Editor's note: this is the third in a periodic series focusing on a financial viability report given by the Center for Governmental Research on the Chautauqua County Home. This story focuses on how much legacy costs would affect a sale.
By ERIC TICHY
OBSERVER Mayville Bureau
The Chautauqua County Home in Dunkirk
MAYVILLE - Chautauqua County might not see much profit if the County Home were sold for cash, a financial viability report by the Center for Governmental Research states.
In fact, after unemployment insurance, accrued benefits, workers' compensation, debts services and other legacy costs are factored in, the county would just about break even.
Of course, that scenario involves the county selling the Dunkirk skilled nursing facility to Altitude Health Services for $16.5 million in cash. The Chicago-based group is one of two bidders on the home.
The other offer, from Absolut Care Facilities Management, LLC, has offered a lease bid of $1.6 million a year - opening the door for even more questions surrounding a profit.
"The issues has to do with what we are calling legacy obligations," the viability report notes. "Financial obligations which would need to be addressed by the county even if it were decided not to continue to operate the County Home in the future."
If the legislature decides to sell the home for $16.5 million in cash, the county would see little of that windfall.
So why is that?
Unemployment insurance: According to the report, the county would have a "potential liability" if the County Home was sold and layoffs were to occur. The county would be responsible for the first 26 weeks of unemployment to any employee let go.
If 5 percent of home employees were to become unemployed as the result of a sale, the county could be on the hook for as much as $156,000 - figuring $10,400 per employee.
Accrued employee benefit time: The county may be forced to pay employees for any unused vacation and possibly sick time. Unused vacation time alone could cost as much as $320,000, whether the county continues to own or sell the facility. If the county chooses to keep the County Home, unused vacation time would be paid over time and not in one lump sum if it were sold.
Workers' compensation: Current compensation obligations, according to the report, stand at $2.25 million as of the end of 2011. The report does point out, however, that it is uncertain how these obligations would be settled if the facility was sold.
"These legacy costs would represent potential obligations the county could sustain and would need to account for should it decide to pursue any option involving transfer of ownership," the report states.
Retirees health insurance benefits: The current value of post-employment benefits to County Home workers is estimated anywhere from $2.1 million to $3.1 million.
Debt services: As of this year, the County Home has $9.5 million in remaining debt services to be paid in annual installments between now and 2020.
"This will of course have to be paid, whether the county remains in the nursing home business or decides to divest itself of its interest in one way or another," the report states.
However, if the lease option were sought, immediate payments of the remaining debt services would not be possible.
Cost allocations: For the last five years, the County Home has "transferred" $500,000 to the county's general fund. "This payment is viewed as helping to cover costs of services legitimately provided by county departmental functions to the Chautauqua County Home."
The report "roughly" estimates that if the home were outright sold, the county would have $15,220,000 in legacy costs with which to deal. If leased, many of those costs would be spread over time.
County Executive Greg Edwards on Friday was quick to point out that a majority of the legacy costs will be paid whether the county owns the home or not.
In fact, the county executive estimates legacy costs to be around $6.3 million, more than half what the CGR report indicates.
"It's really simple when you look at it," Edwards told the OBSERVER. "If we don't sell this the deficits increase, pension cost increases, and the health insurance benefits increase.
"While the debts will be less, everything else will increase."
If sold, the county would receive an estimated $300,000 annually in property taxes, and any money in the County Home's fund balance at the time would be transferred to the county's coffers.
"We can either gain $30 million in 10 years or we can lose $30 million in 10 years," Edwards said.
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