Peoria County Health Department and Budget Subcommittee met August 29.
Peoria County Health Department and Budget Subcommittee met Aug. 29.
Here is the minutes provided by the Department and Subcommittee:
MEMBERS PRESENT: James Fennell - Chairman; Robert Baietto, James Dillon, Allen Mayer, Stephen Morris, Thomas O'Neill, A.J. Querciagrossa, Andrew Rand, Steven Rieker, Barry Robinson (via teleconference), Paul Rosenbohm, Phillip Salzer, Terry Waters, Sharon Williams
MEMBERS ABSENT: Rachael Parker
OTHERS PRESENT: Scott Sorrel - County Administrator; Shauna Musselman - Assistant County Administrator; Jerry Brady, Larry Evans - State's Attorney's Office; Brian Elsasser, Brad Harding, Kate Pastucha, William Watkins, Jr. – County Board Members; Eric Dubrowski – Chief Financial Officer; Julie Ciesla, Kim Hudson – Finance; Angela Loftus – Asst. Director of Human Resources; Gretchen Pearsall - Director of Strategic Communications; Rena' Parker, Jennifer Shadid – Courts Administration; Dan O’Connell – Facilities Director; Nicole Demetreas - Treasurer; Beth Derry – Regional Office of Education; Kent Rotherham – Auditor; Dave Ryan – Supervisor of Assessments; Kathi Urban – Planning & Zoning; Mark Little - Chief Information Officer; Randy Brunner, Doug Gaa - Sheriff's Office; Nathan Bach – Public Defender; Tim Turpin – Heddington Oaks; Steve Sonnemaker – County Clerk; Anthony Miceli – Speer Financial; Kelly Kost - Chapman and Cutler
Call to Order
Chairman Fennell called the meeting to order at 2:05 p.m.
Approval of Minutes
A motion to approve the County Health Committee executive session minutes of April 25, 2017, County Health Committee regular session minutes of July 25, 2017 and Budget Subcommittee
minutes of July 13, 2017 was made by Mr. Mayer and seconded by Mr. Salzer. The motion carried.
Mr. Robinson participated via teleconference with the unanimous consent of the committee.
Informational Items/Reports/Other Minutes/Updates
• Monthly Financial Report
Mr. Dubrowski summarized State Shared Revenues through August 3, 2017 and Financial Data through May 31, 2017:
• 2017 General Fund Revenues are on par or improving upon 2016 budget figures in the majority of categories. The exceptions are “Other Financing Source”, mainly due to the sale of fire station property, and “Charges for Services” and “Fines”. 2017 General Fund Expenditures are seeing decreases in every category in comparison to 2016 figures.
• An overview of Revenues in General Fund departments shows a decrease in Finance from last year due to disposal of assets, and declines in the State’s Attorney’s Office, Circuit Clerk and Court Administration are due to decreases in Fines and Charges for Services. Expenditures in General Fund departments are down in the aggregate; however, expenditures in the Coroner’s Office, Regional Office of Education, and Public Defender are up in comparison to 2016. County Clerk’s expenditures are up; however, expenses decrease when taken in conjunction with the Recorder of Deeds function.
Mr. Dubrowski commented that Local Sales Taxes, one of the largest drivers of revenue, are down $185,000.00 (6.2%) over last year, while Local Use Sales Tax and Corporate Personal Property Replacement Tax have seen increases over 2016.
• Heddington Oaks Update
Mr. Turpin advised that July saw 57 referrals, 18 admissions, 13 discharges and 39 denials. He stated that the current census stands at 158, with two incoming referrals.
Ms. Williams advised that a Family Forum will be held September 13, 2017.
Mr. Dubrowski summarized financial figures through May 31, 2017.
Operating Revenues: Revenues are down compared to the prior year, although the gap has closed slightly. Medicare and Medicaid are down single digits from last year. Private Pay and Other Charges for Services are of some concern as those numbers are down 27% and 32% respectively. Revenues are down 16% overall.
Operating Expenses: Personnel costs are up 6%, while Commodities and Contractuals are down 17% and 12% respectively. Expenditures are down 2% overall.
Mr. Dubrowski advised that Operating Income is currently at a $1.34 million year-to-date loss, while Nonoperating Revenues are up slightly. He stated that if trends continue, the facility will see a $1.4 million decrease in capital assets. He advised that the current overall change in net position is a decrease of $3.1 million.
Mr. Dubrowski advised that the census stood at 152 at the end of July; 88 Medicaid, 8 Medicare, 21 Private Pay (Medicaid Pending), and 35 Private Pay. Mr. Elsasser questioned the success of advertising efforts given the declining number of Private Pay residents, and encouraged staff to continue to address that issue. He also reiterated his concern that Private Pay rates are too high.
Aging (Gross Accounts Receivable): Balance through June 2017 totals $6.3 million, with $1.9 million over one year. The 76 highest balances account for 67% of the total balance, and 74% of the amount over one year. Approximately 1/10 of the total balance and 1/3 of the balance over one year come from individuals who have expired or from old accounts brought over from a previous software system. Mr. Querciagrossa asked if a plan for addressing aging accounts over one year has been identified. Mr. Dubrowski advised that a discussion is currently being formulated and will be brought to committee within the next several months.
Mr. Harding asked if all options regarding the future of the nursing home, i.e. sale, privatization, continue to be viable, and Ms. Williams assured all options will continue to be considered.
Debt Service Overview
General Obligation Bonds
Mr. Dubrowski provided a summary of the General Obligation Bonds which were issued in October 2011: A total of $85.3 million, with Principal of $42 million and Interest of $43.3 million. The revenue for the bonds were a combination of property taxes, general sales taxes, public facility sales taxes and operation revenue. The Bonds are due December 15, 2013-2020 are non-callable. Bonds due December 15, 2021-2014 are callable, either in whole or in part after December 15, 2020. The amount required to call bonds on December 15, 2020 would be $42 million; if bonds are refunded by that date, based on market rates and projections, $6 million in interest would be saved.
Mr. Dubrowski advised that total principal for the non-callable portion of the Bonds for that term would be $1.45 million and interest would be $17.4 million, for a total of $18.9 million. He stated that principle paid to date totals $400,000.00 in principle, $9.9 million in interest for a total of $10.3 million.
Mr. Dubrowski advised that in the original financial model, the goal was to keep annual tax levy around $2 million for the first 10 years of the bond, with the intent to build reserves around stronger and accruing reserves. He commented that revenues have not met the assumptions of the original model.
Mr. Dubrowski advised that total principle for the callable portion of the Bonds would be $40.55 million and interest would be $25.9 million, for a total of $66.5 million. He stated that debt service payments will grow significantly in later years, with actual expenditures notably outpacing the.06¢ tax levy. He advised that larger debt service payments will further reduce cash flow, reduce the long-term debt liability, aid in countering the effect of depreciation, and by 2029 principle will begin to outpace depreciation.
Mr. Dubrowski outlined several options to cover additional bond payments, including Heddington Oaks Charges for Services, General Sales Taxes, Property Taxes, Public Facilities Sales Taxes, any monies related to refunding the Bonds and options for restructuring the Bonds.
Employee Health Loan
Mr. Dubrowski advised the loan was executed June 30, 2014 for a 10-year term at an interest rate of 3%. He stated that principle on the loan totals $3.5 million and interest $577,202.00, for a total of $4,077,202.00. He stated that to date, $1.1 million has been paid in principle and $319,000.00 has been paid in interest. He added that principle outstanding totals $2.4 million and interest outstanding totals $258,000.00.
Mr. Mayer asked about IRS arbitrage rules and complications that may arise with arguments that Heddington Oaks should be sold, when bonds have been issued to finance the project. Mr. Kost noted that the 2011 bonds were issued on a tax-exempt basis, and as the federal government recognizes that circumstances may change with long-term bond issuances, the Bonds were issued as Governmental Bonds. He stated that if the County were to sell, lease or have the facility managed by a private entity, the IRS would note a change of use and would require remedial action. He noted that the Federal Government has extensive rules on management contracts.
Mr. Rieker commented that if the facility is sold for cash, there are options to either repurpose the cash for another appropriate governmental use within a two-year period or redeem the bonds, and asked for clarity on redemption. Mr. Kost advised that all the disposition proceeds must be utilized if redeeming the bonds. He also commented that if the revenue from the sale of the facility is not enough to redeem the bonds, could the bonds be redeemed through supplemental sources. Mr. Kost advised that if there are insufficient funds to redeem the entirety of the bonds, the bonds would be redeemed pro rata.
(Mr. Morris enters meeting.)
Mr. Rieker asked if there would be an opportunity to restructure or reissue the bonds once they become callable, and Mr. Miceli commented that the opportunity to restructure the bonds, or refinance the bonds for significant savings is approaching within a short period of time. Mr. Mayer noted that as the County is using a dedicated revenue stream that is a voter approved property tax to pay for Heddington Oaks, there are restrictions within the County Code related to leasing and/or selling the nursing home. Mr. Harding asked if an appraisal or estimate has been done on the nursing home, and Mr. Sorrel commented that they have not. Mr. Harding requested information regarding the worth of the facility on the market, as well as the all-in cost for the nursing home, both currently and projected out to the maturity of the bonds.
He noted that although no General Fund dollars go toward the service of Heddington Oaks, he questioned how much staff time has been invested in the facility. Mr. Harding added that in his view, Heddington Oaks is not a core county service or a sustainable operation. He stressed that although he does not advocate selling Heddington Oaks, it is imperative that the facility be managed successfully and occupied to capacity.
Mr. Harding requested that staff review the complete and total cost of doing business, including staff time in all departments with responsibility for the nursing home, retroactive to 2003. He reiterated that he is not in favor of selling the nursing home, and is open to a review of all viable options.
Mr. Rand asked the difference between taxable and non-taxable issuances. Mr. Miceli commented that the difference between taxable and tax exempt rates over the life of the remaining issue if refinanced is estimated at 3.7% for tax exempt and 4.3% for taxable issue. He added that the current rate is 4.7%.
Mr. Sorrel advised that staff has met with the majority of departments and offices and anticipate concluding all meetings within the next several weeks. He stated that the gap remains $475,000.00 per requests, and staff will be making every effort to sustain the $1.9 million surplus in the 2017 adopted budget. He stated that by maintaining that number, the County will be in a position to be financially sustainable through 2021. Mr. Fennel stressed that all budget numbers are tentative at that point, and staff will continue to refine and craft a representative budget that will achieve financial sustainability through 2021.
The meeting was adjourned by Chairman Fennell at 3:33 p.m.