Special Legislation

BOS Gives OK To Recovery Plan

Editor’s Note: As we examine the various suggestions made by the Monday Night Group on how the county can emerge from its fiscal downfall and the Modoc County Board of Supervisors’ reactions to those suggestions, we will be posting a series of articles covering the Tuesday, April 13 meeting of the board.

A suggestion from the Monday Night Group that Modoc County seek special state legislation to assist it in replacing misappropriated money to the treasury was met with mixed reaction Tuesday, April 13, by the Board of Supervisors.
   
Supervisor Jeff Bullock said that State Sen. Dave Cox told him months ago that legislation buying the county time to come up with $12.5 million and facilitate allowing the county to carry a deficit budget “was not an option.”
   
Supervisor Patricia Cantrall suggested Cox “could change his mind.”
   
At issue is whether the Board of Supervisors is willing to cooperate and accept the special legislation proposal as just one of the Monday Night Group’s list of options for regaining financial solvency for the county.

“Not to pursue legislation would be folly,” Don Demsher, one of the organizers of the Monday Night Group, admonished the board.

“We’re not asking the state to bail out the county,” John Dederick, another of the ad hoc citizen’s committee spokesmen, explained after addressing the board. “We’re just asking for time. If we work together as a community we would have a lot of influence.”
   
Casting doubt on the probability of special legislation is an e-mail exchange between Kevin Bassett, Sen. Cox’s chief of staff, and Richard Arrow, Modoc County chief financial officer.
   
“He (Sen. Cox) was not aware of any precedent for state legislation that would authorize a county to carry a negative balance…he felt legislation, if proposed, would face an extreme uphill battle in the legislature. The precedent would be significant and the circumstances would invite little sympathy from legislators in other parts of the state,” Bassett wrote.

Bassett’s communiqué to Arrow was dated Monday, April 12 at 10:57 p.m. -- the night before the board was to hear the Monday Night Group’s list of financial recovery options.

Even in its divided opinion, the board voted unanimously to support the proposal for special legislation, and included the request in a follow up letter to the State Controller’s Office outlining the county’s plan for financial recovery.

Library Receives "We the People" Grant

Head Librarian Cheryl Baker told the Board of Supervisors and audience at Tuesday's meeting that the Modoc County Library has received a "Picturing America" grant  from the National Endowment of the Humanities. Included in the grant are three We the People bookshelf grants consisting of 22 books for children and young adults about American courage and freedom. 

Modoc County Could Face Bankruptcy

If the Modoc County Board of Supervisors fails to obtain a loan to repay an estimated $12.5 million it misappropriated from the treasury the county could face bankruptcy.

This financial fate was outlined in a straight forward and comprehensive letter from the State Controller’s legal counsel and read to the board at its April 13 meeting. In the letter, the State Controller specified what the consequences will be if the supervisors are not successful in restoring the money to the treasury.


The letter stated in part:
   
-- The county would have insufficient general funds to pay its bills and would have to begin issuing registered warrants to cover expenditures.
   
-- Without a source of funding to repay the registered warrants, the county may have no option but to seek protection from the bankruptcy courts.
   
-- Federal and state funding would likely be withheld.

The letter, dated March 30, came with an odd twist.

It was not addressed directly to the Board of Supervisors, but at the request of Richard Arrow, Modoc county chief financial officer, it was sent to the San Francisco firm hired by the county to sell an estimated $12.5 million in bonds.

The supervisors, along with Arrow, CAO Rick Rudometkin, Auditor Alice Marrs and Treasurer Cheryl Knoch, were listed as getting copies of the letter.

The letter, which was not shared in a public forum until the April 13 meeting of the Board of Supervisors when Arrow read it aloud, went on to state:

“Finally, if the county were to file bankruptcy, the county’s financial affairs would be handled by a trustee appointed by the court. The trustee, acting under federal jurisdiction and in an attempt to rectify the financial problems of the county, would supplant some of the decisions normally made by elected officials, thereby removing the residents of the element of local control over financial decisions.”

In outlining the consequences of the board’s failing to repay the treasury, the legal counsel for the Controller’s office based the opinion of possible bankruptcy on the statement:

“Should the short-term and long-term financings not be successful, the Controller would have to insist that the amount of any borrowing of restricted funds be returned immediately.”

In explaining why the letter went to the bond counsel firm in San Francisco instead of directly to the Board of Supervisors, Arrow later said that “Brian Quint is our bond counsel. He requested the letter from the State Controller to support his opinion on the tax exempt nature of the revenue bond (Certificates of Participation).”

BOS Misappropriates Medicare Payments

In the continuing saga of its financial mismanagement practices, the Modoc County Board of Supervisors turned a deaf ear to its former top hospital administrator Walt Beck when he told the board it must put aside money to repay what now totals $1.4 million in Medicare overpayments.

Instead, the board placed the Medicare overpayments in the treasury and then used them to cover other county expenses.

This means that once again the Board of Supervisors -- already facing the challenge of replacing $12.5 million it misappropriated from the treasury -- fell back on money it wasn’t entitled to in order to underwrite the cost of operating the county, raising the question of the board’s legal and ethical authority to do so.

The board’s apparent misuse of treasury funds was recently substantiated by Beck, who told the Modoc Independent News in an exclusive interview that he forewarned the board to “wall off” the Medicare overpayments because they would have to be returned.

“I encouraged Modoc County officials to wall off the Medicare funds,” Beck said. “I said to the board, ‘don’t count on this money forever, the hospital can’t save the county,’ that was my constant mantra.”

Beck resigned his position as chief executive officer at MMC Nov. 3 and is now in a similar position at Banner Churchill Community Hospital in Fallon, Nevada.

“I told Bob (Bob Duncan, who replaced Beck as CEO) there would be a ‘take back,’ because the hospital made more money,” said Beck.

Asked if he had prior knowledge of the charge back Beck said, “Yes, but it was more than I expected.”

Beck went on to say, stopping short of naming County Treasurer Cheryl Knoch, that he was uncomfortable with the treasurer, “running that side of the hospital,” referring to the fact that hospital funds were deposited into the treasury. “I wanted to keep better control of hospital funds.”

Currently, MMC owes Medicare $675,000 for fiscal year 2009-10 and $755,000 for fiscal year 2008-09. Duncan has negotiated a repayment arrangement at between 10 and 12 percent interest for the $755,000 and has paid $220,000 on the $675,000 and is financing $455,000. The Medicare reimbursement rate has recently been adjusted down from 70 percent to 48 percent, according to Duncan.

“It wasn’t a surprise to me,” Duncan said , referring to the Medicare demand for payment. “I’m sure everybody knew it was coming. I had conversations with Walt months ago about this,” Duncan continued. “The board was not in a position to retain the funds, which went into the treasury and were spent by the county.”

Duncan also said that Monica Derner, MMC CFO; Mark Charlton, former Modoc County CAO, and the Board of Supervisors all knew the overpayments were coming and that Medicare would want the money back.

“If MMC were a district hospital the money would have been in a separate fund,” Duncan said. “But we’re in the same boat as the county and let’s face it, the hospital is the reason the county is $12 million in debt.”

Some observers believe Medicare often sets a high reimbursement rate when a facility is initially designated as Critical Care Access. Medicare looks at the historical records of the facility and because the historic volume of business at MMC was low the rate was set at 70 percent, which is high.

Since then the volume of business at MMC has increased which means more money came in from Medicare at the higher rate -- excess funds that county officials knew would have to be repaid.

-- Barbara March

Riding for the Iron

John Freeman

     'My dad and grandpa bought and traded ranches back in the 50s. We came back in ’69 when they traded a ranch in Dixon for a place up here. I was in my senior year in high school.
    "Dad was a horse trader and a shoer and raised, trained and raced thoroughbred horses.  I exercised the horses for him. He ran on the fair circuit tracks in places like Sacramento and Vallejo. I was 15 or 16 when I started. I didn’t know too much about it. My dad just told me to get on and ride.
    "He always told me, 'When you think you know it all, you’re not nothing to nobody. Always watch the quiet guy.'
     "I remember this old sorrel horse named Used Car. I sat down on his back and he went around that track two times before I could stop him. I didn’t know that if you sat down on them that was a signal to go. I sure learned the hard way that time.
    "My first outside job here was with Fritz Nosler at the auction yard.  He was a good boss. Then I bounced around Ashland and Fallon and then went to work for Jack Rice on his ranch on Pine Creek Blvd. That’s where Billie Wilson’s ranch is now.
    "In Likely I worked for K.D. and Jimmie Van Loan for 16 years. They were good to me. I learned how to irrigate, hay, work cattle and horses. I met my wife Lois there. We were married in 1989.
    "I was training a few horses at that time. They weren’t very good horses. You could say I was trading one mustang for another. Lois convinced me I needed better horses so I went on a buying trip.  I got some good horses and it’s true what they say.  It’s a lot easier to train a good horse. Lois is a blessing for me. She’s helped me with the horse program a lot.
    "I wanted to get into cow horse training and I have to say that Bud Hastings was the best spade bit cow horse man I ever met. He worked at White Pine Ranch for a long time. Before he died he gave me a spade bit and rawhide reins. He told, ‘make sure you use them,’ and I do, but sparingly.
    "I met Dave Crenshaw when I was with the Van Loans. He told me it would be nice to be my own boss, doing day work and shoeing like he does.  I guess you could say Dave got me started.
    "There’s not so much day work these days, but I do some day work for Billie Wilson.  There’s a lot of shoeing.  I also take care of 400 - 450 cows all summer and I’ll call Dave or Rod Lake to help me out. 
    "But I’m like my dad, I like the horses best."