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Sequoia Healthcare District Pension Plan unfunded liability

Original post made by Jack Hickey, Woodside: Emerald Hills, on Jan 9, 2014

In this age of overextended retirement benefits, the Sequoia Healthcare District pension plan goes unnoticed. Fact is, CHW (now Dignity Health) has ponied up over $24 Million dollars in the past 9 years for the unfunded liability of this plan. CHW assumed responsibility for the plan in 1996, when the hospital was first sold. The District will tell you that this is a "passthru" expense which does not involve tax dollars. The District deposits $2.5+ Million per year into the pension fund and CHW cuts the District a check in the same amount.

True, but it's not that simple.

In December of 2007, CHW became sole owner of Sequoia Hospital in an agreement which provided Sequoia Healthcare District with an economic return on its investment($75,000), for the hospital rebuild, which equals 50% of Sequoia Hospital's excess profit. In legalize, excess profit means "Operating EBIDA exceeding an aggregate 9.3% annual Operating EBIDA Margin". This has provided the District with over $15 Million in revenue since 2007. Had it not been for the unfunded liability of the pension plan, the District would have received $12 Million more in profit sharing.

Who is responsible for the gross mismanagement of the pension fund which created the unfunded liability? Who is receiving the pension benefits?

Art Faro, currently a Member of the Sequoia Healthcare District Board of Directors was CEO of Sequoia Hospital when it was sold in 1996. He is a beneficiary of the plan.

I am asking questions.

Comments (2)

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Posted by Jack Hickey
a resident of Woodside: Emerald Hills
on Jan 12, 2014 at 3:52 pm

The Sequoia Hospital District Pension Plan is a defined benefit plan. Retirees get the amounts promised. If the fund created to finance the payout does not produce the revenue required, it comes out of the taxpayers pocket. District employees have a 401K plan. All government agencies should switch over to a 401K plan.
Some suggest that the District "practically gave the property away" to CHW in 1996. With CHW's assumption of the Districts bonded indebtedness and unfunded liability of the pension plan, they paid a fair price for a property which was headed for California's "seismic upgrade" scrap heap.

CHW came up with a plan which upgraded the facility on-site. In 2007, when the became sole owners of Sequoia Hospital, they did receive an additional $75 Million from the District for the rebuild effort, in return for which the District is receiving a share of profits for 40 years. In addition, CHW(Dignity Health) in return for its tax-exempt status, does "give back' to the community, as do all private hospitals in California.


 +   Like this comment
Posted by Jack Hickey
a resident of Woodside: Emerald Hills
on Jan 12, 2014 at 3:58 pm

The Sequoia Hospital District was in the business of "losing money"Web Link when it found a "white knight" named CHW to bail them out in 1996.
As I stated in my original post, CHW "...has provided the District with over $15 Million in revenue since 2007. Had it not been for the unfunded liability of the pension plan, the District would have received $12 Million more in profit sharing."
Original projections by Goldman Sachs for the profit sharing showed more than $48,000,000 for the first 10 years, and $270,000,000 for 2018-2047. With the hospital remodel almost finished, and an improvement in the Pension fund situation, those numbers may become a reality. I have suggested that the District seek an appraisal of their profit sharing arrangement and carry it as an asset on their balance sheet. Could be worth over $100,000,000.
The value of Sequoia Hospital and the land it was on in 1996 was that of the land minus the cost of building removal. Their $30,000,000 + assumption of the Districts bonded indebtedness and unfunded liability of the pension plan was a bargain for taxpayers of the District. Britschgi and Company made a silk purse out of a sow's ear! And so, in another context, did CHW. A profit for all concerned. Sequoia Hospital is there for those who so choose. Planned Parenthood is there for those who seek abortions. Neither should be receiving pseudo-philanthropic grants of taxpayer money from the Sequoia Healthcare District.


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