Justification of Valley Hi’s $40 Million in the Bank

Peter Austin unveiled graphic results of Valley Hi Administrator Tom Annarella’s modeling efforts Tuesday.

All versions assumed that the levy would be cut from $3 million to $2.250 million.

The first version, seen below, shows the Valley Hi bank account maintaining about $40 million in the bank for the next five years.

To put this in perspective, McHenry County government pulled $79 million out of taxpayers pockets this year.

Financial projections for Valley Hi Nursing Home

Financial projections for Valley Hi Nursing Home

“Five years out we begin to see some collapse in the blue [that is, the bank balance].”

Nick Provenzano seemed to think thatfive to ten years was too long to wait to draw down the $40 million balance.

“We can’t assure increases in Medicare and Medicaid,” Austin replied.

Deputy Administrator Scott Hartman pointed out that Valley Hi does not “break even on Medicaid beds.”

Yvonne Barnes sought the underlying assumptions of the model.

“Why is it taking five years to show it starting to go down?” she asked.

“It’s [the chart] is pretty, but tit doesn’t tell me anything?”

Hartman, who worked on the spreadsheet with Annarella, explained that labor costs are projected to increase 3.5% per year and interest rates are project to rise.

Nest, Austin pointed to scenario 4 2:

The second projection assumes that there are ten more Medicaid beds at Valley Hi.

The second projection assumes that there are ten more Medicaid beds at Valley Hi.

The third version assumes all the patients are on Medicaid:

This what staff thinks will happen if all the Valley Hi beds are Medicaid.

This what staff thinks will happen if all the Valley Hi beds are Medicaid.

The fourth projection assumes that the levy is lowered to $1 million, which would save taxpayers $2 million per year:

The fourth projection assumes a $1 million a year levy, instead of the $2.25 million levy currently on the table.

The fourth projection assumes a $1 million a year levy, instead of the $2.25 million levy currently on the table.

[In all of these projections, enough money to pay all of Valley Hi’s bills must be held in reserve. The fear seems to be that both the Federal and state governments will pay nothing. Meanwhile, the County tries to keep a minimum of four month’s money in its General Fund.

[Cut the red part of each illustration in half and figure out the implications.]

Chuck Wheeler, who proposed cutting the levy from $3 to 2.25 million, though the projections illustrated “a fundamental problem we have in government.

“We look at what government is going to get, rather than what our budget is.

“We need to think of how we can do more with less.”

He said he didn’t think it was proper to look at a 30 year scenario, suggesting at one point that the number of Medicaid beds could be cut to stay within the money available.

Referring to what a business or family would do, Wheeler said, “If revenue were not there, we would look at ways to raise our revenue to lower our costs.”

Provenzano wondered what was happening in the marketplace.

He was told that a study was ongoing, the results of which would be ready next year.

Valley Hi Administrator Annarella explained that private nursing homes were taking fewer and fewer Medicaid patients.

Provenzano observed that the County “will have continuing pressure from the private sector for us to increase Medicaid [beds.]”

Annarella said, “There’s a looming Medicaid rate cut.”

Austin brought up the nursing home next to Huntley’s Centegra Hospital, into which Centegra is expected to push the more profitable Medicare patients it releases.

Centegra is no longer sending Medicare patients to Valley Hi.

“It would be no incentive for Centegra to send patients anywhere other than their [new facility],” Austin said.

Provenzano said, “We’re going to have to look at when enough is enough.

“Maybe we need to get out of this business and let the state take care of it.”

Andrew Gasser asked finance expert Ralph Sarbaugh how abatement of Valley Hi taxes would work.

He begged off until the next County Board meeting.

Gasser also asked for different assumptions to be run, specifically for a $1 million and a $1.5 million levy.

He said he had knocked on 1,500 doors and said “people are really interested in this.

“They do not know that we are taking people from outside McHenry County,” he continued.

“We have only one,” Austin replied.

“Typically, they have family here.”

“The only reason we’re having this discussion is because I crashed to Finance Committee meeting,” Mike Walkup said.

“We’re kicking the can down the road again and it’s a $3 million can.”

He wondered about the advisability of having “a nursing home out in the middle of a cornfield.”

“We’re where we are because we happen to own some land.

“It’s the tail wagging the dog.”

Amending the Tax Cap law was brought up with Austin answering that he had worked with State Rep. Mike Tryon, but the “leadership in the House didn’t want any crack in that Tax Cap law.”

“Majority leadership in the House,” Walkup corrected, suggesting that the County use a member of the Majority, referring to Democrat Jack Franks.

Valley Hi

Valley Hi

John Hammerand observed that the County had kept the levy used to pay off the new nursing home long after its bonds were repaid.

He didn’t think operating funds were much of the referendum approved.

Referring to the voters who approved the referendum, he said, “I don’t think they intended the levy that paid for the nursing home to go on forever.”

Pointing to the fact that there are only twenty-nine county nursing homes in Illinois [102 counties], Hammerand suggested it was “an extra fringe.”

“People should know what it’s costing.”

He also questioned the 3.5% annual projected increase in labor costs.

“That should be a topic of discussion.”

Mary McCann pointed out that two McHenry County nursing homes are for sale and, then, repeated the argument she made in committee that the topic should have been discussed in February, not in November.

She also said the cost to each taxpayer was quite low.

Provenzano said he agreed until he learned that previous Valley Hi levy reductions had just been “redirected to other parts of the budget.”


Justification of Valley Hi’s $40 Million in the Bank — 9 Comments

  1. Notes:

    McCann: “She also said the cost to each taxpayer was quite low.”

    She needs to lose the primary.

    Add this comment to her opinion that all pensions should be subject to an income tax in the state.

    Walkup: “a nursing home out in the middle of a cornfield.”

    Add this comment to his comments relative to Townships, imho he should leave McHenry County and live in downtown Chicago or Washington, D.C. where the mayor demands staff stand at attention when she enters the room.

    I wonder what his position was on opening a County owned shooting range across the road from the nursing home.

    The time has come to sell the Nursing home.

    Instead of wasting taxpayer dollars on studying Township consolidation, let’s use that money to market the nursing home which is guaranteed to reduce our taxes (unless the Board allows the Austin / Sarbaugh team to redeploy Nursing home costs to other departments).

  2. “We can’t assure increases in Medicare and Medicaid,” Austin replied.

    With the present fiscal shape of the Fed and State governments we should consider possible reductions in Medicare and Medicaid not increases so much.

    Gasser, “He said he had knocked on 1,500 doors and said “people are really interested in this.”

    Ya ya, we’ve heard this comment added to every comment Andy makes, that’s old news, that just adds time to the discussion at hand.

    “The only reason we’re having this discussion is because I crashed to Finance Committee meeting,” Mike Walkup said.

    Politicking by Mike during board meetings also adds extra time to the discussion.

    Andrew and Mike should save their self serving for the campaign trail, not during board meetings, board meetings already run longer than is really needed because of lip service.

  3. What I have previously said on the campaign trail and debate for County Board and in recent comments on this blog is now supported by County Board member John Hammerand, “the County kept the levy used to pay-off the nursing home long after its bonds were repaid”.

    As I stated before and will again here, continued collection of taxes from property owners in this manner is not only immoral and dishonest; but illegal.

    Again, had I been successfully elected, I would have requestd an accounting be performed calculating the dollar amount of tax collected after the construction bond was retired and make demand upon the Board that these monies be immediately returned to McHenry County taxpayers with statutory interest.

    This was misfeasance at best by County government if not malfeasance by some and cannot be viewed any other way.

    I hope Mr. Hammerand will take the lead in this regard otherwise you can probably expect a lawyer in private practice will by filing a lawsuit on behalf of McHenry County Taxpayers.

    Where was County Board oversight each year when supposedly examining Valley Hi financials and tax levies which would permit this taxation of residents to continue long after the construction bond was retired?

    Incompetence or worse?

    Maybe prior Board members or current Board members serving at the time would like to comment on how this happened?

    No government entity should levy its residents more than what it needs to operate annually.

    Government is not the private sector where it should be holding excess funds from excess tax collections as if they are retained earnings. What next, dividends and bonuses?

    When you have government operating in this fashion not only does it lead to financial waste but penalizes taxpayers of today and yesterday by asking them to subsidize the taxpayer of tomorrow by paying more than what is necessary.

    What about all those taxpayers who left the county who were overcharged on this illegal levy all these years?

    How is the county going to make them whole and for that matter the rest of us who remain under their taxing jurisdiction.

    Again, the question needs to be asked if Valley Hi is the type of business county government should be running or is it best left to the private sector.

    The mission upon which Valley Hi was founded no longer exists and it is obvious from current Valley Hi activities the taxpayer was misled and financially exploited.

    From the information and discussion in this blog,

    I think the answer is obvious but will anyone on the Board be brazen enough to even raise the issue as a discussion point.

    I recognize when I publicly raised the millions of dollars on hand in a liquid account at Valley Hi and charged that taxes were being levied on a retired construction bond, that my campaign for trustee was doomed given no other candidate or Board member would step forward or acknowledged these facts.

    But what really shocked me, as a newcomer to county politics is after I raised this issue during the debate how many candidates for County Board ask me if what I said was true. . .

    The real tragedy in all of this, is if you polled the Board on how this could happen the answer would likely be they simply did not know because they did not know where to look.

    Which brings me to my next thought, given McHenry County is the 27th highest taxed county in the U.S., is the extent of incompetent oversight by County Board limited to Valley Hi?

    I think we all know the answer to this and is why as taxpayers we should limit the size of County government irrespective how well intended the cause. . .

  4. To clarify the Valley Hi situation.

    Valley Hi was originally a nursing home that had been built in the 19th century at the site of a farm owned by the County.

    By the late 20th century it had become a run down and decrepit building that looked like something out of a Steven King movie.

    In the general Fall election of 2002 the voters of McHenry County were asked if they wanted to approve a special tax levy to “build and staff a county nursing home”.

    It passed by around 5000 votes out of more than 75,000 cast.

    I think it is reasonable to assume that many voters were focused on the construction of a new building and may not have given much thought to the fact that they were authorizing an ongoing obligation for staffing and other expenses over and above what might be garnered from the state and federal governments.

    For many years around $6 Million per year were collected.

    The original bonds were paid off.

    Due to increased reliance on Medicare and private pay, however, this entire figure did not need to be used.

    Subsequently the amount was lowered to $4.5 Million and then to $3 Million while I was on the VH Operating Board.

    Annual deficits had been running around $500K until this past year when it was in the red about $1 Million due mostly to slow pay by the state.

    Due to the fact that the amounts collected exceeded the operating deficits, the cash reserve climbed steadily to it’s present level of around $40 Million.

    Currently there are plans in the private sector to build a couple of new facilities that are associated with local hospitals.

    The Valley Hi building is not located near any hospitals, owing to the decision to use land already owned by the county to build the new facility rather than looking at other options.

    (This same logic drove the re-location of the Dept of Transportation, which is now complaining that it needs another facility in the Southeast quadrant of the county were more of the county road mileage is located).

    Current trends in the nursing home industry are to marry the nursing home to existing hospitals so patients can be easily moved back and forth.

    (This may spell the eventual demise of the free standing nursing home).

    If those are approved and built, it will lower, and could eliminate, the Medicare and private pay components of Valley Hi.

    Valley Hi loses money on each Medicaid bed.

    Due to one of the untended consequences of the PTELL legislation (tax caps), we cannot recapture any levy amount that has been given up without going back to the voters.

    Therefore, each time we reduce the levy, we are stuck with that, plus any cost of living increases.

    The Democrats in Springfield are apparently wanting to let local governments twist slowly in the wind over PTELL restrictions that were passed by the GOP when they briefly had control of the legislature in the 90’s.

    I agree with the PTELL restrictions when applied to local government levies, which are purely discretionary with the local government bodies, but where the voters have expressly approved a specific amount of a levy, it doesn’t make sense not to allow the local government to move the levy amount up and down as needed within that figure.

    Otherwise what you get is government stockpiling of the levy collection and/or embarking on projects not originally contemplated just to use it up.

    As such, PTELL winds up costing the taxpayers more rather than saving them money.

    Comments on what the readers here think are welcome.

    We will be voting on the overall budget, including the Valley Hi component, at the next County Board meeting the Tuesday before Thanksgiving.

  5. Mike:

    Thank you for the history and explanation.

    Are you saying the construction bond and maintenance or Staffing bond were part of the same debt instrument and incorporated into a single tax levy?

    My understanding is the construction bond was retired and the structure completed without a reduction in the Valley Hi tax levy?

    Am I correct in this analysis and if so, this makes no sense? If I am incorrect, please explain?

    Also, what was the date for the expiration of the maintenance bond assuming one was procured or was this just a levy.

    Also, given your analysis of the future of nursing home industry in McHenry County which sounds bleak for Valley Hi because it is not located next to a hospital, why consider paying money for any capital improvements.

    Isn’t it better to discuss now an exit strategy and returning the care of our elderly back to the private sector where it belongs and where local government can gain some tax revenue?

  6. I’ll have to get you that information Dave.

    Yes, the long term prospects may not be good.

    I think we may be sitting on a White Elephant here.

    The problem is that we have now invested substantially in a nice building so what do you do with that?

    Trying to develop infrastructure on a site just because you happen to own the underlying land is not a good idea.

    Location, location, location.

  7. Mike:

    My email is david@stieperlaw.com.

    Would like to see written information on Valley Hi discussion back and forth between us.

    I have great respect in the manner you express your opinions on this blog, through your understanding of history and believed facts rather than shooting from the hip or reciting political platitudes.

    Not sure of your voting record but you are good civil servant in this regard, keep up the good work.

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