and Whereas, the purpose of the Corporation shall be to carry out the purposes of SDCL § 9-27-37, furthering the economic development of the City of Brookings and its environs, and with authority to promote and assist in the growth and development of small business concerns in the areas covered by its operation, to improve access to healthcare services, to reduce healthcare costs, to ensure supply of healthcare providers, and to promote and assure an improved standard of living and an increase in prosperity and health; and Whereas, the Mayor and Council of the City have determined that it is wise, expedient, advisable and in the public interest of the City that the request be approved and the persons making said request be authorized to proceed with the incorporation of the Corporation as prescribed by state law. Now, Therefore, Be It Resolved that permission to incorporate an industrial development corporation to be known as "Brookings Health System Investment Authority" be and it is hereby approved and that the persons making said request are authorized to proceed with the incorporation of said Corporation; and Be It Further Resolved that the form of Articles of Incorporation of the Corporation be filed with the Clerk of the City; and Be It Further Resolved that the purpose of the "Brookings Health System Investment Authority" shall not compete with the Brookings Economic Development Corporation and shall focus on improving access to healthcare services, reducing healthcare costs, ensuring supply of healthcare providers, and to promote and assure an improved standard of living and an increase in prosperity and health of small business. Passed and Approved this 25th day of July, 2017. CITY OF BROOKINGS - �����, v����/.��z� ' _? Keith W. Corbett, Mayor i��;,T � �.' _ ��C'�'�` --� ��, ari Thornes, City Clerk Brookings Health System Investment Authority Time Line of Events Sun Mon Tue Wed ' Thu Fri Sa[ Sun Mon Tue Wed ' Thu Fri Sxt 1 2 3 1 d 5 6 7 8 9 10 2 3 4 5 6 7 S 11 12 13 14 IS 16 17 9 10 lli 12 13 14 15 18 19 20 21 22 23 24 16 17 IS! 19 20 21 22 �� 25 26 27� 28'. 29 30 23 24 25� 26' 27 28 29 �_— i 30 31 Sun Mon Tue Wed Thu Fri Sat Sun Mon Tue i N'ed �, Thu Fri Sat '� 1� 2 3 J 5 1 2 � 6 7 8 9 10 I1 12 3 4 5 6 7 8 9 13 l4 15 I6'�� 17 18 19 ]0 11 12�� 13, 14 15 16 20 21 22 23 24 25 26 17 18 19 20 21 22 23 27 28 29 30! 31 24 25 26 27 28 29 30 July 25t" - Meet with City Council to present the overview of the Investment Authority - If Council passes resolution to create Authority, move forward according to below: July—August - Construct the following documents - Articles of Incorporation - By-Laws - Make up of Board 0 10 Members ■ CEO ■ 9 — BHS Board Members • 5 City appointed • 3 County appointed • 1 Physician - IRS determination — 501c3 or c6 - Develop Investment Policy / Strategy - Investment Advisor / Manager o Request for Proposals September 12tn�26cn - City review / approval - Pass Resolution approving documents o By-Laws /Articles of Incorporation ■ Investments strictly for BHS o Investment Policy - Publish Resolution as part of minutes - First / Second Reading of Supplemental Appropriations Ordinance / Publish Ordinance BROOKINGS HEALTH SYSTEM INVESTMENT AUTHORITY Situation: Brookings Health System (BHS) is a city-owned hospital whose mission is to provide high quality compassionate personalized health care. To insure resources are available to meet that mission, the Board of Directors has directed that the facility maintain sufficient cash and short-term investments to cover 180 days' worth of expenses ("cash on hand"). Both Moody's and Standard & Poor's show median days' cash on hand for AA rated hospitals at 300+ days and A-rated hospitals at 200+. For BHS, 180 day's cash on hand is approximately $16 million. In any given week, about $3 million is needed to cover payroll and other expenses. Assuming a $3 million extra cash cushion to cover higher expense times, at least $10+ million could be invested. As a governmental unit, investment options are quite limited. For 2015, those investments yielded less than 1% return. Investments in AAA short-term securities, money markets, or other high-quality investment vehicles will normally result in a higher return than governmental securities. Not-for-profit hospitals throughout the country rely on their investment returns to supplement earnings from operations and fund future capital equipment and projects. As payment reductions are implemented by Medicare and other third-party payers, operating margins are diminishing. As a result, investment returns are needed by hospitals to continue caring for patients, expanding operations and further advancement in technology and facilities. An option for BHS to invest funds in other commercial securities or investment vehicles would be if the state laws regarding government/municipal hospital investments were amended similar to the legislation recently adopted in Minnesota (see attached). However, the other government hospitals in South Dakota are not in the same situation or position as BHS — most of them are relying on tax subsidies to remain open and do not have funds to invest. So the legislature would likely view this issue as very low priority. An alternative option is for BHS to establish an industrial development corporation similar in structure to the existing Brookings Economic Development Corporation. This new "Brookings Health System Investment Authority" would have the stated purpose of improving access to healthcare services, reducing healthcare costs, ensuring supply of healthcare providers, and insuring Brookings health care remains high quality and affordable. The corporation would solely be established to invest funds on behalf of Brookings Health System. The new Investment Authority would be incorporated as a not-for-profit corporation under South Dakota law. Our auditors recommend the corporation have the same board of directors as BHS plus the hospital CEO so that its investments and earnings can be included in the BHS financials as a blended component unit. The investments would remain managed by the City through the BHS Board like they are today, but since they would reside in the not- for-profit corporation they could be invested in commercial investment vehicles similar to not- for-profit hospitals. To recap, this proposal: - Creates a new not-for-profit corporation owned wholly by the City through BHS - Allows BHS to invest in commercial securities like other not-for-profit hospitals - Has the same board of directors as the hospital (adding the hospital CEO as a 10tn member). - Permits the rollup of all assets, liabilities, revenues, and expenses to the City through BHS financials. CHAPTER 18--S.F.No. 341 An act relating to health; authorizing a governmental entity to invest funds of a hospital owned or operated by the governmental entity;amending Minnesota Statutes 2016, section 144.581, subdivision 1; Laws 1988, chapter 645, section 3, as amended. BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: Section 1. Minnesota Statutes 2016, section 144.581, subdivision 1, is amended to read: Subdivision 1. Nonprofit corporation powers. A municipality, political subdivision, state agency, or other governmental entity that owns or operates a hospital authorized, organized, or operated under chapters 158, 250, 376, and 397, or under sections 412.221, 447.05 to 447.13, 447.31, or 471.59, or under any special law authorizing or establishing a hospital or hospital district shall, relative to the delivery of health care services, have, in addition to any authority vested by law, the authority and legal capacity of a nonprofit corporation under chapter 317A, including authority to: (1) enter shared service and other cooperative ventures; (2) join or sponsor membership in organizations intended to benefit the hospital or hospitals in general; (3) enter partnerships; (4) incorporate other corporations; (5) have members of its governing authority or its officers or administrators serve as directors, officers, or employees of the ventures, associations, or corporations; (6) own shares of stock in business corporations; (7) offer, directly or indirectly, products and services of the hospital, organization, association, partnership, or corporation to the general public; a� (8) expend funds, including public funds in any form, or devote the resources of the hospital or hospital district to recruit or retain physicians whose services are necessary or desirable for meeting the health care needs of the population, and for successful performance of the hospital or hospital districYs public purpose of the promotion of health. Allowable uses of funds and resources include the retirement of inedical education debt, payment of onetime amounts in consideration of services rendered or to be rendered, payment of recruitment expenses, payment of moving expenses, and the provision of other financial assistance necessary for the recruitment and retention of physicians, provided that the expenditures in whatever form are reasonable under the facts and circumstances of the situation.- � _ _ � , . i`.�it�I�iil(iC�" ds a}�' iiflllli�LiJi i i(i i.�iU�il;i : i�i1-i, i11VCJl I�U`J{JllCii I�ll Ii.1J it I ai 4 jj JeCI.lf It�% �;: ��G� ;�een recommended by an investment adviser registered under the federal estment Advisers Act of 1940 United States Code title 15 sections 80b-1 to 80b-21 or a bank or trust company exercising its trust powers. Funds invested under this clause �st be investecJ �ccordinc� t� wr±ttFn in4�astmer�t no�iries_ar�c� v+��itten,_in��estment_proced�res EFFECTIVE DATE. This section is effective the day followinq final enactment. Presented to the governor April 25, 2017 Signed by the governor April 27, 2017, 3:51 p.m.