County commissioners vote on foundation bylaws, would not require public meetings

Commissioners discussed concerns about transparency and control of the $1.25 billion dollars available for the community
Updated: Sep. 21, 2020 at 1:28 PM EDT
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WILMINGTON, N.C. (WECT) - Now that the New Hanover County Commission has given its approval to move forward with the sale of New Hanover Regional Medical Center to Novant Health, the fate of the funds from the roughly $2 billion purchase price is under consideration by county commissioners — as is the role of the public.

While NHRMC currently is a county-owned hospital, leaders are working to create a new non-profit foundation, the New Hanover Community Endowment, INC.

After initial allocations are made to funds for employee pensions and county emergencies, this foundation would serve as the holder of approximately $1.25 billion of county money if the pending sale with Novant goes through, but it might not be subject to the same scrutiny that public boards are.

On Monday, county commissioners discussed several items related to the creation of the foundation and its purpose.

When it comes to investing, government entities are restricted by state law as to what they can invest in, explained the county’s Chief Financial Officer Lisa Wurtzbacher, but non-profit foundations are not.

Typically, government entities are limited to about a dozen different investment opportunities that are considered low-risk but also low-yield. When it comes to a return on investment with an amount of money as significant as $1.25 billion, a few percentage points can mean millions earned each year, but also the risk of losing the same millions.

According to documents from the county, that is why the county is looking to invest the money without being subjected to the restrictive statute.

“While it is not certain what the financial markets will do in the future and thus impossible to know what potential returns may be from a portfolio that can only invest in options under NCGS 159-30 versus investment options outside of NCGS 159-30, investment options under NCGS 1159-30 typically yield a lower return. To increase the ability of the community foundation to grow the funds in its use for the future, we have worked to structure the foundation in a way that would ensure the best chance of not being under the restrictions of NCGS 159-30,” documents read.

While the money would be the county’s, one way that Wurtzbacher said they hope to get around state law and restrictions on investments is by limiting the makeup of the foundation’s board. The proposed 11-person board would consist of a minority of county commission-appointed members.

Of the 11 members, the commission would only directly appoint five. The remainder would be appointed by the new hospital board established after the sale.

County Manager Chris Coudriet and an outside attorney Don Munford argue this would limit the influence that the commission has over members of the foundation’s board.

Commissioners had concern about if this setup would cause Novant Health to have influence over the new foundation board, because the new hospital board will have representation from the parent company.

A spokesperson for Novant reached out Tuesday to note that Novant Health will not take part in nominating the foundation board, because those appointments will be maid prior to the sale going through.

“The Community Foundation board will be appointed by the NHRMC Board of Trustees and the New Hanover County Commissioners, which will be done prior to Novant Health closing on the partnership.”

WECT has reached out to the county for additional clarification on the timeline for the appointment of the new hospital board.

Regardless, it is not yet clear if this mechanism would work or would be allowed, because the initial members of the new hospital board will at least in part be appointed by the existing board of trustees, which is an extension of the county commission and therefore subject to state statutes that govern public bodies.

And while setting up the foundation in this way could free up additional investment options, it could also limit how much access the public has to the process.

There were some concerns and changes proposed by county commissioners during the presentation, with one of the biggest sticking points for Commissioner Rob Zapple being the bylaws as-written not requiring the foundation to be subject to North Carolina open meeting laws.

Munford, who explained the bylaws to the commissioners, strongly opposed opening the foundation to public scrutiny, despite the fact the board would be handling more than $1 billion of the public’s money.

Munford said subjecting the board to open meeting laws would make it a “political” body and he said he crafted it specifically to not be political. He said he did not believe that open meetings changed anything other than the way people vote, and that open meetings allow for situations to become distorted and political.

Zapple suggested a compromise of a partially-open protocol.

“Do you see a benefit in essentially trying to open up this foundation which we could do through these bylaws so that the public, and the media, have an opportunity ... to sit in and observe the discussions to see how their money is being spent?” Zapple asked Munford.

Munford said not only did he not see a benefit, he had crafted the bylaws to specifically avoid that situation.

“The open meeting law is a way to expose political bodies to the public. I have crafted documentation for this community endowment to not be a political body,” Munford responded. “I don’t want to see board members or Novant pressing the board for pet projects.”

Zapple and Commissioner Jonathan Barfield disagreed, arguing that the body is inherently a public entity.

“It’s a private foundation with one-and-a-quarter billion dollars of public money – to me there is nothing private about it ... I don’t see the harm in having regular scheduled meetings and allowing the public to see what the discussion is and how their money, the public’s money, is being spent,” Zapple said.

Munford responded saying that injecting politics into the foundation would be much more destructive than anything else commissioners could do to it.

Commissioners also changed the bylaw that allowed a simple majority to request the removal of another foundation board member as well as the proposed two, three-year term limits. It will now require a supermajority in order to request the removal of a sitting board member, and the commission changed the proposed term limits to three, three-year terms.

Commissioner Pat Kusek made the motion to accept the bylaws as they are written (with the two changes commissioners voted on), ultimately, the vote passed 4-1 with Zapple dissenting.

No changes were made to require the meetings be open to the public.

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