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Mathieson: Too Much Taxing? McHenry County Nursing Home Has $43M in the Bank




By Nancy Mathieson - 

While the McHenry County Board had been arguing all fall about possible township consolidation, another local controversy was quietly settled. Valley Hi, a County-run nursing home had accumulated an astonishing $43 million cash balance, and the Board in November finally voted to cut the annual tax levy down to zero.

How did Valley Hi Nursing Home in only nine years accumulate $43 million, or over half the size of the County’s entire annual property tax revenues?

The original Valley Hi was built in the 1800’s at the site of a farm owned by McHenry County. According to Board member Mike Walkup, by the late 1990’s it had become decrepit and “looked like something out of a Steven King movie.” In 2002 voters were asked if they wanted to approve a special tax levy to “build and staff a County nursing home.” The vote passed by about 5,000 votes out of 75,000 votes cast.

But all did not go well. Even with the annual tax levy, a scathing outside audit in 2006 reported Valley Hi ran a $2 million deficit and labeled the home “managerial dysfunctional.” In 2010, the County Board re-assumed managerial control from Revere Health Care by creating a new Operating Board for Valley Hi.

The Operating Board and nursing home administration did their job well: they reversed a $2 million deficit into a $13 million surplus in 2007, followed by a $30 million surplus in 2011 and a $39 million surplus in 2014. By the fall of 2015, the Board reported the Valley Hi bank balance was up to $43 million. The 2006 annual tax levy was set at $6 million; when the building bonds were paid off the levy was lowered to $4.5 million and then to $3 million. Valley Hi has an annual operating budget of about $10 million.

In October of last year, Mike Walkup requested the Valley Hi levy be split from the others for voting purposes. In November, Valley Hi administration seemed worried about these actions, and put together new financial projections. The projections showed a decline in the fund balance over time; however, the projections also showed fees and charges for service remaining flat, personnel expenditures rising 3.5% annually and capital outlays rising to $1.2 million in 2016. Some criticized the administration for having no explanations for their assumptions.

In mid-November, the Board voted unanimously to cut the tax levy for Valley Hi to zero, saving the average home owner about $30 each year. According to Board member Chuck Wheeler, Valley Hi levies can still take place without another referendum if they continue to be made every other year. And how do local residents weigh in on the surplus? “Townspeople think that’s an awful lot of money,” Wheeler said.

As anticipated, the next discussion at the Board was how the $43 million “in reserves” could or should be given back to taxpayers. Kelly Liebmann, a candidate for County Board, thinks the cash reserves should be kept and invested in long term Treasury Bills with interest (about $800,000 yearly) covering any future Valley Hi financial shortfalls. Ersel Schuster, another County Board candidate, also rejects the idea of returning the reserves to the taxpayers, saying “the majority of those funds would be consumed by the ‘committees and lawyers’ assigned to figure out who gets what.”

Chuck Wheeler says the most likely solution is the surplus will be used to fund a host of County capital and maintenance projects, including building new parking garages and paving roads. Under this plan the County would borrow funds from Valley Hi and pay interest. By law the Board could make this decision without another referendum.

What is the future of Valley Hi? One option is a voter referendum to decide whether to 1) keep Valley Hi, 2) spend five years closing it down through attrition or 3) sell it. Valley Hi is not located near any hospitals due to the original decision to build on farm land owned by the County. Current trends are to build nursing homes near existing hospitals so patients can more easily access hospital services.

Nancy Mathieson has a 30-year career in business, securities regulation and public policy.  Nancy held positions at the Chicago Mercantile Exchange (CME) and the New York Stock Exchange (NYSE), where she was a Director of Market Surveillance and managed a professional staff in the investigation of securities trading violations. She also served as Operations Director at Truth in Accounting, a Chicago think-tank whose mission is to promote transparency in government financial reporting. In this role, she directed Accounting teams in grant-funded research studies on the financial condition of state and local municipalities. Nancy received her B.S. in Economics from the University of Illinois at Chicago and her M.B.A. from New York University.


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