From the Desk of
County Executive Jan Gardner
(11/2014) During my campaign for County Executive, I promised to restore trust in government and protect taxpayers. One of the biggest betrayals of trust was the proposed sale and privatization of Citizens Care and Rehabilitation Center and the Montevue Home.
I was pleased to recently announce that an agreement has been reached and the County will retain Citizens and Montevue continuing our longstanding mission to take care of our own, honor the deed on the property, and keep our promise to our seniors.
People have asked me why the deal made by the last Board of County Commissioners was such a bad deal. Letís walk through the numbers.
The new state of the art facilities cost $38 million to build. These facilities are located on 7.5-acres of prime land worth approximately $7 million. In addition, the county agreed to include $4.8 million worth of accounts receivable as part of the sale. The land, building, and accounts receivable brings the total value of these County assets to $49.8 million.
Just as the new nursing homes were about to break even, and perhaps generate a small profit, the prior administration agreed to sell the buildings for $29.6 million, the 7.5 acres of land for only $400,000, and the accounts receivable for $1.5 million. So, assets worth $49.8 million were to be sold for $31.5 million Ė a loss to county taxpayers of a whopping $18.4 million!
This makes absolutely no sense. No rational business person would ever make such a bad deal.
Just like when you sell your home, there are closing costs to consider. The real estate brokerís commission on the sale would have cost taxpayers another $750,000. Recordation taxes and legal fees for this sale would have cost taxpayers another $700,000 more at settlement. Then the County agreed to pay $367,000 to cover benefits that had been earned by employees while they
worked for the County. These three items cost taxpayers a total of $1.8 million.
To add to the bad deal, the prior administration agreed to pay $10.7 million to ensure the continuing care of 58 indigent patients at Montevue. When the commissioners handed over the keys to the facilities on May 1, 2014, the number of subsidized patients had already dropped to 46, with no change or reduction in the $10.7 million the County had agreed to pay. Today, there
are only approximately 30 subsidized patients remaining at Montevue. This is a bad deal for county taxpayers because this $10.7 million vastly exceed the actual cost to provide care to these residents.
To close on the sale, the County would have also needed to bring $6.25 million to the table to cover the Countyís debt for constructing the buildings, because the sale proceeds were so low, they would not have covered the balance of the mortgage due on the buildings.
So, if I had proceed with the deal put in place by the prior administration, it would have cost county taxpayers $8.05 million at closing to sell the land and buildings, and $10.7 million more for the continuing care of a rapidly declining number of residents at Montevue, for a grand total of $18.75 million. Thatís right, to close on a deal where taxpayers sold assets at a
loss of $18.4 million, taxpayers would have to shell out an additional $18.75 million in cash. It is a stunningly bad deal and a complete betrayal of the taxpayers of Frederick County.
But wait, it gets even worse. Because a group of private taxpaying citizens had sued the county to prevent the deal from going to settlement, the prior administration assigned a secret lease agreement to use the facilities. That lease, developed entirely outside the public process, was also a bad deal for the taxpayers. Not only did the county agree to lease the facilities
at a below market rate, it forced the county to pay the taxes, insurance, and maintenance on the buildings. This added $1.6 million to the tab over a two-year lease period.
If I had allowed the deal to close and Citizens and Montevue to be sold, the taxpayers would have ended up paying $18.75 million to sell facilities $18.4 million below their market value and have absolutely nothing to show for it but broken promises. All our county assets would be gone and no services would remain for our seniors.
I am pleased that the negotiated agreement reached with all parties is a good financial settlement for the County. It is within our existing budget, so no new funds will be required. And, we will retain our valuable county assets and most important, keep our promise to our seniors.
Protecting Taxpayers From the Cost of Residential Development
Frederick County has recently experienced a skyrocketing increase in the cost of construction for new schools. For example, the new Frederick High School came in $30 million above engineering estimates increasing from $84 million to $114.5 million over the period of one year. Similar increases in the cost of school construction have been seen across the entire state and is
the result of a number of factors including market conditions, new state mandates like prevailing wage and storm water regulations, and higher standards for energy efficiency, ventilation and ADA.
Couple this reality, with the fact that many county schools are severely overcrowded right now including Centerville Elementary School in Urbana at 148% of capacity and Urbana Elementary at 135%. Hillcrest Elementary is at 140% and Waverly Elementary at 135%. Deer Crossing Elementary near New Market is at 125% of capacity with thousands of homes to be built nearby and no
new school in the plan.
How do we pay for these needed schools? One way is for new residential development to pay its fair share. The county has assessed an impact fee for schools for about 25 years. The last administration added a new option allowing a residential developer to keep building even if schools are seriously overcrowded. This option has added to the overcrowding in Urbana and has not
provided the needed money to build the schools.
Therefore, I recently asked county staff to update impact fees for the new cost of school construction. This exercise resulted in a recommendation to increase impact fees by 12% and to increase school mitigation fees by 67%. It is important to note, that the school mitigation fee is only paid by some residential development where the developer choose this option and where
schools are already overcrowded.
These areas are primarily in Urbana, Monrovia, and New Market/Linganore where thousands of new houses were approved by the prior board and schools were not adequate and already overcrowded. This mitigation fee is not paid within any municipality or in areas of the county where schools are not overcrowded like Emmitsburg, Thurmont, Woodsboro , and Walkersville.
Of course, some people are unhappy that residential developers may have to pay these larger fees. But, the question that must be asked is who should pay? Should residential development pay its way, or do you want to pay the entire bill for needed new schools? Impact fees and school mitigation fees protect taxpayers from footing the bill for schools needed to support new
Development fees are just a piece of the puzzle. I also plan to ask our state delegation to introduce a bill to require the state to pay the cost of new state mandates or at least cost share in them. I do expect the county to be able to add some money to school construction as revenues improve as a result of a better economy. And, the Board of Education must do some cost
containment and value engineering to lower the cost of school construction.
Citizens deserve a government they can trust. Thatís why I have worked so hard to protect county taxpayers. I will make sure that Frederick County taxpayers are protected both now and as we move forward.
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