County finalizes first part of Citizens, Montevue sale

May 02--The county Thursday completed the first step in selling its nursing and assisted living homes by transitioning center operations and employees to a for-profit company.

A rapid succession of events leading to the transfer began Wednesday when representatives of the buyer, Aurora Holdings VII, told county officials they were ready to move forward with the transaction. Within hours, signatures were drying on an asset purchase agreement and lease, and employees arriving to work at Citizens Care and Rehabilitation Center and Montevue Assisted Living learned that they were no longer on the county's payroll.

On Thursday morning, even some Frederick County commissioners weren't fully aware of what had occurred.

"I was aware it could happen at any time. I didn't know it had actually happened. I am happy it happened," Commissioner Paul Smith said during a phone interview.

The development also took Commissioner David Gray by surprise; he said county board members had discussed a lease with Aurora in general terms but never hashed out specifics.

The 188 benefited and 157 nonbenefited employees at the centers had little warning that the transition was going to happen Thursday, said Leatrice Urbanowicz, a licensed practical nurse at Citizens. Small signs of transition and vague advice to "expect big changes" had seemed to put employees on edge recently, but staff hadn't gotten official notice of the May 1 shift, she said.

"Information just doesn't seem forthcoming," said Urbanowicz, who has worked at Citizens for more than five years.

Commissioners President Blaine Young said far from being quick, the ownership transition has moved slowly since county leaders approved it during a public hearing last year. A lawsuit and other legal issues have bogged down the process and forced county leaders to divide the $30 million sale into three pieces. The first step, handing over the operations to Aurora, happened after officials signed an asset purchase agreement and facility lease with the company.

Urbanowicz said center staff Thursday morning were directed into a conference room, where Aurora representatives distributed employee packets. County representatives passed out letters stating that the workers' employment had been discontinued, but that they had left in good standing, she said.

This operational transfer had been on hold until Aurora had lined up the necessary financing and state approvals, but the county has been waiting at the ready for weeks, Young said. When company representatives Wednesday gave the go-ahead for the shift, Young fired off an email that evening sharing the information with the four other commissioners. He sent a second email close to 11 p.m. notifying the rest of the board that the transition was underway.

Now that Aurora has taken over the facility operations, the company has assumed ownership of the center finances, including its profits and shortfalls. County staff estimates the money-losing centers have cost taxpayers about $53 million since fiscal 2000, and Young said Thursday's development addressed the deficits responsibly.

"The patients were taken care of, the employees were protected, and also we could move forward with tackling the financial aspect on the citizens," he said.

While operations at the 170-bed nursing home and 75-bed assisted living center transitioned to Aurora, the grounds and newly completed building remain in the county's hands for now. The county will charge Aurora $1.44 million in annual rent for the first four years of the 21-year lease agreement that took effect Thursday. After that, the rent is set to increase by 1.5 percent each year.

Once Aurora secures title insurance, a task made difficult by the ongoing litigation, the company can purchase the building and its contents for $29.6 million, County Manager Lori Depies said. At that point, the company can enter into a ground lease with the county, according to a drafted agreement. After legal issues surrounding the property's subdivision are resolved, Aurora will be free to buy the land for $400,000.

Though Aurora won't make the bulk of its payment until the building purchase, some money did change hands when the company acquired the center operations. Aurora bought the centers' accounts receivable, or unpaid debt owed to the facilities, for $1.5 million, Depies said.

Also during the recent transaction, the county credited the company with $367,527, so center employees could take leave time with them to Aurora. The county owed the company an additional $583,333 as the first installment of a continuing care agreement meant to support Montevue residents who rely on subsidies. Under the agreement, the county will pay $10.7 million across three years so the current indigent residents of the assisted living center can receive care at Montevue as long as medically appropriate.

The agreement also provides that future county leaders can pay to allot assisted living space to needy residents, Depies said.

Finally, the county credited Aurora for a deposit made by the company last year and a parking lot design fee. When all was said and done, Aurora ended up owing the county $327,289 in the recent transaction, Depies said.

Young said he signed the agreements Wednesday. Though commissioners did not vote specifically on the lease, Young said the agreement was part of last year's decision to sell the centers. The resolution supported by all commissioners except Gray authorized county staff, Young and Smith to facilitate the sale.

Commissioner Billy Shreve agreed that a separate vote on the lease was unnecessary.

"I think the sale of the nursing home was vetted. I don't think each contract structure or settlement needs to be vetted by the public," Shreve said.

However, Jan Gardner, a candidate for county executive, said she was dismayed by the lack of public process. Gardner, who asked commissioners and staff about the sale during Tuesday's county meeting, said she received misleading answers to her questions about whether the transaction would happen later in the week.

The transaction also puts an end to Montevue's roughly 200-year-old mission of serving needy county residents, she said.

"I think it's a profoundly sad day for Frederick County," she said. "They took something that was good and special about Frederick County and destroyed it."

Follow Bethany Rodgers on Twitter: @BethRodgersFNP.

___

(c)2014 The Frederick News-Post (Frederick, Md.)

Visit The Frederick News-Post (Frederick, Md.) at www.fredericknewspost.com

Distributed by MCT Information Services