I’d like to take a few minutes to follow up on my public comments from two weeks ago regarding the health department. Since then, I sent a request for information to the health department executive director, who responded with some very interesting information.
Not everything that I asked for, but helpful. And I can tell you that when it comes to fiscal responsibility and transparency, the health department has not been acting in the best interest of Platte County taxpayers.
Regarding my charge that they speculated in commercial real estate and lost, that’s absolutely correct. The health department’s original projections estimated total project costs of between $2.9 and $4.4 million. So let’s assume the number right in the middle, $3.7 million, was the total projected cost. But the final total looks to be closer to $7.2 million. That’s $3.5 million over budget – twice the projected cost. And I would bet that proceeds from the sale of the Platte City and Parkville properties could be as much as a million dollars less than projected, making the total project over $4 million in the hole. That’s what happens when you lack fiscal responsibility, and you speculate in real estate.
But worse yet, they bought an office building during a global pandemic, spending $1.9 million in critical cash reserves that they must have known they would need. Despite what they have been saying publicly, they very easily could have backed out of the purchase contract by just forfeiting their $10,000 escrow deposit. It happens all the time.
According to the former executive director, reserve funds are supposed to be used for “operational expenses,” and are recommended by their auditor to be equal to six months of operating funds, or about $1.7 million. But the $1.9 million spent on the new building was not used for “operational expenses,” they bought a building with it. And by the end of 2020, cash reserves were down to $390,000, $1.3 million short of the recommended reserve cash balance. During a pandemic, and because they bought a building they didn’t need. That is the height of fiscal irresponsibility.
So to solve their self-inflicted cash flow problem, they competed with small businesses for COVID relief grants and received $400,000 that could have gone to small businesses. That’s $400,000 that the health department should not have needed, but they took it anyway. And remember, small businesses were devastated. Those in the health department that were involved in making that decision should be ashamed.
And finally, the Missouri Constitution strictly prohibits taxpayer-funded agencies from going into debt without voter approval. But that’s exactly what the health department did. They won’t call it debt, they’ll call it a lease purchase agreement, also sometimes referred to as certificates of participation. But it’s debt – essentially a construction loan. I don’t know the amount, because they wouldn’t show me the documents, but I can do basic math, so I suspect it’s in the range of $5 million.
Structuring debt like this is an attempt to do an end run around voters. Because you know, getting voter approval is messy and time consuming. In fact, in 2018, the Platte County Commission decided that this type of financing was so inappropriate for local taxpayer-funded agencies that they passed an order banning the county from using this type of financing scheme.
Many consider this type of debt financing to be unconstitutional. At the very least, it goes against the spirit of the Missouri Constitution.
So to summarize, the health department speculated in the commercial real estate market costing the taxpayers roughly $4 million more than anticipated.
And because they spent their reserves on this unnecessary and speculative real estate deal, they ended up taking $400,000 in grant funds that should have gone to small businesses.
And to finance this scheme, they incurred debt that wasn’t approved by the taxpayers, and therefore likely unconstitutional.
This issue demonstrates a complete lack of governmental transparency, fiscal responsibility, and accountability to taxpayers. And so in my opinion, the health department board members that voted to purchase that property in 2020 and who showed that they don’t care about transparency, fiscal responsibility, and accountability to taxpayers, should resign.
--Scott Fricker Presiding Commissioner Platte County