Thursday, August 7, 2008
A notorious anti-tax group is drawing fire from Salinas Valley Memorial Healthcare System supporters for distributing a flier that exaggerates hospital executives’ salaries just before voters received ballots for Measure W, a hospital bond measure.
In a report lined with glossy head shots of SVMHS managers, City Watch claims the hospital used tax money to pay President and CEO Sam Downing more than $1.8 million, and handed out between $384,214 and $706,527 to four other executives. City Watch’s math is flawed for several reasons.
First, the report combines salaries and benefits into one lump sum. (Fine print at the bottom of the flier explains this.) Also, the benefit figures are skewed. City Watch obtained the salaries from the 2006 tax form of former hospital-affiliated nonprofit Concentrated Care Inc. Mike Profumo, a financial consultant for SVMHS, says the figures were inflated because they switched trusts for the retirement plans that year. For example, the $1.1 million contribution for Downing, Profumo says, is an amount accrued from more than 20 years of employment. And finally, less than 1 percent of the hospital’s budget comes from property taxes, Profumo says, adding that those dollars are reserved for equipment expenses, not salaries.
“I think [the flier] is grossly incorrect, misleading and distracts from the real issue,” says Norm Nelson, a Measure W campaign volunteer and SVMHS doctor. The real issue, Nelson says, is the public district hospital needs to expand its overcrowded emergency room and replace its 55-year-old building. Measure W, which is the single item on a mail-in election, asks voters to approve $392 million in bonds to fund the construction.
Mark Dierolf, a City Watch representative who would only agree to an email interview, says he stands by the report. The flier, he says, was meant to counter the hospital’s “information campaign.” The public district hospital can’t spend money advocating for Measure W, but SVMHS is allowed to educate residents about the need for new facilities. “They have an obligation to provide the public the whole truth, not just their spin, when they use public funds,” Dierolf says. “The recent City Watch reports provide answers to questions people want but have been denied by SVMHS in their publicly financed campaign.”
City Watch is not taking a position on Measure W. Instead, Dierolf says the group is distributing the “educational” card “person-to-person and door-to-door.”
Profumo says the flier is deceiving because “people think that’s actually what [Downing] takes home every year.” Downing makes about $673,000 a year, including lease of a company car, plus about $126,000 a year in benefits, Profumo says.
By comparison, Steve Packer, CEO and president of Community Hospital of the Monterey Peninsula, made $680,566 in 2006.
Downing’s salary is on par with similarly sized hospitals, according to an executive compensation survey recently published in news weekly Modern Healthcare. The median salary for presidents and CEOs of hospitals with net revenues of more than $200 million was about $675,000 in 2008. SVMHS’ total operating revenue is about $377 million. But hospital officials say there is not enough money in the budget to build a new hospital.
Senate Bill 1953, which passed in 1994 after the Northridge earthquake, requires acute-care hospitals like SVMHS to be seismically sound by 2013. Jim Griffith, vice president for strategic planning at SVMHS, says the hospital could face closure if it isn’t upgraded. “If we don’t have our funding to do that, we will be at the mercy of the state,” Griffith says.
Griffith says total construction will cost about $600 million, with the hospital borrowing $200 million to pay for construction. If the hospital bond passes, it will cost property owners in the 230,000-resident district an estimated $114 annually if their home has an assessed value of $300,000, although that payment could increase to $177 in 2011.
The Salinas Valley Taxpayers Union, represented by Dierolf’s sidekick, Brett Landon, argues the hospital has enough money to pay for improvements without going to voters. Then again, Landon and Dierolf are the same pair that tried (using similar arguments) to repeal Salinas’ utility tax in 2002. If the city had followed the duo’s financial advice, money for valuable city services would have been drained.
Even though City Watch lacks credibility, the organization’s misinformation tactics don’t help Measure W’s chances. The measure needs a two-thirds majority to pass, and tax measures are generally a tough sell to voters.
The elections department recommends that voters mail in their ballots no later than Aug. 22. Ballots are due Aug. 26.