Wilkes-Barre City Council approves revenue bonds for hospitals

WILKES-BARRE — City Council at Thursday’s regular meeting approved up to $180 million in revenue bonds to nonprofit Woodbridge Healthcare to purchase and make capital improvements to Commonwealth Health Hospitals in Wilkes-Barre and Scranton.

The tax-exempt bonds were approved with a vote of 5-1, with Council Vice-chair Tony Brooks voting no.

The bonds will be issued by the Wilkes-Barre Finance Authority, which previously approved them at its last meeting.

According to Wilkes-Barre Mayor George Brown, the city is not responsible for the repayment of the bonds and will act merely as a conduit carrier for them.

It was explained at the work session by attorney Laura Kurtz, bond counselor for Woodbridge, and further clarified at Thursday’s meeting by City Manager Charlie McCormick that city council was obligated to vote on the bonds because of the federal tax code’s Tax Equity and Fiscal Responsibility Act, which requires municipal governments to provide their approval for the use of tax exempt bond proceeds for facilities under their jurisdiction.

Council also gave approval under the Municipality Authorities Act since the authority that issued the bonds was incorporated by the city.

The nonprofit, which formed in May, announced the acquisition of Commonwealth Health and its three main hospitals — Wilkes-Barre General Hospital, Regional Hospital of Scranton and Moses Taylor Hospital in Scranton — on July 30 for $120 million.

Woodbridge is the sister organization to Stone Bridge Healthcare, which specializes in saving distressed hospitals, but the two are separate entities and it was indicated at the work session by Steigman that Stone Bridge would soon be dissolved because of the apparent confusion it created.

According to previous Times Leader reporting, the sale agreement also includes the acquisition of Commonwealth Health’s ambulatory surgery centers, emergency departments, imaging centers, laboratories, outpatient rehabilitation, sleep care centers, walk-in clinics, wound care centers and physician network.

At least $30 million will go toward capital improvements, Woodbridge said.

In addition to keeping Commonwealth Health’s current staff, roughly 4,000 employees across all three facilities, and honoring current union agreements, Woodbridge has also pledged to bring back services at those facilities that have been discontinued, although it’s unclear exactly what services will return.

Wilkes-Barre General stopped providing inpatient labor and delivery services in July of 2023.

Lackawanna County vote

Because two of the facilities are in Scranton, the Lackawanna County Board of Commissions will also have to approve the bonds. That meeting is scheduled for Oct. 16.

If Lackawanna County were to vote no on the bonds, it is unclear how that would affect the sale of Commonwealth Health facilities as a whole. Woodbridge President Don Steigman did attend Thursday’s meeting, but left before the Times Leader was able to inquire about that aspect of the sale.

If Lackawanna County does approve the bonds, Steigman indicated at Tuesday’s work session that Woodbridge plans to close the sale by the end of the month.

The Board of Directors at Woodbridge is made up of hospital executives with decades of experience in the healthcare field, some with specific experience in hospital mergers and acquisitions.

As he explained at the work session, Steigman previously served as President and COO of Jackson Health System in Florida, where he oversaw the operations of seven hospitals and has extensive experience in financial turnaround.

Brooks votes no

Council vice-chair Tony Brooks explained why he voted no to the bonds.

Brooks referred to a recent Times Leader article published in August that discussed the 1.9 million in real estate tax revenue that Luzerne County would lose if Woodbridge were to acquire Commonwealth Health.

In the article, it was explained that just because the organization is a nonprofit, that doesn’t mean it automatically gets tax exempt status.

Decisions about exemption are largely based on standards established by the state Supreme Court in a case against the state filed by the Hospital Utilization Project — now called the HUP test, officials have said.

In reading off the list of mandates to receive exemption, Brooks said that he believed that the sale would not relieve the government of “some burden” because the Wilkes-Barre stands to lose $774,583 in real estate tax revenue and because Woodbridge said it was unable to contribute to the city’s PILOT program.

Other mandates for exemption include: advances a charitable purpose; donates or renders gratuitously a substantial portion of its services; benefits a substantial and indefinite class of persons who are legitimate subjects of charity; and operates entirely free from private profit motive.

“But we’ll be hopeful for the future,” Brooks said. “[Steigman] has said on public record that he will talk to the mayor next year about a PILOT and I look forward to the budget address on Wednesday to see how we actually make this thing happen for at least this year. But I’m very worried about next year or the year after that.”

Council member Jessica McClay also explained why she ultimately decided to vote to approve the bonds. She said she wavered a lot on the decision, but voted in favor because she was concerned that the hospital would close if the sale did not go through.

“I’m hoping that everything you’ve told us is what you’re going to do,” McClay said to Steigman. “And I’m hoping that next year when we speak to you, that you can contribute to the pilot program.”

The mayor also spoke about the sale, and reiterated that the city would be able to make up the loss of real estate tax with transfer fees and permit fees.

The mayor also said that it’s likely the city will increase it’s earned income tax revenue as well, if Woodbridge does bring certain services back and hires more staff.

“Commonwealth has basically been parceling off and stopping services for a long period of time now, and anticipated that they’ll continue to do so,” Brown said.

Public comments

Several residents spoke out against the bonds, and at least one resident said they were in favor of them.

City resident John Suchoski questioned how much Woodbridge pays its executives and also seemed doubtful that the organization would make good on its promise to expand services.

“It just doesn’t pass the smell test. Like, I understand where the city’s coming from, where you want to try and save the hospital. You want to provide more services, but there’s no guarantee that they will provide more services. Are they obligated to?” Suchoski asked.

He also wanted to know what happens to the income coming into the hospital.

Steigman addressed several of his concerns.

“We have access to other grants and foundations and other sources of income that you would not have as a for-profit hospital,” the president explained.

Steigman continued, “Every dollar that gets made through operations gets, either invested back into operations of the facility, or to capital equipment versus an investor owned organization has an obligation to their shareholders.”

He also said that because Woodbridge is a nonprofit, it is required by law to pay salaries within fair market value.