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PROCEEDINGS OF THE CITY COUNCIL
OF THE CITY OF GRAND FORKS, NORTH DAKOTA
April 9, 2007

The city council of the city of Grand Forks, North Dakota met in special session in the council chambers in City Hall on Monday, April 9, 2007 at the hour of 7:00 o’clock p.m. with Mayor Brown presiding, pursuant to call by Council Members Christensen and Brooks, which was served on all members. Present at roll call were Council Members Brooks, McNamara, Glassheim (teleconference), Gershman, Christensen, Bakken (teleconference), Kreun - 7.

Mayor Brown announced that anyone wishing to speak to any item may do so by being recognized prior to a vote being taken on the matter, and that the meeting is being televised.

CONSIDER APPLICATION FOR PROPERTY TAX
EXEMPTION FOR NEW BUSINESS BY AURORA MEDICAL
CENTER, LLC

The city auditor presented the matter of public hearing on an application for property tax exemption for new business by Aurora Medical Center, LLC at 1451 44th Avenue South, Unit C.

Mayor Brown stated he had speaker cards that were randomized by the city auditor so as not to give preferential treatment to anyone; and requested speakers to limit their statements to new information and limit comments to one or two minutes.

Jessica Logan, 5156 7th Avenue North, co-chair of Altru's Employee Activities Committee, is an Altru employee and patient, and is a citizen of Grand Forks and a taxpayer. She presented petitions "to stop City support of the Aurora Medical Center Tax Forgiveness" and that they do not want our tax dollars to support a for-profit hospital. She stated the criteria they are using is based on economic development and encouraged council to slow down and study the situation and impact it would have on Grand Forks; that if our City can afford a large tax forgiveness, that they consider using the money for different program for the community, i.e., drug education programs in the school, fixing street, decreasing amount of property tax increase. She presented petitions containing 624 signatures to the city auditor.

Council Member Gershman stated for the record that it should be understood that a tax abatement is not giving money away that we have; it is money that we don't collect and a postponement of collecting that; and people have to understand that we can't take money that we don't have and put it into a program.

David Molmen, 398 Woodland Circle, chief operating officer of Altru Health System, read a brief statement - that the issue before the council is a request for tax exemption for a proposed for-profit hospital in Grand Forks based on a claim that it meets general guidelines for consideration as economic development; that they believe this proposal fails to meet the criteria and have provided actual health care claims data showing patient origin and place of service for patients residing in Grand Forks and the broader region; that data doesn't conclude that greater than 50% of the patients for this new hospital would come from communities more than 50 miles away.

He stated they do not dispute the right of entrepreneurial physicians and others to build a hospital that would be in competition with Altru Health System, but do dispute the notion that such a venture would be under written in part by the Grand Forks community in the form of a tax exemption. Because Grand Forks is served by a single hospital the community receives a subsidy of nearly of nearly $7 million per year, a federal subsidy, with a second hospital that money is gone from the community forever, it is not transferred to another organization or business, it leaves us with one of only two options: a reduction of service or an increase in the cost to the patient. They believe that the applicant has failed to show the merit of this application and accordingly, the council should turn it down. If, however, you are not yet convinced the council must have further study, including discussion of the issue with the Department of Health, North Dakota Blue Cross & Blue Shield and other experts looking at actual experiences of communities that have faced this issue and the actual impacts on the region.

Dr. Thomas Peterson, 5692 Cypress Point Drive, stated on behalf of Aurora Medical Center, they request a 5-year step-down real estate abatement, that they have given numbers based on their findings, a feasibility study, all of which they have in their work packets. He stated their plan is to build a general acute hospital and in NDCC there is a definition for what that type of hospital is, and that they would meet that requirement and in addition would have extra services including obstetrics, gynecology, surgical and recovery services as well as other service lines. He stated there is also a definition for a full-service general acute hospital in the NDCC and included with that they offered emergency services. He stated they can't prove where people would come from but that they had a feasibility study done and they looked at the data and came up with projections.

There has been overwhelming community support for having choice and second hospital and would still request the council to look at the merits of the proposal for tax abatement, that they feel they meet those criteria and that their feasibility study data is accurate, plus or minus 3.7%, and are talking about a small part of the market and strongly believe that increased services will be better for everybody in town, including the community hospital.

There is a precedent, the city council granted two step-down 5-year tax abatements for the Richard P. Stadter Psychiatric Center, the Stadter Center is a psychiatric hospital, and that there are more psychiatric hospital beds in the region when count the State Hospital in Jamestown, at Altru, unit at Thief River Falls, Fergus Falls Regional Treatment Center, Brainerd, unit in Bemidji, Devils Lake hospital and Minot. They are talking about building 67 bed hospital and can be good for everybody involved.

Council Member Gershman stated he wanted to make another clarification, that the Stadter Center did not have a local competitor for psychiatric care when the step-down was given. Dr. Peterson stated that Altru has a psychiatric unit and the Stadter Center has added this business to town, and that is why they feel adding the hospital is going to increase the business at the community hospital.

Council Member Gershman stated that when they give any sort of tax incentive we tend to ask who the investors are and asked who investors are behind this project. Dr. Peterson stated for operations it would be himself, Dr. Noyes, Dr. Miller, Dr. Trottier, Dr. Mark Peterson, Dr. Rabadi and that is the majority and he is involved through small business that he owns; and capital side:would include those stated and partner from Paces Launching who is general contractor.

Dr. Peterson stated in response to Council Member Kreun's question, they would provide emergency services; that in the State of North Dakota have to provide emergency services to patients on a 24 hour basis for treatment or care, 24 hour nursing services, physicians available at all times. He stated their first action statement is that they will not deny care to anybody who comes to the hospital, and currently their providers provide and have given the numbers, and the Stadter Center 42% was care to the poor which includes no pay, Medicaid, donations, etc. and that is very large.

Dr. Bill Mann, 2817 17th Avenue South, stated that he believes in general that physician-owned hospitals are detrimental to the communities in which they exist, the cost of care rises because of the competitive nature that develops, there is abundant evidence, and is current subject of congressional study. The reason this happens is because the majority of high paying elements in medicine are created by the performance of procedures. In this local situation the potential for harm is even greater, it means a $7 million loss to Altru Health System. He stated he is a member of Altru Health System, that he is a member of a community owned organization, that was created 30 years ago by the amalgamation of two hospitals and the purpose was to stop the inevitable competition that occurs and can be seen in every metropolitan area in ND and every other state. He believes the council has an obligation to balance the economic benefits of increasing the tax base against the probable and inevitable harm to the average citizen who would be seeking health care in Grand Forks.

Dr. John Lambie, 3214 Belmont Road, reviewed history of when St. Michael's and Deaconess Hospitals combined, that he came to Grand Forks in 1962 to practice internal medicine and at that time had a very limited medical community, the Grand Forks Clinic had 18 physicians and the independent physicians were about an equal number and had a difficult time recruiting physicians to this community; that when Deaconess became in a state of disrepair, 22 physicians at the Clinic purchased land where Columbia Road is now, they merged the two hospitals and became United Hospital, and the physicians that purchased that land donated land to the hospital to build a new facility, they donated land to the Rehab. Hospital, UND so they could construct that facility, and after construction moved in 1976, they could recruit physicians because they had state of the art facilities and the more physicians you have the easier it is to recruit other physicians. Within a year and a half at the time they completed the clinic, they had to build a mirror image of the clinic, double its capacity to take care of the additional physicians they had been able to recruit. His concern is going back to 1962 with fragmentation of hospital services and doesn't think that both facilities are going to be able to continue to have state of the art equipment and more difficult to recruit more physicians to this community, they are in competition with every other place in the US for physicians, that they get their fair share of family physicians trained at the UND Medical School but will have hard time recruiting other specialists, won't show up for a number of years but if pass this tax abatement and if build another hospital, welcome to 1962.

Dr. Rory Trottier, 5598 Pinehurst Drive, stated he has been listening to this for a long time, and have got to a situation in the community that is getting worse, scare tactics from the other side, that there are multiple studies finding, proving, saying that non-profit hospitals do not add much more benefit and for- profit hospitals do not drive up health care costs, but thinks the scare tactics that are going on about how the community and hospital is going to crumble is complete nonsense - the community hospital is going to flourish, and we are going to be getting people from out of town, and if look at his statistics in his surgeries alone, most of his consults and referrals are coming from places that are not in this community, this is about a tax abatement for a business venture that a group of independent physicians would like to do - not about putting Altru out of business

Mayor Brown closed the public hearing and asked for council comments.

Council Member Christensen stated when this issue first came up he asked Mr. Swanson for an opinion re. ethics based upon our Code and Mr. Swanson said he could vote, on Monday and Wednesday in light of that opinion he asked questions but as this matter has evolved, the question of his impartiality has been brought into question and that he is not going to subject his family or himself or profession or council to an appearance of impropriety and is recusing himself from this and that he is not going to vote nor is he going to comment any further. It was moved by Council Members Gershman and Kreun to recuse Council Member Christensen. Carried 6 votes affirmative.

It was moved by Council Member McNamara to table this item for two weeks from tonight at a special meeting of the city council. Council Member Gershman seconded the motion. Upon roll call the following voted "aye": Council Members Glassheim, Gershman, Kreun, McNamara - 4; voting "nay": Council Members Bakken, Brooks - 2; Council Member Christensen recused. Mayor Brown stated the motion to table carried and this item is put on the agenda two weeks from tonight at a special council meeting on April 23, 2007.

ADJOURN

It was moved by Council Member Brooks and seconded by Council Member Christensen that we adjourn. Carried 7 votes affirmative.

Respectfully submitted,



John M. Schmisek
City Auditor

Approved:
______________________________________
Michael R. Brown, Mayor