I don't have a firm opinion on this but the community-based mental health treatment facilities need to be in place and working before the hospital is closed. 

Two problems have been mentioned in comments: 1) the money won't be there for expanded community services and 2) it is difficult to site such services because of neighborhood opposition. I don't know if all that is true but would like to hear answers to those two issues. I know people have been talking for decades about the need for community-based mental health services but it never seems to happen, or never as much as is needed. I hear that the main local mental health "service" we have is jail.