State says Community Hospital property exempt from affordable housing law

Long Beach could be one step closer to transferring ownership of the Community Hospital property after the state last week ruled that the land is exempt from a California law that would have required the property to be offered on the open market for affordable housing developers.

The law, called the Surplus Land Act, was a major hurdle in the city’s plan to pay back significant losses to the hospital’s operator, Molina Wu Network (MWN), by transferring ownership of the 8.7-acre property in East Long Beach.

MWN closed the struggling hospital for good in December due to the mounting costs for seismic retrofit. The company has said it plans to turn the property into a mental health and wellness campus, but that proposal was sidelined this year when the state initially ruled that the city, which owns the land, must declare it as surplus and offer it up for bidding to affordable housing developers.

The city appealed the state’s decision, and in a June 2 letter, the California Department of Housing and Community Development determined the property qualifies for exemption from the Surplus Land Act because the city and MWN entered into exclusive lease negotiations prior to the law being signed by Gov. Gavin Newsom in October 2019.

The property, however, must be sold or transferred by Dec. 31, 2022, to qualify for the exemption, the state said. 

The city has also applied for broader state exemptions due to the fact that the property is on a major earthquake fault line.

The December closure was not the first time the facility shut down because of seismic concerns. After nearly a century in Long Beach, Community Hospital shuttered in 2018 when then-operator MemorialCare opted not to spend tens of millions of dollars on seismic repairs mandated by the state.

Residents and stakeholders launched a campaign to save the hospital, and the city in response inked a deal with newly formed health care group MWN that was intended to allow the group to keep the hospital open and pay for the tens of millions of dollars in seismic retrofits needed to save the emergency and acute-care services.

It was an uncommon deal in that the city, which owns the property, included a provision in its lease agreement with MWN that required the city to reimburse the group for operational losses if the 45-year lease was terminated early by either party.

City leaders at the time conceded the risk but said they were concerned about health risks to the community and a potential jump in emergency response and transport times if East Long Beach lost the hospital.

Community officially reopened for transfer patients on Jan. 5, 2021, with its emergency room following in May 2021 after being closed for nearly three years.

But in the midst of a pandemic-enhanced nursing shortage, the hospital struggled to find staffing and was saddled with mounting costs for seismic retrofits. By November 2021, MWN announced the hospital would close once again, with the company claiming losses upward of $30 million.

Long Beach is now on the hook to reimburse MWN, in a transaction that will likely result in the city “selling” the 8.7-acre site to the group for $0 to fulfill the lease obligation.

It is unclear if MWN plans to move forward with a wellness campus in light of the state decision. A representative for MWN could not immediately be reached for comment. 

Co-founder John Molina has said in past interviews with the Post that he is committed to transforming the property into a campus focused on community health needs and mental health care services for the city’s growing homeless population.

Editor’s note: In addition to being co-founder of MWN, John Molina is also the primary investor in the parent company that owns the Long Beach Post. Read more about the Post’s ownership here.

To save Community Hospital, Long Beach leaders took a risky gamble—and lost

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Kelly Puente is an award-winning general assignment and special projects reporter at the Long Beach Post. She has worked as a journalist in Long Beach since 2006, covering everything from education and crime to courts and breaking news. Kelly previously worked at the Long Beach Press-Telegram and the Orange County Register before joining the Post in 2018. She is currently pursuing a master’s degree in public policy and administration at Cal State Long Beach. Reach her at [email protected].
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