Finance Committee Provides Dilemma for Gottemoller

The Finance Committee has laid a dilemma in McHenry County Board Chairman Joe Gottemoller’s lap.

The ordinance laying out the tax levy for county government was to be on the agenda of the next County Board meeting.

It has to be on public view for thirty days before passage Fiscal Year 2016 starts on December 1st.

The problem is that the Finance Committee defeated the motion to approve the levy resolution on a 3-3 vote.

Ties fail.

That vote followed an attempt to amend the levy downward by District 4 member Chuck Wheeler.

But the topic of reducing taxes for Valley Hi came from primary opponent Mike Walkup.

Wheeler,who was appointed to replace Ken Koehler to the Valley Hi Nursing Home’s Operating Board last meeting, took aim at the nursing home part of the levy.

Valley Hi Cash on hand 2006-13

This chart is a bit behind. Now the money in the bank is over $40 million.

It was for $3 million, the same amount as last year.

The problem is that there is over $40 million in the bank

Add the background that Valley Hi pretty much breaks even:  $10-11 million spent, $10-11 million in resident income.

Wheeler moved to reduce the Valley Hi levy by $750,000.

The form of his motion wouldn’t save taxpayers any money.

It took an hour to an hour and a half for committee members to figure out that such savings could only be accomplished if the bottom line of the levy ordinance–about $79 million–were reduced by $750,000, too.

So, what’s been happening as the Valley Hi levy has been cut from $6 million to $5 million to $4 million to $3 million?

Administrator Peter Austin and Associate Administrator for Finance Ralph Sarbaugh explained that as the Valley Hi levy was decreased, the amount of the decrease was allocated to other levies, that is, other parts of the overall levy were increased by the same amount as the nursing home’s was cut.

After figuring out how the motion should be worded, Wheeler made it again.

The meeting started at 8:15.

I left at 12:55 for a luncheon appointment and there still was no vote.

On the way out, however, I heard Mary McCann say, “And, nobody will notice the difference.”

I learned later that Committee Vice Chairman Jim Heisler left the room before the vote was taken.

That left six members–Chairman Mike Skala and members Yvonne Barnes, Mary McCann, Nick Provenzano, Larry Smith and Chuck Wheeler.

The vote on Wheeler’s tax cut motion was 3-4:

  • Barnes, Provenzano and Wheeler in favor
  • Skala, Heisler (a member of the Valley Hi Operating Committee), McCann and Smith opposed

The amendment failed.

Then, Heisler left the meeting.

The next vote was on the levy with Valley Hi at $3 million.

The vote was again 3-3:

  • Skala, McCann and Smith in favor
  • Barnes, Provenzano and Wheeler
  • Heisler absent

Wheeler and Smith are not up for election next year.

Barnes, McCann, Provenzano and Skala face the voters in March and, if they win the Republican Primary Election, all the voters in November.

So, here’s Gottemoller’s dilemma:

The new Rules allow the Chairman to place something on the County Board’s Agenda that has not been approved by a committee.

So, will Gottemoller do that or will he encourage Committee Chairman Skala to hold another meeting before Tuesday in an attempt to gain majority approval?

Adding to the political considerations of a Republican County Board holding taxes constant for the fourth year in a row (capturing only new construction), is that the issue was brought up at the Finance Committee by his primary opponent for the GOP nomination for County Board Chairman–Mike Walkup.

Although he was not present for the public comment part of the meeting at 8:15, after his committee meeting he came and was allowed to comment before the levy was voted upon.

= = = = =
A detailed report of the meeting will be described this weekend.

But, first,

More detailed information on the meeting:


Comments

Finance Committee Provides Dilemma for Gottemoller — 9 Comments

  1. Valley Hi has 3 problems.

    1. Ongoing difficulty finding sufficient CNAs and nurses for staffing needs.

    2. Centegra, source of most Medicare referrals, is building its own poshy LTC facility, 98 beds.

    3. $40 million surplus subject to dispersal to large property taxpayers claiming
    ( rightfully) excess accumulation.

    Same with levy; the levy is more than 275% of predictable annual expenses.

    Solution:

    Reduce VH capacity to 80 Medicaid beds.

    Period.

    Current residents grandfathered, but phase out the 38% of capacity representing private pay and Medicare.

    There are ample LTC Medicare and private pay beds in the county and soon 98 more, and Centegra will never send another lucrative Medicare referral to VH when they can self -refer to their own new facility.

    This solves problem of chronic staffing shortages, staff can be cut by 1/3.

    At $70 per day loss per Medicaid patient, an 80 bed facility would cost $2 million a year.

    There is $40 million surplus earning little or no interest, and additionally at risk in excess of FDIC coverage.

    Solution: VH enterprise fund loans the $40 million to another government entity or school.

    At 4% interest, the surplus could fund $1.6 million annual VH expenses.

    The levy could be cut down to $500,000.

    And VH would retain its surplus for decades as it self-funds through a combination of earned interest and spending down surplus capital.

    At some point in the future, the will of the voters may offer different referendum guidance.

  2. Good answer Susan.

    A tip of the hat to Mr Wheeler.

    VH is an asset to the county.

    A very well-run facility in my eyes and I think we should support it.

    However, the excess collected needs to find its way back to taxpayers.

  3. The concept of investing excess funds in inter-govenmental loans may be a good one.

    I am aware of one instance where this occurred with Elementary School District Lemont-Bromberek 113A borrowing from High School District Lemont 210 back in 2011-2012.

    113A was a district that mirrored my own district, Cary-26, in that they too had been running deficits, had to borrow utilizing Tax Anticipation Warrants to keep the doors open, and both had a bond referendum in November 2010.

    Cary’s passed, 113A’s did not.

    After that failure, not one single bank would lend 113A money through the TAW’s.

    The State had crafted legislation to take over 113A since they were going to run out of cash.

    The High School District stepped in and lent 113A the money to prevent the State takeover.

    So it can be an excellent tool to create a win-win for the lendor and the borrower.

    However, an expectation of a 4% yield is not realistic.

    Depending on what investment policies may exist, I doubt they would tie up their money in any transaction for more than 3, maybe 5 years.

    The current borrowing costs for school districts, etc. are substantially lower than 4% for that time horizon.

    5-year Treasury’s are currently yielding only 1.34%.

    But that’s not to say a mutually beneficial transaction could not occur with a school district looking to refinance, say $5 million in existing debt, and negotiate a deal where VH gets a yield above their current rates and the school district gets an affordable rate and avoids underwriting fees and other debt re-issuance costs.

  4. Woodstock D200 borrows on 20 year timeline.

    And they pay very high rates/yields.

    And pays near 2% in underwriting costs.

    And refinances on a frequent basis.

    (see 2013 bond yielding 4.2% on a 5.75% rate)

  5. Specifically to Valley Hi, they seem hell bent for expansion/SPENDING the surplus, commissioning a $23,000 study to identify ‘need’.

    I doubt whether one of the need parameters requested was ‘lower property taxes’.

    My opinion is to contract rather than expand.

    Expanding simply magnifies the very real pressing problems (which will only get worse) of finding adequate CNA staff, and dealing with Centegra bully tactics.

    What is never pointed out is that if VH didn’t exist, private/for profit nursing homes would be required to provide increased service to indigent clients as a condition of their CON (Certificate Of Need).

  6. D200’s rates are a function of the prevailing rates at the time the debt was issued, their credit rating, and the maturity length.

    I can’t see HV committing to an investment longer than 3 years, maybe 5.

    lso VH should have some policies in place limiting the types and underlying credit ratings of its investments.

    D200’s rating may not meet their minimums.

    Also, given all of the refinancing done by D200 over the last several years, I’m not sure they have anything that is callable in the near future.

    Or at least anything that wouldn’t be subject to negative arbitrage.

  7. All probably true, except maybe the short term aspect…

    VH could hold out 1 year operating expense (current $11 mil budget until contraction to 80 Medicaid beds complete) and put the rest in long term instruments.

    D200 is staring at a debt bomb explosion starting in about 5 years, as CAB (they borrowed $14 million for 20 years, and will pay $50 million interest+ $41 mil= $64 million when bond comes due) and other debt starts coming due.

    And there are other opportunities no doubt.

    But what about the rest of the overall premise?

    Without some pushback from taxpayers, I believe VH will expand, spend down the surplus, and ensure the future levy will only go up, never down.

    All to enhance Centegra’s ability to cherry pick Medicare patients ($450/day reimbursements) and dump Medicaid ($175 per diem) onto taxpayer funded facility.

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