Levy: Nursing Home Public Benefit Corporation Proposal is ‘The Worst of Both Worlds’

County Executive Says Measure Would Create New ‘MTA-Like Authority’ that Lessens County Oversight, Maintains Public Bureaucracy and Benefits, Increases Debt and Saddles the Taxpayers with the BillsCites 2004 State Comptroller Report on Erie County’s Experience, as Well as Nassau and Westchester PBC Issues

Hauppauge, NY – Suffolk County Executive Steve Levy this morning said a last-ditch proposal apparently being floated by State Senator Brian Foley and several Suffolk legislators opposed to privatization of the county’s 264-bed skilled nursing facility through the sale to a private operation presents ‘the worst of both worlds, where the county loses all oversight of operations of the facility but taxpayers are stuck with uncontrollable bills.”

The county executive said establishing a Public Benefit Corporation to take control of the Yaphank facility, as is expected to be proposed Tuesday, would create “an MTA-like authority that can raid the pockets of taxpayers without any accountability.” Under typical PBC proposals, a new, appointed authority is established, issuing taxpayer-guaranteed debt to ‘buy’ the existing facility from the municipality. Levy noted that Suffolk taxpayers would be responsible for paying that debt, as well as for subsidizing any future losses the PBC incurs in operating a facility that has run in the red for decades.

“We’ve already been hit by the MTA tax to bail out a government entity that operates with no accountability, how long will it be before Suffolk businesses are hit with the ‘JJF Tax’?” Levy added.

‘Socks It To the Taxpayers’

“This proposal is a bad idea at the worst possible time,” Levy said. “While every elected official in the state is talking about reducing the number of private authorities and levels of government, Senator Foley and his liberal spending friends are talking about building a new bureaucracy to sock it to the taxpayers.”

Levy said the downsides of a Public Benefit Corporation to the taxpayers include:

• Removing any county oversight or authority over operations and expenses at the facility;
• Continuing annual subsidy from county taxpayers for operating losses;
• Maintaining the municipal workforce with generous municipal pay and benefit packages at taxpayer expense;
• Issuance of debt, which would have to be guaranteed by county taxpayers, for the Corporation to pay for the acquisition of the facility – in essence, paying the county with its own bonded money;
• Increased costs in establishing a wide range of support services (maintenance, purchasing, payroll, legal, etc.) that are presently provided by the county;
• Possibility of federal loss of Medicaid reimbursements through this model

State Comptroller Faults Model

Levy also stated the fact that, unlike Erie, Westchester and Nassau, Suffolk’s skilled nursing facility is not associated with a municipal hospital, which presents the potential for an even greater taxpayer subsidy.

He cited a 2004 New York State Comptroller’s review of the experience of Erie County in establishing what is known as a Public Benefit Corporation to run its medical center and nursing home, which also acknowledged the problems experienced in Nassau and Westchester counties in establishing the same new level of bureaucracy.

“Erie County has followed the same unsuccessful method used previously by Nassau and Westchester Counties. They have taken a private hospital that was losing significant amounts of money as a county operation, saddled it with significant new debt that adds to the hospital’s fiscal burdens, and set it up as an independent agency with no specific new revenue or operational initiative that would help it achieve self-sufficiency. It is hard to see how the hospital becomes more cost-effective when the first action taken is loading it with debt.” (Executive Summary, emphasis added)

“Senator Foley is trying to bring Albany-nomics to Suffolk County: borrowing from ourselves by incurring new debt and making it sound like a win for the taxpayers,” Levy stressed. “The tax and spend faction of the Suffolk Legislature is throwing up this desperate, last-ditch proposal to distract their colleagues from making the right decision that protects the taxpayers – approving the proposed sale of the facility to a private operator,” said Levy.

Private Sale Brings Taxpayers $62 Million Over Five Years

Under Levy’s proposal, the contract for a sale price of $36 million includes the physical structure, land and the bed license. Levy said that sum would help the county significantly in meeting its projected 2010-2011 shortfall.

The net benefit from the proceeds of the sale, after bonds are paid off, is $20 million, and that the privatization effort will eliminate an $8-10 million annual deficit to the General Fund in running the facility, bring a projected five-year savings of approximately $62 million to taxpayers.

“Under private sale, the $20 million net benefit goes right to the taxpayers, and the $8-10 million annual subsidies by the taxpayer are ended,” Levy stressed. “Under the Foley plan, the $20 million paid to the county is coming from ourselves, borrowed money that taxpayers must guarantee, and taxpayers will continue to be responsible for paying operating shortfalls.”

The county executive stressed that the legislature’s in reviewing the proposed sale produced a second appraisal much in line with the $36 million sale price, and that a Budget Review Office report confirmed – as is required by law – savings of at least 10 percent annually.

Over the last few years, a number of New York counties have closed, downsized or privatized their nursing home operations including:

• Dutchess (closed)
• Niagara (closed)
• Westchester (closed)
• Orange (downsized)
• Nassau (downsized)
• Montgomery (privatized)

Additionally, Albany, Fulton, Genesee, Warren, Essex and Ulster counties are also exploring privatization or closure.

“If we are to avoid a budget disruption, significant layoffs or a massive property tax increase next year, I remind the legislature that the only legitimate alternative out there is this sale,” Levy concluded