We've been watching the fallout since last Wednesday when a major revelation emerged at the UMC Management Corporation Board. The Board's own financial consultant, J.P. Morgan Chase, made it clear to those present that the $400 million financing gap that must be overome to build the Charity Hospital replacement facility...is still very much in existence. It's not clear that the UMC will get the money it needs.
HUD, after considering the pre-application from the UMC Board, came back with about ten different areas of concern that require additional explanations and improvements by the UMC. The Board's consultant noted that construction and site preparation (read: demolitions) have gotten far out ahead of the financial and management realities. The "Clean Slate" is not so clean. It's dirty.
In other words, LSU has demolished nearly 20 structures and cleared 18 lots in the UMC Footprint...but it doesn't have the money to build the hospital. And now we're not the only ones who have noticed. The UMC Board's spin about having the funding has been debunked. UMC can't even go to a formal meeting with HUD about its application for mortgage insurance until it's cleared up the concerns raised at the recent board meeting.
Additionally, it became clear at the board meeting that continued site preparation activities in the UMC Footprint would jeopardize a chance at obtaining HUD backing necessary to bridge the financing gap. So any further demolitions in the UMC Footprint going forward could potentially destroy UMC's chances at getting the funding required to make the whole project happen.
Here's another point: at UMC Board meetings in the fall, presenters made it clear that if UMC failed to get HUD financing, the project would almost surely fail to garner support in the private bond market. At last week's meeting, all options were suddenly back on the table. Those present were told that in the event HUD did not approve the insurance, then the project would simply proceed to enter the private bond market. It was a very interesting - and noticeable - change of course.
UMC might want to re-consider the option of revamping the existing Charity Hospital at this point - before it blows more money on site clearance in the UMC Footprint.
Really, given the ill-advised decision to proceed with site clearance before sufficient financing was onhand, we may see the "worst of all possible outcomes" result at this point. UMC could have simply rebuilt in Charity. It had enough money to do so with the FEMA Charity arbitration settlement alone. Now, since significant funds have been expended to demolish properties in the UMC Footprint, there may not be enough to rebuild in Charity anymore. And if the HUD financing doesn't come through...and the private bond market isn't a realistic option...then we're looking at a scenario where the state is both unable to reopen in Charity and unable to build in Lower Mid-City. Gee, wouldn't that be nice?
If the state has sufficient funding left from the FEMA arbitration settlement, the most feasible way to accomplish the task of bringing healthcare back online, as has always been the case, is to reopen in Charity Hospital. It would have saved endless heartache for residents, prevented displacement of functional businesses, and avoided the destruction of a classic historic neighborhood.