The University of Louisville appears to have successfully negotiated away any job retention requirements as part of the $35 million taxpayer-funded loan authorized by the Kentucky General Assembly to purchase Jewish Hospital. The Cabinet for Economic Development (CED) initially proposed specific job-related metrics UofL Health would need to meet to achieve partial loan forgiveness but ultimately signed off on an agreement that essentially negates job retention as a part of the deal.

On March 5, UofL President Neeli Bendapudi went before the Senate Education Committee to testify in favor of HB 99, the legislation authorizing the loan program. In response to a question, Bendapudi stated, "the requirement on us is to retain 100% of the Kentucky based jobs." However, the loan agreement approved by the Kentucky Economic Development Finance Authority (KEDFA) provided UofL with two options to have 50% of the loan forgiven.

Furthermore, according to emails obtained by the Center for Open Government through Kentucky’s open records statutes, it looks as if the University of Louisville and UofL Health were in the driver’s seat to establish the terms that allow them to escape full repayment of the loan. In theory, CED represents the public’s interests when negotiating with a company (or organization) seeking financial benefits made possible by Kentucky’s taxpayers.

A March 17 email from Katie Smith, the cabinet’s Commissioner for Financial Services, asked UofL to confirm that "existing, full-time, Kentucky resident jobs is 6,736."

UofL Chief Financial Officer, Dan Durbin, circulated an internal email two days later to verify a recalculation that reduced the number of existing full time jobs to 5,880.  Durbin wrote, "the current jobs number needs to change to 6,537 and we say that the decrease in employment is attributed to removing that layer of management that adds no value." His email finished with a question: "Can someone verify that the numbers on the attached PDF are good? I have no way of knowing."

CED accepted the 5,880 figure as part of the loan approval document that went in front of KEDFA. There is nothing in the email exchanges or other documents to suggest the cabinet attempted to independently verify the number of Kentucky-based jobs provided by UofL.

What’s more, UofL Health proposed removing language that would have required them to increase the number of physicians in medically underserved areas (MUAs) as part of the second option that allows them to qualify for partial loan forgiveness. CED incorporated UofL’s language verbatim in the final loan agreement.

Katie Smith's March 17 email proposed that Option 2 include "maintaining the existing 4 facilities in operation within the MUAs” and require “an increase of 10%" in the number of physicians working at the four locations. She asked UofL for their thoughts on this requirement.

Two days later, UofL Health legal counsel James Rayome responded, "it would be difficult to indicate what percentage the number of employees should be increased (under Option 2) since...the goal of providing high quality services to the medically underserved areas is truly dependent upon strategically located access points."

Rayome's email continued, "being sensitive to KEDFA's needs to measure our progress, I am in the process of drafting language with regard to establishing an access point goal."

A conference call was held on March 20. Rayome followed up that call with UofL Health's proposed Option 2 language, eliminating the requirement that UofL Health commit to increasing the number of physicians providing services in the medically underserved areas.

Smith responded, "this information is very helpful. We will update the loan agreement and board report." Rayome’s language is what was presented to KEDFA as part of a March 26 preliminary and confidential document recommending the loan be approved.

UofL Health can have up to 50% of the loan forgiven by meeting the terms laid out in Option 2. Option 2 requires UofL Health to retain certain facilities in the medically underserved areas but does not contain any job retention or job creation conditions. By meeting the requirements of Option 2, the job retention requirements laid out in Option 1 can be ignored.

The Center submitted several questions to the economic development cabinet asking if this interpretation is correct. If so, does that ultimately mean there isn't a firm requirement that UofL Health create or retain jobs in order to achieve partial loan forgiveness?

(A response was not provided prior to posting this piece. We will update this post if we receive anything from CED.)In a presentation before the interim Appropriations and Revenue Committee last month, UofL Health indicated they have increased the number of jobs from 5,880 to 6,000.  The General Assembly can and should revise the requirements of the loan program to direct CED to include job creation and/or retention as a condition for future loan forgiveness.

President Benapudi shouldn’t be opposed to signing on to a firm commitment honoring the statements she made in front of the legislature when lobbying for HB 99. How she responds will speak volumes about UofL’s appreciation for the taxpayer’s help underwriting this risky deal.