Chambana Sun

Champaign County Committee of the Whole met March 14.

Here is the minutes provided by the Committee:

Members Present: Christopher Alix, Jack Anderson, Brad Clemmons, Lorraine Cowart, Shana Crews, Aaron Esry, Jim Goss, Stan Harper, Josh Hartke, Matt Hiser, Jim McGuire, Max Mitchell, Kyle Patterson, Pattsi Petrie, Jon Rector, Giraldo Rosales, Stephen Summers, James Tinsley, C. Pius Weibel

Members Absent: Robert King, Diane Michaels

Others Present: John Farney (Auditor), Tami Ogden (Deputy County

Administrator/Finance), Barb Ramsey (Chief Deputy Auditor), Kay Rhodes (Administrative Assistant), Rick Snider (County Administrator), Dan Welch (Treasurer)

Call To Order

Weibel called the meeting to order at 6:30 p.m.

Roll Call

Rhodes called the roll. Alix, Anderson, Clemmons, Cowart, Esry, Goss, Harper, Hartke, Hiser, McGuire, Michaels, Mitchell, Patterson, Petrie, Rector, Rosales, Summers, Tinsley, and Weibel were present at the time of roll call, establishing the presence of a quorum.

Approval Of Agenda/Addenda

Motion by Mitchell to approve the Agenda/Addenda; seconded by Anderson. Weibel removed item VIII-E-5 because a candidate had not come forward for the Litigation Committee. Motion carried with unanimous support.

Approval Of Minutes

Motion by Rosales to approve the minutes of February 14, 2017; seconded by Goss. Motion carried with unanimous support.

Public Participation

There was no public participation.

Communications

Tinsley announced that memorial services for Dr. Willie T. Summerville were scheduled for Wednesday, March 15, 2017, 4:30 p.m.-7:30 p.m. at Urbana High School; Thursday, March 16, 2017 at 7:30 p.m., a concert will take place at Mount Olive Baptist Church; and Friday, March 17, 2017 at 11:00 a.m. at the Vineyard Church of Urbana.

Justice & Social Services Community Reentry Quarterly Report – December 2016-February 2017

The report was received and placed on file.

Monthly Reports

All reports were received and placed on file.

Other Business

Motion by Rector that the Closed Session minutes of the Justice & Social Services Committee shall remain closed pursuant to Resolution No. 7969, a Resolution Establishing Procedures for Semi-Annual Review of Closed Session Minutes by the Champaign County Board; seconded by Esry. Motion carried with unanimous support.

Chair’s Report

There was no Chair’s report.

Policy, Personnel, & Appointments Appointments/Reappointments

Motion by Weibel to recommend County Board approval of a resolution appointing Nancy Greenwalt to the Rural Transit Advisory Group, term 1/1/2017-12/31/2018; seconded by Esry. Motion carried with unanimous support.

Motion by Weibel to recommend County Board approval of a resolution appointing Sister Karen Carlson to the Community Action Board, term 4/1/2017-3/31/2020; seconded by Cowart. Motion carried with unanimous support.

Crews entered the meeting at 6:43 p.m.

County Board of Health

Motion by Petrie to recommend County Board approval of an ordinance amending fees under the Health Ordinance of Champaign County; seconded by Weibel. Jim Roberts of CUPHD and Julie Kumar, a member of the County Board of Health were available for questions.

Clemmons stated that the Public Health Fund was strong last year as well as this year and questioned the use of out-of-state comparable counties to justify the proposed fee increases. He felt that area counties such as Vermillion, Douglas and Macon better represented comparable County fees. Clemmons cited the proposed 125% increase to septic permit fees as an example: listing the septic permit fees of Douglas - $100; Vermillion - $200; and Macon - $250. He questioned why the Champaign County permit fee should be increased to $450 along with many other proposed fee increases when the Public Health Fund seems to be very robust without the proposed increases.

Roberts pointed out that the fund balance goal is to have 25%. The current fund balance is at 35% due to the property tax associated with the hospital, without that, the fund balance is at 29%. Clemmons pointed out that this was still 4% above the desired goal.

McGuire understood the desire to place responsibility of construction costs on the homeowner. However, to carry a reserve and continue to collect the levy without using the funds did not seem right.

Roberts felt that this topic should be discussed and decided upon by the County Board of Health. McGuire pointed out that the County Board had final approval of the fees. He would like to see more detail as to the reasoning behind the proposed fee increases.

Clemmons spoke of his own experience with CUPHD when he installed a septic system. He felt that a fee of $200 was very reasonable for the services received. Roberts explained that they had reviewed the actual costs to CUPHD over a two-year period to process a permit and the average cost came out to approximately $450.

Clemmons also objected to the proposed increase to food service permits and the detrimental effect upon rural restaurant owners given the proposed increases for both food and septic permits.

Esry asked if a CUPHD employee would be devoted to more timely inspections in the rural areas if the proposed fee structure were approved by the County Board. Roberts could not guarantee this request.

Weibel pointed out that County Board members could put forth amendments to the proposed fee document. Petrie could not support the proposed amended fee structure without additional data in order to make a more informed decision.

Alix encouraged County Board members to provide feedback to the County Board of Health before the April Committee of the Whole meeting.

Motion by Petrie to defer until the April 11, 2017 Committee of the Whole meeting in order for more detailed information to be brought forth; seconded by Goss.

Goss requested a side-by-side comparison of the information. Roberts pointed out that the information could be found on the County website in the minutes for the County Board of Health.

Goss indicated that the County Board packet should contain all necessary information for members to make an informed decision. Motion to defer carried.

County Clerk

The February 2017 report was received and placed on file.

County Administrator Monthly HR Report

The February report was received and placed on file.

Other Business

Motion by Weibel that the Closed Session minutes of the Policy, Personnel, & Appointments Committee shall remain closed pursuant to Resolution No. 7969, a Resolution Establishing Procedures for Semi-Annual Review of Closed Session Minutes by the Champaign County Board; seconded by Hiser. Motion carried with unanimous support.

Omnibus Motion by Weibel to appoint the following: Jim Goss to the Environment & Land Use Committee; Brad Clemmons to the Highway & Transportation Committee; and Max Mitchell as Vice Chair of the Highway & Transportation Committee; seconded by Esry. Motion carried with unanimous support.

Chair’s Report

There was no Chair’s report.

Designation of Items to be Placed on the Consent Agenda

Items A1-2; E2-4 were designated for the Consent Agenda.

Finance Treasurer

The Treasurer’s report of February 2017 was received and placed on file.

OMNIBUS MOTION by Weibel to recommend County Board Approval of resolutions authorizing the execution of deeds of conveyance of the County’s interest or cancellation of the appropriate Certificates of Purchase on real estate, permanent parcel numbers: 01-35-30-206-010; 14-03-36-301-001; 16-07-25-400-035; 19-27-23-458-001; 20-03-34-480-003; 20-09-01-178- 020; 26-30-09-165-001; 20-09-01-179-007; 20-09-28-305-018; 22-31-07-451-013; 22-31-07- 451-013; 30-21-15-205-040; 41-20-09-228-051; and 41-20-09-229-037; seconded by Mitchell. Motion carried with unanimous support.

Auditor

The Auditor’s report of February 2017 was received and placed on file.

Board of Review

The 2016 Board of Review Annual report was received and placed on file.

Nursing Home

The Nursing Home monthly financial report was received and placed on file.

Farney was available for questions regarding his memorandum regarding the Nursing Home financial status. Petrie inquired about the early receipt of a Medicaid payment in March. Farney indicated that they had received a check on Friday, March 10, 2017 for approximately $226,000. The Medicaid payments normally arrive at the end of the month and while it would assist with the current payroll issue, it only alleviated the financial situation in the short-term.

Petrie asked if there were any nursing home vendors who could no longer wait for payment. Farney indicated he knew of one vendor who was due approximately $300,000 from the nursing home and this vendor had contacted the nursing home, MPA, and finally the Auditor’s office as a courtesy to provide notice of impending debt collection procedures for payment of funds past due. Farney added that the County is also incurring an interest charge from this vendor of approximately $3,500 per month. Farney noted that of the $2.9 million due nursing home vendors, approximately $40,000 is directly connected to finance/interest charges.

McGuire asked for further explanation regarding the current financial situation regarding the nursing home’s payroll. Farney explained that the nursing home’s current cash balance is approximately $470,000; approximately $260,000 is required for payroll by March 15, 2017 in order to pay employees on March 17, 2017. Throughout the rest of the month, the nursing home will continue to pay vendors. Some vendors take precedence due to contractual obligations. MPA has estimated that if the nursing home continues to pay these required contractual obligations, there will not be enough cash to make the March 31, 2017 payroll.

Goss asked for clarification regarding the current nursing home debt. MPA’s financial report listed the debt as $3.37 million at the end of January and the Auditor listed the approximate debt as $2.9 million. Farney explained that MPA had included the loan for the recent replacement of the boiler and the debt service.

The Auditor’s report on the Nursing Home’s financial status was received and placed on file.

Motion by Petrie to recommend County Board approval of a resolution authorizing the Nursing Home Interim Action Plan; seconded by Cowart.

Snider referred to his memo in the meeting packet and explained that the continuing backlog of Medicaid applications is creating an impact of over $115,000 monthly revenue shortage on cash flow. The current projection provided by Management Performance Associates shows the nursing home fund balance falling to a negative position after accounts payable and payroll are processed for March 17, 2017.

The fund balance will drop to a negative position of -$142,762 by the end of March, and a negative position of -$257,762 by the end of April. In order to continue operations, CCNH has an immediate need of approximately $400,000. The County Treasurer has indicated that he can make available $150,000 from remaining levy funds secured by future revenue. This leaves a gap of $250,000.

The outcome of the April vote on the two nursing home ballot questions will play a large part in Board decisions as to the future disposition of the home. There are three possible scenarios resulting from the election: 1) an increase in the nursing home operating levy is approved; 2) authorization to consider a sale or disposal of the nursing home is provided to the County Board; or 3) both questions are defeated.

Snider proposed the following interim plan of action until the outcome of the April referenda is known because the County has the obligation to maintain the home and to protect the health, safety, and welfare of the residents of the home.

1. Authorize the establishment of a temporary credit facility of $250,000 to maintain payroll and critical services at CCNH. The funding for this facility would come from General Fund. Reimbursement to General Fund would occur in accordance with one of the anticipated scenarios prior to the end of FY2017.

2. Authorize the formation of a committee to manage the use of the credit facility. The committee would include the Treasurer, Auditor, County Administrator, and MPA representative. Each accounts payable run beginning March 17 and thereafter would require the written authorization of the County Administrator before processing. Furthermore, the committee would be granted leave to prioritize critical vendor payments and to direct MPA to suspend any expenditures that are deemed nonessential (e.g. travel, training, awards, etc.)

3. Implement budget relief measures. These would include:

a. Increase private pay rates on long-term skilled nursing care by 10%. The revised rate of $223.30 would remain at the low-end of the local skilled nursing facility market and ensure that patient care costs are fully recovered. It makes little sense to subsidize private pay rates at a time when the home is unable to make payroll. b. Authorize the County Administrator to enter negotiations with AFSCME to

seek temporary wage adjustments.

Snider stated that the goal would be to reduce expenses by at least $50,000-60,000 per month, or $450,000-$540,000 savings through the end of FY2017. Snider felt that the interim plan as presented would provide an improved opportunity to conserve cash and avoid additional accumulation of debt obligations.

Anderson asked if the temporary wage adjustment would be focused on a particular group of employees or certain pay grades. Snider indicated that the lower wage employees would be exempt from temporary wage reductions.

Petrie asked if the recommended private pay rate increase would cover the cost of care. Snider affirmed stating that the current cost is approximately $220 per day. Goss asked if the loss of any private pay residents due to the proposed rate had been calculated into the fee increase analysis. Snider felt that even with the proposed increased rate the nursing home would remain at the low-end of the market.

Weibel recommended an Ad-HOC committee to manage the use of the credit facility to include the Treasurer, Auditor, County Administrator, and a MPA representative as referenced in the plan. Snider agreed.

Snider reviewed his second memo concerning scenario planning for the future direction of the Nursing Home. The three (3) primary scenarios for consideration were:

Scenario 1: The nursing home levy increase to 10 cents is approved by voters; Scenario 2: The County Board is authorized to engage in a sale or disposal of the home; and Scenario 3: Both ballot questions are defeated with no additional authority for the Board.

Snider added that a fourth scenario is possible, in which both ballot questions are approved by voters, however, he felt this would default back to the proposed actions in Scenario 1.

Scenario 1

The first three years of the program would focus on financial recovery. As debts are retired, the focus can shift to deferred maintenance issues and establishment of an operating balance for the home. The County could begin addressing strategic capital expenditure requirements and continue to build working cash later on to stabilize the home. The County should move away from utilizing tax anticipation warrants as a method of paying its IMRF/FICA obligations. These should be paid out of current revenues as a fund balance is established over the next several years.

The earliest opportunity to access funds approved through the tax levy increase occurs in December 2017. The County would issue a tax anticipation warrant (TAW) to borrow funds to pay creditors (including the County) and debt service. Knowledge that the funds will be available by the end of the year should ease concerns among the vendors. Snider estimated that approximately $3 million should be available through the TAW. Whether that will be sufficient in the first year is not certain at this time as there are uncontrolled factors that could increase the demand for cash. In that case, it may be necessary to use an alternative debt instrument to generate the needed funds sooner.

The County will need to work with the AFSCME bargaining units to attain wage concessions through the end of FY2017. Snider indicated that it would be impossible to avoid further borrowing to meet payroll and other obligations without generating economies through wage concessions and increased fees for private pay residents.

The AFSCME contracts expired on December 31, 2016 and are currently under negotiations. The County would hire a temporary administrator until a decision is made to pursue a long-term care management company or to hire County staff. It would also be essential to find a skilled business manager to oversee the financial operations of the home. One of the issues with the current model is the lack of financial transparency in vendor contracts and payments.

Esry asked if the proposed scenario actions included the receipt of state funding. Snider indicated the plans did not and felt it would not be in the County’s best interest at this point to depend on any funding from the State of Illinois.

Scenario 2

One of the concerns raised in connection with a sale is the potential for reduction of Medicaid services. As of March 3, 2017, the patient census is 165. Of this, approximately 111 patients, or 67% of census, receive Medicaid assistance or are Medicaid-eligible and are awaiting approval. A typical average Medicaid census among Illinois skilled nursing facilities is about 55%. Using that figure, the home would support a Medicaid census of 91 patients. However, a for-profit entity would also market the home to achieve a census as close to the home's capacity as possible to lower average per-patient costs. If the home were to reach capacity at 220 patients, the Medicaid census would rise to 121.

A reasonable target date for completion of a sale or disposal transaction is about 12 months from the time marketing of the home begins. Upon approval of the County Board, staff would initiate an RFP to solicit brokerage services to market CCNH and manage the offer and sale process.

Snider stated there were many positive aspects of the nursing home. CCNH is the largest skilled nursing facility in Champaign County, with the largest patient rooms in the area. It is also a newer facility than most of the others. The strong integration with Carle Foundation Hospital is also important for potential interested parties as this relationship provides an ongoing stream of referral business.

However, the negative media stories and perception could also have a negative impact on a sale. The presence of a union within the home with strong successorship rights following a sale could also deter bidders, reducing the number of offers and lowering the ultimate sale price.

Snider explained that a previous valuation of CCNH using a direct capitalization approach indicated an expected market value range of the home between $10 million to $12.7 million, or a range from $46,000-$58,000 per bed. This value is based upon a census range of 176-184 patients. Based upon the nursing home size, location, current payer mix, and net operating margins, the valuation used a capitalization rate of 13%.

Snider said using a prior sale methodology, the value of the nursing home on a per-bed basis would be about $45,000 per bed, or $9.9 million. The last local comparable sale occurred in December 2012 in Savoy, Illinois. That 213-bed facility sold for $11.5 million, or $53,991 per bed.

Proceeds from a sale transaction would pay down debts. These include the $3 million in accounts payable, $2.5 million for the general obligation bond for the remediation work done following initial construction, and $6.6 million in principal remaining on the original construction bond. Unreimbursed expenses during the transaction period could require additional cash.

Snider added that during the sale of the Vermillion County nursing home, the board authorized a credit line of $1 million for such expenses so we may expect a similar amount to be required. It may be possible to satisfy all outstanding debts with sale proceeds. However, should those fall short, it may be that the unsecured debts are paid first, and the general obligation bond paid next, before abating the debt service for the construction bond as that enjoys a dedicated revenue source for the retirement of the principal.

Snider indicated that interim financing would be required during the period of soliciting and negotiating a transaction. It would be advisable to minimize expenses where possible to conserve cash using the same strategies within Scenario 1.

Alix referenced the Champaign County Nursing Home Strategic Options Study submitted by Mr. Aldrich in February 2017, in which he had recommended a possible Joint Venture between Carle Foundation Hospital, Carle Clinic, Health Alliance, Presence Covenant Medical Center, Christie Clinic, and Champaign County, which would jointly create a new not-for-profit corporation to sponsor the Champaign County Nursing Home.

Alix stated that it was his understanding that in order for any movement with this type of strategy, the referendum for the sale and/or disposal of the Nursing Home would need to pass. Alix envisioned scenarios in which the County would still need to borrow money in order to facilitate this type of strategy. Snider agreed that it was a possible alternative and they continue to have discussions with area health care facilities.

Scenario 3

Snider continued the discussion with Scenario 3. In this scenario, both referenda questions are defeated (additional property tax, sale/disposal authorization). The County must decide what action to take to protect the well-being of CCNH residents and the County's finances. The County's only legal option is to downsize the patient population to a sustainable level.

Snider explained that one of the first questions that will emerge is what will happen to patients currently residing at CCNH if downsizing is required. As of March 3, 2017, the patient census is 165. Of this, approximately 111 patients are Medicaid-approved (97) or Medicaid- eligible (14) awaiting approval. Other patients would fall under payer categories of Veterans Administration, Medicare, and private pay/private insurance.

Snider stated that the most recent data from CMS that includes reported patient census, it appears that it may be possible to accommodate most patients at local facilities within Champaign County. Additional inquiries are required to verify capacity for intake. When a downsizing occurs, the Illinois Department of Human Services (DHS) would be expected to place a transition team to assist in placement of patients at alternative facilities.

The Illinois Department of Public Health may have funding available to provide temporary assistance to homes willing to accept patients awaiting Medicaid benefit approval from DHS.

The State’s Attorney has indicated that the County would have the ability to downsize the nursing home operation but would be required to meet state and possibly federal statutes that govern this action.

The downsizing of the nursing home would occur in stages. Patients would be consolidated into units remaining in operation as vacancies developed to minimize staffing requirements.

It will be necessary for the County to bargain with the employee union (AFSCME) to determine the effects of the downsizing. Any layoffs or furloughs in connection with downsizing must be coordinated with the union. The impending loss of jobs will result in continuing exits of personnel as they seek employment outside of the nursing home. It will be necessary to offer incentives or severance packages to retain key employees. Agency employees may also need to fill critical gaps where employees are not available.

Snider added that another challenge of managing the downsizing of a home is the deterioration of payer mix. As patients leave the home, the first groups departing are the Medicare and private pay residents; these patients are the easiest to place at other facilities. Fixed costs will be distributed over a shrinking resident population, increasing the average daily expense per patient. It is essential to transfer patients out as expeditiously as possible until the target population is achieved.

The nursing home has a current accounts payable just over $3 million. The cost of employee benefit payouts will approach $250,000 for TOPS and TOPSReserve alone. Additional funds will be required to provide incentives as previously mentioned for retention of key employees.

Snider summarized the immediate financial issues facing the County. CCNH currently has approximately $3 million past due in accounts payable and it has reached the end of credit limits with most of the vendors. If an increase in the tax levy is approved then it may ease vendors concerns and CCNH could work with them on payment plans.

In the other two scenarios, CCNH could see demands increase for payment of debts. The General Fund balance has about $4 million and with the nursing home debt, reaching almost $3 million it will deplete that balance. Snider asked the County Treasurer Welch to add to the discussion.

Welch distributed copies of his monthly cash flow report. Welch stressed that the County Board should be contemplating what happens at the end of the year. He listed the debt service, the loan for the nursing home boiler replacement, and $390,000 for accounts payable pointing out the additional loan of $250,000 under consideration, bringing the total to approximately $1.2- $1.3 million. If this is not repaid by the beginning of next year, it will place a hole in the fund balance moving forward. Motion carried with unanimous support.

Motion by Hiser to recommend County Board approval of a resolution authorizing a short-term loan from the General Fund to the Champaign County Nursing Home Fund to protect public health and safety, protect public property, and to limit County liability; seconded by Petrie.

Snider pointed out that an amended resolution had been brought forth for consideration. McGuire felt the additional language better represented what it is that the County Board wants to accomplish with this loan and the reasons for it.

Motion to Amend by McGuire recommending County Board approval of the amended resolution with additional language authorizing a short-term loan from the General Fund to the Champaign County Nursing Home Fund to protect public health and safety, protect public property, and to limit County liability; seconded by Weibel. Motion to amend carried with unanimous support. Motion with amended resolution carried.

County Administrator General Corporate Fund Reports

Ogden gave a brief presentation on the General Corporate Fund. Ogden drew attention to a comparison of the revenues and expenditures in FY2015 and FY2016. In 2015, the actual revenue was $35,998,851 and in 2016, it was $34,830,142, this figure includes surplus TIF leaving a difference of -$1,158,710.

Expenditures for FY2015 were $35,033,959 and $35,499,630 in FY2016 showing an increase of $465,671. Personnel 1.5%; Commodities 0.9%; Services 1.6%; and Capital 1.7% represent expenditure growth in FY2016. The FY2015 Fund Balance was 14.7% and FY2016 Fund Balance is 12.9%.

RFP for Underwriting Services

Motion by Esry to authorize the release of an RFP for Underwriting Services; seconded by Hartke. Motion carried with unanimous support.

Other Business

Motion by Weibel that all Closed Session minutes of the Finance Committee shall remain closed pursuant to Resolution No. 7969, a Resolution Establishing Procedures for Semi- Annual Review of Closed Session Minutes by the Champaign County Board; seconded by Summers. Motion carried with unanimous support.

Chair’s Report

There was no Chair’s report.

Designation of Items for the Consent Agenda

Items A2-14; D3; were designated for the Consent Agenda.

Other Business

Motion by Alix to enter into closed session pursuant to 5 ILCS 120/2 (c) 11 to consider litigation, which is probable or imminent. He further moved that in addition to the County Board members, the following individuals remain present: the County Administrator, Deputy County Administrator, the County Treasurer, the County Auditor, and the Recording Secretary; seconded by Goss. Motion carried unanimously. Alix, Anderson, Clemmons, Cowart, Crews, Esry, Goss, Harper, Hartke, Hiser, McGuire, Mitchell, Patterson, Petrie, Rector, Rosales, Summers, Tinsley, and Weibel all voted in favor of the motion.

The Committee of the Whole entered into closed session at 9:00 p.m. The committee returned to open session at 9:15 p.m.

Adjournment

Chair Weibel adjourned the meeting at 9:16 p.m.

http://www.co.champaign.il.us/CountyBoard/Committee_Of_The_Whole/2017/170314_Meeting/170314minutes.pdf