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How to bring social justice, economic growth and science and culture to downtown Chattanooga
Anyone who has ever walked the grounds of the Salk Institute in La Jolla California must be struck by the avaunt guard architecture of this research campus by the sea. The intent I believe of the builders of this research campus where several fold but one surely must have been to make an impression on both visitor and research employee alike. An inviting campus setting is sure to retain this cluster of research employees to the research facility by the use of this human “since of place” The skill full use of architecture and public art by the Salk institute in the early 1960’s to attract research scientists set in motion the growth of this economic and cultural cluster of workers and with in decades several other research non profits and the university of California at San Diego had set up a presence in La Jolla. La Jolla’s magnificent natural beauty adds to it’s since of place.
I make the argument that any community in the nation that publicly owns infrastructure such as a public hospital can leverage the value of these employees and the capital invested in the hospital property to expand the business base beyond that of providing healthcare thus diversifying that business plan. A cluster of workers engaged in the pursuit of scientific research represents permanent employment by highly educated people who bring to the community not just employment but consumers and creators of art and culture.
The question becomes how you leverage the value of the people and property of a public hospital to build a research campus without burdening the public hospital with debt that cannot be paid off with public hospital patient revenue. The answer must be to leverage a portion of the hospitals value to acquire additional revenue streams or cash flows. My proposed method is to use cash flows from federal research funding to generate cash flows that would retire debt that was used to build the research campus, I propose a unique public private partnership to leverage the hospitals value and that is to enlist and allow the hospitals intellectual assets, its employees to participate and benefit from expanding the hospitals business base.
We would use an employee stock ownership plan, known as an ESOP as the vehicle to borrow the capital to buy a minority share of the hospital for the ESOP, the hospital would transfer the funds from the purchase to a research endowment trust. The research trust every year would use a portion of interest earned on its assets to pay salaries of research scientists. The research scientists employed would write grants for federal research funds, a portion of the federal research cash flow pays down the ESOP debt. The ESOP is an employee pension benefit so research and patient care cash flows pay down the ESOP’s debt. The ESOP leverages the hospitals value into a research trust an asset. The research trust leverages the hospitals intellectual value, its people, into federal research funding cash flows that benefit the entire community. The research trust builds a research campus that in turn adds value to the hospitals capital assets that leverage into increased value to the ESOP. The research trust leverages the community’s cluster of research employees.
An ESOP is an employee pension benefit that only is used in for profit businesses. In order for the public hospital ESOP to purchase a minority share of the public hospital it must own a for profit corporation that would enter into a partnership with the public hospital. Many hospitals have ownership agreements and partnerships with there physicians and extending these partnerships with the Nursing and support staff encourages their intellectual contributions to the hospital and the community. Including all employees in the ownership structure and using their ESOP as a vehicle for funding the research trust also benefits the wider community in that all employees’ decades hence will retire with a secondary pension to the hospitals primary one, those leveraged funds having been transformed into pension assets, the same assets having grown over many decades into a research trust.
To all of you reading these words think of it this way the public hospital has borrowed $100 million from local government economic development bonds to loan to its for profit ESOP, the ESOP uses the funds to purchase a share of the public hospital and over many decades builds wealth for the hospital employees, The hospital uses the funds it has gained back from the ESOP to place into the research trust which now has a $100 million endowment. We would argue that the hospital should engage in a public/private partnership with the community and its local governments and nonprofits to pay down the ESOP debt not to just subsidize the ESOP pension plan in it self but to indirectly fund the research trust and all of the capital investment in research campus and federal matching funds that that this would imply. A leveraged ESOP in this case means fundamentally so much more then benefiting and engaging employees in the management of an enterprise and expanding it but in helping a build a community, a region, a nation.