Edina can hold off a public aid arms race

  • Article by: EDITORIAL BOARD , Star Tribune
  • Updated: May 23, 2014 - 5:59 PM

City “gift/grant” for Fairview hospital would set bad precedent.

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Fairview Southdale Hospital

Photo: DAVID BREWSTER • Star Tribune file, 2006,

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Even hard-core Edina city government followers had likely called it a night by the time the suburb’s leaders took up one of the most important agenda items — and one that could have troubling budget ramifications for cities statewide — at Tuesday’s City Council meeting.

Around 11 p.m., about four hours after the meeting’s start, officials finally began hearing what appears to be the first publicly disseminated pitch from Fairview Southdale Hospital for a $2 million municipal “gift/grant” for emergency department renovations. The $42 million project is already underway, but the private, nonprofit Fairview Health Services system has agreed to fund only $30 million, leaving the hospital’s officials and boosters to make up the difference.

With a little more than $3 million still to be raised after tapping private donors, hospital officials have decided to ask nearby cities for what is essentially a cash contribution to the project — a request that departs from the typical economic development aid model of infrastructure assistance. Fairview Southdale is also seeking funds from Richfield, Bloomington and Eden Prairie. Talks with Edina officials, according to the Fairview presentation, have been underway for a year, and the other communities are watching Edina before they decide what to do.

Edina Mayor James Hovland and the City Council clearly frustrated Fairview’s representative at the meeting when they decided not to vote on the request and instead to take time to gather input from residents, who could see a property tax increase if the city agrees to help the hospital through one approach outlined in a city memo. City leaders are to be commended for their good sense. Caution was not only merited by inadequate public awareness of the request, but also by the precedent it could set.

If Edina approves the “gift/grant,’’ as the memo from the Edina city manager described it, other Minnesota cities can expect to hear the same pitches from Fairview and other big hospitals, creating a public aid arms race at a time when local government budgets are already stretched.

Asked this week if Fairview might seek aid from cities for the other eight hospitals in its system it owns statewide, officials said: “Like any nonprofit, Fairview believes philanthropy will be an important aspect of funding our mission going forward. We’ll continue to make opportunities known for individuals and community support.’’

It’s worth noting here that “nonprofit” does not mean publicly owned. While some Minnesota hospitals are municipally organized, many large medical centers are owned by private, nonprofit corporations. According to industry analyst Allan Baumgarten’s annual reports, Twin Cities hospitals saw growing margins in 2012, with metro hospitals reporting “net income of $533.7 million.’’

The Fairview request is different from the infrastructure assistance recently provided by the state to help the city of Rochester fulfill its role in Mayo Clinic’s Destination Medical Center. Money doesn’t flow directly to Mayo — a distinction lost on Edina leaders who cited that project as a reason to possibly aid Fairview.

Edina city leaders also need to scrutinize how much more taxpayer support Fairview Southdale deserves. As a nonprofit hospital, it already enjoys a local property tax exemption of about $675,000 a year. Now Fairview wants more, yet as the city manager notes, the health system’s $3.3 billion in “annual unrestricted revenue is 35 times greater than the city’s.”

How Edina residents would benefit is also unclear. They already provide support through county taxes to Hennepin County Medical Center. What would they get for their additional assistance to Fairview Southdale? The medical center draws patients from around the metro. Would residents get a discount on care? Would the city share in any enhanced revenue?

Hospitals certainly face significant challenges to their business model. But it’s a dubious leap to conclude that taxpayers, who also provide billions in hospital revenue through Medicare and Medicaid, now need to pony up even more for renovations and other wants. Edina officials are smartly taking time to study the request. When they’ve done their due diligence, their answer to Fairview Southdale should be “no.”

  • Read the report

    Edina City Manager Scott Neal prepared a thorough analysis of Fairview Southdale Hospital’s request to the city for financial assistance. To read the report, go to http://tinyurl.com/od2kyt9

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