Local Government

McHenry County Board grapples with $35M Valley Hi budget surplus

WOODSTOCK – New management and new leadership transformed Valley Hi Nursing Home from a fiscal disaster into a tight ship now turning a slight profit.

But the $35 million surplus its tax levy has accumulated – enough to fund more than three years of operations for the county-owned facility west of Woodstock – has some County Board members wondering what to do.

Opinions at Wednesday’s meeting of the Public Health and Human Services Committee ranged from spending down the surplus to holding it firm and ensuring it doesn’t grow larger.

And in the background throughout the discussion was whether Valley Hi’s newfound solvency could be threatened by future federal and state health mandates or the state’s fiscal problems.

“I’m starting to feel that we can expect to [break even or profit] year to year,” county Administrator Peter Austin said.

“Barring any action from the state,” committee member Mike Walkup, R-Crystal Lake, replied.

“That’s the great unknown,” Austin said.

The Valley Hi Operating Board wants at least $16 million kept on hand – $11 million for a one-year reserve of its operating expenses, and $5 million to cover unforeseen expenses that would otherwise have to be paid out of the county’s general fund.

The 128-bed, all-inclusive nursing home makes its revenue through Medicaid, Medicare and private pay, not counting the tax levy. It has run in the black since 2011 following a series of reforms, but prior to that bled millions of dollars in red ink each year that was plugged by property taxes.

A scathing 2007 outside audit called Valley Hi “managerially dysfunctional” and revealed the home had run in the red since 2001, and ended 2006 with a $2 million deficit. The taxpayer levy, then $6 million, is what kept Valley Hi’s budget whole.

The home’s former administrator resigned in the wake of the audit, and the County Board temporarily turned over management of Valley Hi to Cary-based Revere Health Care, which over three years brought the nursing home much closer to profitability by keeping cost increases low while significantly increasing income.

The County Board in 2010 reassumed control of Valley Hi, hired new Administrator Tom Annarella and gave oversight to a County Board-appointed operating board similar to how other Illinois counties run their publicly owned senior homes. Walkup and fellow member James Heisler, R-Crystal Lake, hold the County Board’s two voting seats.

But while efficient management brought costs under control and raised profitability – as did paying off the $14 million to build Valley Hi’s current home – the county continued to collect the levy, which was created by voter referendum. The County Board has since lowered that levy from $6 million to its present $4.5 million on this year’s property tax bills. The surplus fluctuates between $30 and $36 million at any given time during the tax cycle, Austin said.

Austin recommended a course that keeps the surplus but does not let it increase further, recognizing that annual costs will increase, perhaps faster than anticipated because of state mandates and the Affordable Care Act.
Reducing or eliminating the levy would create financial issues for the entire county budget because it is part of the county’s overall levy and not separate – the county’s revenues under the tax cap would be capped at the lower rate.

John Hammerand, R-Wonder Lake, proposed such a solution, reducing the levy and allowing Valley Hi to operate on the accumulated reserve, then going to the voters once it runs out to see if they want an increase.

“Why are we afraid to go back to the people if we use this surplus and reduce our levy?” Hammerand asked.

But committee Chairwoman Donna Kurtz, R-Crystal Lake, called such an idea “completely irresponsible” without much more planning and outreach.

“We’re blessed with solid management. I want to avoid a hair-trigger decision of, ‘Hey, we’ve got all this money, let’s go do something with it,” Kurtz said.

The committee only discussed Valley Hi, and did not have any corresponding resolution on which to vote. Only three members remained – one shy of a quorum – by the time the committee got to Valley Hi.

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