The University of Colorado Health is officially running Memorial Health System, and the city’s holding the cash from the deal in two escrow accounts to pay off debts and kick off the Colorado Springs Health Foundation.
The city received $340 million in cash and investment money from Memorial to defease the bonds. Three out of the four bonds will be paid off this year, and the fourth will be paid off in 2018 because that’s the earliest day the debt can be erased.
An additional $259 million payment is being held in a different account, said City Attorney Chris Melcher. The money will be used to start the foundation, whose board of directors will be in place by February 2013.
Melcher said the amount of money available to the foundation will depend on the outcome of a lawsuit between the city and the Public Employees Retirement Association. PERA claims the city owes between $190 million and $246 million to exit the pension plan. The city asserts that the employees are no longer city workers, and the city owes no money.
Colorado Springs has filed suit in Denver District Court to have a judge settle the issue, and Melcher said he hopes for a resolution within a year.
“We don’t think we owe any money,” he said. “And if we do, it won’t be $246 million. The day PERA issued that quote the stock market was at 11,300. Now, it’s at 13,500.”
Melcher also took issue with PERA’s claims that if the city didn’t have to pay extra money for withdrawing Memorial’s contributions, then other city employees will have to pick up the difference.
“I think that’s wrong,” he said. “Because we’ve paid every dime that PERA has asked us to pay. If they don’t have enough to cover their promises, they need to consider whether they should have asked for more money. Or maybe they’re making promises they can’t keep. Those are questions PERA needs to answer, but we don’t think city employees, or Utilities employees or employees who work at Pueblo should be responsible for their bad choices.”
PERA can’t blame poor stock performance or the recession for its budgeting woes, Melcher said.
“Every college has said their endowments are back to where they were before the recession,” he said. “I know that’s the case at Colorado College. Maybe PERA just made the wrong investment choices.”
The lingering PERA question will determine how quickly the new Colorado Springs Health Foundation gets off the ground. Melcher said the group will spend most of 2013 preparing by-laws and making governance choices.
“We’ve decided that we don’t want them to make distributions until the base is at $100 million,” he said. “That might take a few years. But if the PERA question is settled in our favor, they’ll have that much on day one. And that can only benefit the entire Colorado Springs community.”