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Local Government Center proposes restructuring

New Hampshire Union Leader

June 02. 2013 9:57PM

CONCORD — The New Hampshire Local Government Center has proposed corporate restructuring that includes separating the public insurance administrator's various arms and changing the name of the organization itself.

But an aggressive timeline — LGC officials said they hope to have new bylaws adopted by July 1 — and a proposal to simply transfer assets from LGC's subsidiary LLCs to revived not-for-profit corporations have drawn concern from the top regulator at the state Bureau of Securities Regulation.

"The process of reorganization is not simple, nor will it be seamless," said BSR regulator Barry Glennon.

LGC has proposed changing its name back to the New Hampshire Municipal Association — its original name before a 2003 reorganization — and eliminating LLCs that oversee its health insurance, property and liability offerings and municipal advocacy arms. The LLCs were created in 2003 despite LGC being told by the state that it couldn't merge not-for-profit corporations into LLCs, partly because limited liability corporations do not have not-for-profit status in New Hampshire.

For the last 10 years, LGC has, technically at least, run three of its operations using for-profit corporations that had the not-for-profit LGC Inc. as its sole owner.

"We're doing this to get rid of the LLCs," said LGC interim Executive Director George Bald. "We're doing it to promote more transparency."

Further, LGC, in reverting to its NHMA moniker, will no longer oversee the various insurance risk pools.

At a May 28 meeting, LGC board members had few questions for staff regarding the proposal before setting a public hearing on the proposed changes for June 21. The entire discussion on the proposal, in which the corporate model of LGC would be completely overhauled, lasted slightly more than 15 minutes.

"It seems fairly straightforward to me," board Chairman Thomas Enright said. "I don't see that there's a lot here that I'm concerned with."

But a part of the plan calls for transferring the assets and liabilities of HealthTrust LLC, Property-Liability Trust LLC and the New Hampshire Municipal Association LLC into corresponding not-for-profit corporations.

"The plan is that once those transfers happen, the LLCs would be dissolved," LGC in-house attorney David Frydman said.

Frydman said each of the actions would require a vote of the respective boards of directors after a public hearing was held.

However, such a large-scale transfer would not be as simple as a vote of a board, Glennon said.

"There is jointly owned real estate worth millions of dollars," he said. "There are insurance contracts with hundreds of New Hampshire political subdivisions, which touch tens of thousands of New Hampshire residents and hundreds of millions of dollars of taxpayer money.

"We've expressed our concerns to LGC about not repeating the mistakes of the past and to follow the hearing officer's order," he said.

Further, state law and LGC's bylaws each say that, when the LLCs are dissolved, all assets left after debts had been settled must be returned to members. And complicating the proposed transfers is that the money involved is all taxpayer funds. LGC's total operations bring in — and pay out — hundreds of millions of dollars per year.

Bald, though, said LGC does not believe that the transfers involve giving money to new or different corporations.

"It's not like we're transferring assets to another corporation," he said. "We're really just changing from LLCs to (not-for-profit corporations)."

Bald also said the reorganization is not an attempt by LGC to somehow "get away from" meeting the requirements of a hearing officer's order to return $53 million in surplus funds to member communities. Part of that sum, about $17 million, is money the hearing officer deemed was improperly taken from members of the HealthTrust pool and used to subsidize a workers' compensation program.

LGC officials have struggled with identifying how to meet that portion of the order, which has a Dec. 1 deadline. The workers' compensation program, which has lost money annually and is under threat of collapse, has no reserves. While Bald said he had lined up meetings with banks to seek financing, he said Friday that he had no answer yet for how to meet that part of the order.

"I'm not going to wait until December to come up with a solution," he said. However, "I don't have a proposal that I'm prepared to discuss publicly."

Bald said LGC officials are willing to change the timeline or alter the plan to appease regulators. He said LGC was attempting to complete the process by July 1 so the HealthTrust and Property-Liability Trust fiscal years, which currently operate on a calendar year, could be aligned with "most" of the insurance arms' customers, which operate on July 1 to June 30 fiscal years.

"If our regulators say they want us to slow down or don't want us to do it this way, we'll look at doing something different," Bald said. "It's not that I'm hard and fast that it needs to be July 1. I'm hard and fast that we're doing the things the regulators asked us to do."

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