Aurora pegs losses at $59 million

Waukesha Freeman, Apr. 1, 2006

By ERIK BROOKS
Freeman Staff

OCONOMOWOC A decision by city officials five years ago to block construction of a hospital in Pabst Farms has cost Aurora Health Care $59 million, Aurora argued in court documents filed Friday in its lawsuit against Oconomowoc.

The damage estimate ordered by a judge as the case nears trial this fall represents the net loss for Aurora as of Jan. 1, assuming a new hospital opens by early 2009. If it does not open then, Aurora would face further lost profits and additional construction costs, according to the report from accountant William James Taylor, a longtime University of Wisconsin-Milwaukee professor and private consultant.

Mayor Maury Sullivan called the $59 million sum a good April Fools joke.

They can claim whatever they want to claim, he said. Well deal with it in court.

It remains unclear what amount Aurora will actually seek in damages if the case goes to trial.

A statement from the health system late Friday afternoon said Aurora still has its sole focus on building the new hospital.

The damage estimate was only submitted at the direction of the court and in accordance with the calendar established for this case, the statement reads.

Aurora filed the Oconomowoc lawsuit in 2001. It argues city officials illegally used the zoning process to block construction of the hospital on 43 acres in Pabst Farms.

After years of legal wrangling, the case was put on hold in 2004 as Aurora sought to build a new Pabst Farms hospital nearby in the town of Summit.

Those efforts also failed as the Waukesha County Board voted to overturn a town decision allowing for construction of an $85 million, 88-bed facility.

Aurora and the town filed a separate lawsuit in that matter, and it was dismissed in Waukesha County Circuit Court last week. Aurora and Summit have vowed to appeal the defeat. Aurora revived the Oconomowoc case after the Summit hospital plans fell through. A final pretrial hearing in the suit is set for Oct. 9 before Judge James R. Kieffer.

In advance of the trial, Kieffer asked Aurora to arrive at a damage estimate.

Taylors report, filed Friday, takes into account anticipated revenues and expenses from Jan. 1, 2003 to Jan. 1, 2006, and the $34 million in increased construction costs resulting from what could be a six-year delay in building the Oconomowoc hospital.

Gross revenues alone would have topped $90 million during that three-year span, according to the report. Net revenues those after insurance company and other discounts are factored in would have stood at more than $53.7 million.

Expenses would have been $45.4 million during that same time, according to the report.

The construction savings make up the bulk of the damage request.

For a Dec. 31, 2002 opening, land, building and equipment costs would have been $132 million, Taylor estimated.

For a Dec. 31, 2008 opening, those same costs would be about $166 million.

In addition to that $34 million difference, Aurora faced unspecified additional costs because it has been prevented from relocating its Wilkinson Clinic and has been forced to lease space to deal with the clinics space crunch, Taylor reported.

Sullivan declined comment on the specifics of the damage claim, and said the city has not begun thinking about ways it would pay for any lawsuit damages.

In its statement, Aurora also hinted it would be open to settlement talks in a way that would not impose further costs on Oconomowoc taxpayers, and we remain eager for those discussions to take place.

Sullivan said settlement talks would have to happen through the court proceedings.

The city has previously expressed through the court proceedings a desire to talk, he said. They have rebuffed that. So the suit is proceeding.