County OKs Extended Settlement Payoff Plan

Ventura County supervisors on Tuesday approved a deal with the U.S. attorney’s office to take two extra years to pay a $15.3-million settlement, a more expensive plan but one officials say makes good financial sense.

“It’s the first good news we’ve had in a long while,” Supervisor John Flynn said after an hourlong closed session in which the board approved the matter. “We’re not completely out of the woods, but we’re beginning to see the light.”

But not all county officials are convinced the five-year repayment plan would keep projects and programs--including funding for the homeless and a new Juvenile Hall--off the chopping block.

After county attorneys complete the new settlement, the annual payment will go from $5.1 million to $3.12 million. Based on a variable interest rate, ranging from 4.5% to 7.3% annually, the county will pay about $300,000 extra in interest over the five years.

“It’s still a $3-million annual loss and it has to come from somewhere,” Auditor/Controller Thomas Mahon said.

Although Mahon is drafting a plan on how to cover the debt, he said ultimately supervisors will decide on which funds to dip into to make the payments.

They could, for instance, cut existing programs or decide against funding future programs not already included in the budget, Mahon said.

In October, many department heads are scheduled to request additional funds to keep open vital services, such as county parks and a countywide homeless shelter in Camarillo.

Already, Kathy Jenks, who runs the RAIN homeless shelter, is worried the new financial burden may finally result in the closure of the 60-bed facility.

Each year she has difficulty obtaining the funds to keep the doors open, and in October plans to request about $600,000 to allow the shelter to remain open through the year.

“October’s starting to look pretty bleak,” Jenks said. “We would end up being another political fallout from this whole behavioral health mess.”

The county’s financial troubles began last year after a decision by supervisors to merge the county’s mental health and social services departments. Supervisors rescinded the 10-month-old merger in December after federal officials made it clear it violated Medicare billing rules.

The failed merger sparked several federal and state audits into the county’s mental health system. One audit by the U.S. attorney’s office uncovered faulty Medicare billing practices going back nearly a decade.

The $15.3-million repayment settlement is considered the worst financial blunder in Ventura County history.

County Counsel Frank Sieh said Tuesday’s action brought the county one step closer toward the healing phase.

“When the final details have been wrapped up, we will bring some closure to the Medicare billing issue,” Sieh said. “We’re moving in the right direction and we’re almost there.”

Sieh and Flynn said by paying the federal government over five years instead of three, the county could avoid depleting its reserve funds to pay its debt.

Keeping a healthy reserve would maintain the county’s excellent credit rating, and prevent major public works projects from being delayed or abandoned, Flynn said.

Flynn helped persuade U.S. attorney’s officials to allow for the extension, arguing that a five-year payment plan would threaten the county’s badly needed juvenile justice center, a social services complex in Santa Paula and upgrading the county-run hospital.

“I’d like to thank the U.S. attorney for their cooperation and understanding,” Flynn said. “They’re helping keep the county in tip-top financial shape.”

Treasurer-Tax Collector Hal Pittman and Mahon recommended supervisors accept the longer repayment, though it will mean added interest costs.

“I’m concerned any time we have to spend more money, but better to go for the five years,” Mahon said. “If the interest rate were to suddenly become onerous, that would be an incentive to pay it off earlier.”

Chief Administrative Officer Lin Koester was also optimistic on keeping the county’s top credit rating intact. A depleted reserve could hurt the county’s bond rating, making it more expensive to borrow money for future building projects.

“Five years is better than three,” Koester said. “It’s a very good compromise.”