DATE: June 7, 2022
TO: Honorable Mayor and City Council
FROM: Stephen P. Deitsch, City Attorney
By: Michael Bruckner, Deputy City Manager
SUBJECT: RESOLUTION NO. 7432 APPROVING AN EIGHTH AMENDMENT TO
THE AGREEMENT AND LEASE BY AND BETWEEN THE CITY OF
ARCADIA AND METHODIST HOSPITAL OF SOUTHERN CALIFORNIA
Recommendation: Adopt
SUMMARY
It is recommended that the City Council approve the Eighth Amendment to the Agreement and Lease (“Lease”) with Methodist Hospital of Southern California (“the Hospital”). The Hospital has recently negotiated an Affiliation Agreement with USC Health System (“USCHS”), which includes significant commitments from USCHS. Due to the terms of the Affiliation Agreeme nt, the Hospital has requested th e City’s consent to transfer the Lease to USCHS, and it is recommended that the City consent to such transfer on the terms and conditions set forth in the Eighth Amendment to the Agreement and Lease with Methodist Hospital of Southern California.
BACKGROUND
The City entered into a Lease with Methodist Hospital of Southern California on May 28, 1953, pursuant to which the Hospital was required to own and operate a non- profit hospital facility on the City-owned premises. There have since been seven amendments to the Lease. Copies of the original lease and each of the amendments are on file and available for review in the City Clerk’s Office.
The Hospital and USCHC have recently negotiated an Affiliat ion Agreement and have submitted formal written notice of their agreement to the Office of the Attorney General of California for regulatory review and approv al (the document can be downloaded here:
https://www.methodisthospital.org/documents/Notice-to-the-Attorney-General-by- MHSC-dated-11.18.2021.pdf). Following regulatory approval, the Hospital will officially join the Keck Medicine clinical enterprise as USC Arcadia Hospital.
Methodist Hospital of Southern California
Eighth Amendment to Agreement and Lease
June 7, 2022
DISCUSSION
Under the terms of the Eighth Amendment, the Lease shall be assigned from the Hospital to USCHS and USCHS will assume all of the former Hospital’s obligations, duties, responsibilities, and liabilities under the Lease. The Eighth Amendment is conditioned upon and effective concurrent with the closing of the Affiliation Agreement between the Hospital and USCHS, provided that such closing shall occur no later than December 31, 2022.
If the Hospital and USCHS do not close on the proposed transaction for any reason prior to the December 31, 2022, closing date, the Eighth Amendment shall be void with no force or effect. Within three (3) business days of the closing of the Affiliation Agreement, Hospital shall provide to the City Manager written certification of the date of such closing, otherwise referred to as the Assignment Date. USCHS will therefore be bound by terms, covenants, conditions, and provisions of the Lease after the Assignment Date. Further, the Eighth Amendment extends the term of the Lease another 99 years after the Assignment Date.
The City has consented to the Assignment of the Lease, provided that if at any time during the first five years after the closing of the Affiliation Agreement, the affiliation should be terminated and unwound such that USCHS is no longer the corporate member of the Hospital, the City agrees, and both the Hospital and USCHS thereby agree, to consent to reassignment of the Lease from USCHS back to the Hospital, together with all obligations under the terms of the Lease.
FISCAL IMPACT
There is no fiscal impact upon the City anticipated or associated with the approval of the proposed Eighth Amendment to Agreement and Lease. The Hospital has reimbursed the City for all attorney costs to prepare the updated lease documents.
RECOMMENDATION
It is recommended that the City Council adopt Resolution No. 7432 approving an Eighth Amendment to Agreement and Lease by and between the City of Arcadia and Methodist Hospital of Southern California.
Methodist Hospital of Southern California
Eighth Amendment to Agreement and Lease
June 7, 2022
Attachment: Resolution No. 7432