Mercy Receives $1 Million On 4-0 Vote

The Manhattan City Commission voted 4-0 Tuesday night to give Mercy Community Health Foundation $1 Million of MEDOFAB money.

Brad Everett did not vote because his wife works at Mercy and he said he thought it was a conflict of interest. Ed Klimek's wife also works at Mercy but Klimek said he did not feel the same as Everett. The City received a ruling from the Ethics Committee that the Commissioners could vote. Here is the Memo the Commission received about the Grant:

BACKGROUND

The City of Manhattan is in receipt of an application for Manhattan Economic Development Opportunity Funds from Mercy Community Health Foundation, Inc. Mercy Community Health Foundation, Inc., is a not-for-profit corporation affiliated with Mercy Health Center of Manhattan, Inc., a not-for-profit community hospital. The Foundation is organized solely for the support of Mercy Health Center and conducts fund raising activities on behalf of the Hospital. As indicated in its request for funding, the Foundation is seeking funding support toward its capital campaign for the expansion of Mercy Health Center. The application received from the Foundation requests $1,000,000 in funding from the Fund to be distributed at $200,000 per year for five years. The funding will be used 100% to augment the capital campaign to renovate and expand Mercy Health Centerís College Avenue facility.

On September 5, 2001, the Manhattan Economic Development Opportunity Fund Advisory Board (MEDOFAB) discussed the Foundationís application. MEDOFAB is recommending that the City Commission approve an immediate $500,000 allocation to the Foundation, with the continuing match of $1 for every $5 raised by the Foundation through December 31, 2004 for an additional $500,000 maximum. (See enclosed MEDOFAB minutes.) This motion was passed by MEDOFAB on a vote of 5 to 1, with two members declaring a conflict of interest and not voting and a third not attending but also believed to have a conflict of interest.

On September 18, 2001, the City Commission discussed at its regular meeting the process and procedures for considering this funding application. Mercy Health Center, Inc., employs spouses of both Commissioner Klimek and Commissioner Everett, and there was some question whether those two Commissioners could participate in the discussion and vote if there was a possible conflict of interest. In order to resolve this issue, the City Commission directed City Administration to request an opinion from the Kansas Governmental Ethics Commission, the agency charged with rendering advisory opinions on the interpretations of Kansas Statutes dealing with conflict of interest. This request asked for a ruling on this specific fact situation and asked if there was a conflict of interest if a contract is entered into with the Foundation when the employment is with Mercy Health Center. The Kansas Governmental Ethics Commission met on October 18, 2001 and considered this issue. Enclosed is a letter from the Kansas Governmental Ethics Commission indicating its interpretation based on Kansas Statute. Neither Commissioner Klimek nor Commissioner Everett have a conflict of interest regarding this issue as the employment is with Mercy Health Center and not with the Foundation which is the organization requesting the funds.

DISCUSSION

Attached is the funding application form from the Mercy Community Health Foundation, along with other documents provided by the Foundation. Also attached is the official statement from the hospital revenue bond issue that the City of Manhattan issued on behalf of Mercy Health Center of Manhattan in early 2001. The Official Statement may be helpful to the Commission in order to understand more in detail the relationship between the Foundation and the Hospital, and also understand the details of the Hospitalís renovation and expansion project.

As is typical when applications are considered by the Manhattan Economic Development Opportunity Fund Advisory Board, a member of the Board was appointed to review in detail the application and provide a summary to the Board at its meeting. William Varney was assigned to review the application, along with City Administration. Enclosed is that review which summarizes the elements of the application. Highlights of the application are as follows:

* The Foundation is requesting $1,000,000 in funds

* Funds will be used to augment the capital campaign for the Hospitalís renovation and expansion that has an ultimate goal of raising $7.5 million. (See Exhibit A of the application review for more details on the project.)

* Dr. Donald Wissman has completed a report, dated August 2001, entitled "Community Impact of Mercy Health Center Expansion" indicating that the following new jobs, associated with the hospital renovation and expansion, would be created for the period 2002 through 2006:

o 71 Mercy Health Center employees

o 29 Physicians

o 87 Physician support staff

187 Employees Total

* Based on the $1,000,000 request and the estimate of 187 employees, this application would yield a cost per job of $5,348.

As previously indicated, the Manhattan Economic Development Opportunity Fund Advisory Board is recommending that the City Commission approve an immediate $500,000 allocation to the Foundation with a continuing match of $1 for every $5 raised by the Foundation through December 31, 2004, for an additional $500,000 maximum. There was a lot of discussion at the Advisory Board Meeting regarding a need for the Foundation to have funds committed in order to secure other funding and potential grants to support the project. However, the Board did want to provide an incentive for the Foundation to raise the additional funds and felt that the match requirement would be an appropriate way for the community to leverage additional dollars for the project. Bill Riley, the Chair of MEDOFAB, or Bill Muir, the Vice Chair of MEDOFAB, will be present at the meeting in order to provide comments regarding the Boardís recommendation and discussion at the meeting.

Should the Commission be inclined to approve funding for the Applicant, City Administration would prepare an agreement between the City and the Applicant regarding the disbursement of funds. This has been done with the previous 17 applicants receiving funding through MEDOFAB. The agreement will specify the details of the disbursement of funds and any requirements that would be placed upon the Foundation regarding the funding. The Boardís recommendation did not specifically recommend any job creation requirements or claw backs to the agreement as the funding would go to augment the Hospitalís capital campaign, and the Hospital, not the Applicant, would be the entity creating the jobs. Any fund recipient would also be required to provide annual accountability information to the City regarding use of the funds and job creation resulting from the funding. For additional information regarding the Fund goals and to review the checklist utilized by MEDOFAB, see attachments.