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Judge approves E.J. Noble Hospital’s use of trust funds to obtain credit

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GOUVERNEUR — State Supreme Court Judge David R. Demarest has ruled that E.J. Noble Hospital can use three restricted trust funds as collateral for credit to allow the financially struggling facility to obtain ongoing operating cash.

The hospital had asked the court’s permission to use the trusts’ funds, which total more than $900,000, either as collateral for a line of credit or to have portions of the money provided directly to the hospital to help it meet financial commitments.

The hospital has been experiencing financial hardship for several years, culminating in a Sept. 28 decision by the state Department of Health to shut down its lab due to deficiencies. Although the state later allowed a partial reopening of the lab, the blood bank remains closed and the hospital cannot provide a number of services, such as most surgeries and a maternity ward.

The hospital is working out a management agreement with Canton-Potsdam Hospital, Potsdam, which still must be approved by the National Automatic Sprinkler Pension Fund, the guarantor of $11 million in bonds that financed the hospital’s recent addition.

According to Judge Demarest’s decision entered Wednesday, the hospital has three endowment funds that were set up by donors to provide a regular stream of income. In order for the funds to be used for any purpose other than what the donor stated, three conditions must be met: the trust must be charitable in nature; the donor must have demonstrated a general, rather than a specific, charitable intent; and circumstances must have changed, rendering literal compliance with restrictions impossible.

The hospital did not argue that compliance with the restrictions was impossible, but rather that it has become impractical. The trusts are earning little in interest and, once corporate trustee fees are taken out of them, produce little, if no, revenue.

Despite questions from the state attorney general’s office regarding the use of the funds, Judge Demarest determined that the hospital had demonstrated that dramatic changes over the years in the way health care is financed contributed to E.J. Noble’s financial straits and that tapping its trust funds is necessary to the hospital’s continuing operations.

“Although it may very well have to reinvent itself to survive, the relief requested will assist it in remaining viable,” Judge Demarest wrote.

He also concluded that the proposed use of the funds was consistent with the donors’ intent to “benefit the citizens of their community” by providing operating assistance to the hospital.

“Based upon the information provided by the Hospital as to the devotion to the Hospital each of the donors expressed during their lifetimes, it is natural to assume that had they known how little benefit was being received under the original terms of the trusts, they would have approved of changes to insure their charitable intentions,” the judge wrote.

Hospital board Chairman Timothy J. Monroe said Friday that the decision is still being reviewed to determine specific conditions under which the funds may be used.

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