LAST TUESDAY’S SUPERVISORS MEETING featuring the Board’s final farewell to retiring CEO Carmel Angelo signaled what sounds a lot like a return to a version of the old CAO Tom Mitchell era, Mitchell, long-time observers will recall, was famous for answering almost every question with either “I’ll get back to you,” then not getting back; or “I’m looking into it,” with the “looking” never resulting in anything; or “We’re working on it” which also dragged out with no end date. Staff answers to several ordinary questions from the Board harked back to those near-forgotten Mitchell days. Say what you will about CEO Angelo, but she seldom answered questions evasively and dishonestly like that. Angelo preferred to either dispute the Board’s recommendations and directives outright or simply ignore them and report their status as “in process” until they were no longer applicable to anything.
INCOMING CEO DARCIE ANTLE broke down in tears during her short appearance in Tuesday’s grand tribute to retiring CEO Carmel Angelo.
We haven’t seen anybody break down in tears in the Board chambers like that since when then-Fourth District Supervisor Patti Campbell broke down during a discussion of mental health service problems back in the 1990s.
Antle choked back tears as she recounted some difficult situations that she and Angelo had dealt with during Antle’s relatively short time in the Executive office. We don’t know why new CEO Antle would cry though — she’s getting a big promotion and an accompanying big CEO-style raise. She should be laughing! If Ms. Antle is this fragile, however, she better buck up soon. Being CEO of Mendocino County isn’t for the faint of heart — especially these days.
BUDGET NOTES: Angelo Departs as $12 Million Dollar Deficit Looms — Or Does It?
Board Chair Ted Williams led off last Tuesday’s CEO farewell session by reading a proclamation that praised Angelo for her commitment to the fiscal sustainability of Mendocino County. That was followed by accolades and proclamations from State Senator McGuire, Assemblymember Wood, Congressman Huffman (by pre-recorded video), the presidents of state-wide lobbying organizations and a parade of Executive Office loyalists. Public Comment was capped off with John Sakowicz presenting his minority report detailing a number of Angelo’s less than savory “accomplishments.” Williams dismissed the criticisms as “unfounded personal attacks.”
Supervisor Haschak said Angelo’s focus was “always on the people and the employees of Mendocino County” but not a single county employee, department head or union rep came forward in praise of Angelo. Williams, taking another shot at critics said, “If you look at social media or a local tabloid [an obvious reference to the mighty AVA] you see a reductionist perspective. Carmel is looking at the whole puzzle.” The carefully orchestrated praise-fest featuring a smiling CEO blowing kisses to her own staff lasted about 35 minutes, the same amount of time devoted later in the day to the entire mid-year budget report.
The mid-year budget report, presumably assembled by Carmel Angelo’s highly praised (by her) Executive Office Budget Team, was scattered, incomplete and all over the map. In one moment we had Angelo bragging about a huge $20 million reserve as she prepares to head out the door, and in the next Interim CEO Darcie Antle announces that projected revenues are falling short and expenses are escalating, driven largely by projected cost overruns in the jail expansion project and health plan deficits. (The County is self-insuring regarding healthcare.)
The report was very poorly organized and haltingly presented by Antle and a cadre of Executive Office staffers, some of whom repeated info already presented by the previous speaker, as they all seemed to be reading from the same prepared script.
Depending on where you looked in the Mid-Year report, the Power Point, the Attachments, the Exhibits or the oral presentation, the numbers and explanations were contradictory. It seemed obvious the documents had undergone several revisions with the “final” version being the least rough of a series of rough drafts.
Despite the high praise for Angelo’s supposed commitment to fiscal sustainability, the mid-year budget report contained the shocking news of a potential $12 million dollar deficit for the current fiscal year, including $9 million in the General Fund. Or was it the $1.2 million “operational deficit”? Revenue is projected to be off by $1.245 million, primarily due to a $3.5 million shortfall in cannabis tax revenue plus other shortages, partially offset by Transient Occupancy Tax (up $2 million despite covid), sales tax (up $700,000) and property tax (up $500,000, despite the pot market collapse).
Projected costs for the new jail building (set to go out to bid in June) continue to escalate. The initial county match of $1 million quickly became $2 million, then $3 million, then $4 million, despite repeated downsizings by the County’s expensive Sacramento based design consultant, the same one which designed the $1 million house (Crisis Residential Treatment Center) for the Schraeders which ended up costling almost $5 million. Or maybe the jai expansion overrun will be $6 million since the original cost of $25 million is now pegged at $31 million. The budget presentation was unclear on the currently unfunded county share of the overrun which might be $3 million, or maybe $4 million. The current plan is to use reserves to cover the overrun and restore the reserves by incurring long term debt in the form of bonds (plus interest). Which sounds a lot like robbing Piper to pay Pauline. Instead of making debt payments on bonds with intere, why not use the same money to repay the reserves? (Mainly because the bond consultants only get paid if bonds are issued.)
The leading cause of the budget shortfall is a projected deficit in the Health Plan Trust of $7.37 million (with $4.8 million of that in the General Fund). The Health Plan Trust consultants were on hand to answer questions. Supervisor McGourty attempted to inject a bit of humor, asking, “Are we getting sicker, heh, heh?” The answer seemed to be yes, with more employees utilizing the health plan coverage and with an increase in the average cost per employee. Although “utilization” accelerated beginning in the first half of 2020, the consultants said Covid was not a significant factor. (Although this would certainly seem to account for the increased numbers of employees using the plan.)
The consultant attributed the deficit to not increasing the health plan premiums for the last ten years, plus some significant large claims (illnesses) and inflation. The consultants deflected questions about types of claims, asserting that even listing basic categorical information could violate privacy rules by somehow revealing the nature of the illness afflicting individual employees. No one questioned the absurdity of the remark. None of the Supervisors (except the famously disinterested Gjerde) have been in their positions long enough to remember that the same consultant previously had no problem saying that specific catastrophic illnesses such as heart disease or cancer were the main drivers of increased costs.
Supervisor Haschak had a question about the budget team’s recommendations, which listed $15 million in departmental requests (including $1.6 million for the Sheriff’s Office). Haschak said he was trying to get clarification on what the recommendations were. Antle walked him through the vague list, noting that except for $500,000 that was previously authorized, none of the other items would be funded. Haschak, having just heard that none of the other things would be covered, astutely asked, “So none of these other things would be covered?” Antle replied, “That’s correct.”
Haschak then asked about the $1.6 million requested but not funded for the Sheriff’s Office. (Elsewhere deep in the presentation package, the Sheriff attributed the cost overrun to overtime responding to disasters, an increase in murders and armed robberies and a sharp spike in coroner’s cases and autopsies.) But just last month the Sheriff’s department was reported to be right on budget for the first half of the year.
Sheriff’s Office overtime has been a hot button issue in recent years and was the apparent (but not real) cause of the conflict between the Sheriff and the Board of Supervisors (with the Board threatening to hold the Sheriff personally liable for any overruns.) But on Tuesday, Antle said the Sheriff’s budget overrun could be covered by under-runs in other departments and end-of-year fund-balance carryover. Then again, Antle said that most departments operate at a loss so they themselves will need some of that fund-balance carryover. Nobody followed up on the inconsistencies in the report or the explanations, or the underlying rationale for any of the recommendations.
The report was so poorly organized that is was hard to tell what it really means. For instance, the health plan deficit didn’t materialize overnight but must have been building for at least the last couple of years although under CEO Angelo it was never cited as an issue. And as usual, there was no department by department budget-to-actual rundown making any kind of mid-year assessment (already almost three months after the fact) almost meaningless. In short, no one should jump to any conclusions about the implications of the “potential” budget shortfall and what it means for any agency dependent on county funding.
As usual, the supervisors themselves had very little to say and seemed almost completely disinterested in the information presented. Except for McGourty’s health plan joke and Haschak’s muddled attempt at clarification, there were no other questions or comments. Williams and Supervisor Mulheren managed to get through the presentation without saying anything at all.
Supervisor Dan Gjerde reserved his comments for the end, when he made the staff’s recommended motion augmented by two additional items: “Direct the Executive Office to work with the Auditor to look at current reporting protocols and practices to assure that fiscal information is disclosed in a timely manner.” (Which shows that Gjerde is at least aware that financial information is not presented to the Supes in a timely manner, if at all.) And, “Direct the Executive Office staff to ask the state if cannabis taxes can be paid with state cannabis funds.” (Obviously in anticipation of numerous pot permit applicants bailing out on their pot taxes because they can’t sell last year’s crop at a price to cover their costs.) The motion passed unanimously. Besides, in Gjerde’s first item the verb he chose was for the Executive Office to “look at reporting protocols,” not to actually require timely reporting.
The only Public Comment came from Ron Edwards, a cannabis advocate, who is one of the few members of the public who still lives in hope that the Supervisors pay any attention to what the public thinks. Edwards commented on the budget, “Boy, what a mess you’re looking at here! I’m hoping that you can come up with some creative ways to increase tourism. Have a Restaurant Week expansion. Maybe get people eating out putting money in the economy a little bit more. I hate to say this but maybe we need somehow to get more participation into the cannabis program. I don’t know what the prospects are for 2023. I know we’re in complete turmoil now.”
Right. As Carmel Angelo puts Mendocino County in the rear view mirror and retreats to San Diego with her nearly $15,000 monthly pension payments, Mendo’s economic salvation lies in more tourists dining out during a perpetual rolling Restaurant Week and getting more pot growers to participate in the completely unworkable cannabis program with prices in freefall.
Mendo Subpoenas Ortner — Six Years Later
This Tuesday the Supervisors have agendized an unusual item which demands that two officers of Ortner Management Group (OMG) — Melissa Lance and. Thomas Ortner — appear before the Supervisors to answer financial questions about their contract and produce some documents relating to their three-years as Mendocino County’s Adult Mental Health Services contractor from 2013 to 2016.
Item 4a) “Discussion and Possible Action Including Return on Legislative Subpoenas Requiring Appearance and Examination of Certain Officer(s) of Ortner Management Group, LLC (OMG) and For Receipt of Production of Documents Related to the County’s Contracts With OMG
(Sponsors: County Counsel and Behavioral Health and Recovery Services)
Recommended Action: Examine certain former officer(s) of Ortner Management Group, LLC (OMG), and receipt of production of documents related to the County's contracts with OMG.”
The most interesting part of the subpoena is that it appears to be related to a “pending” audit by the state Department of Health Care Services (DHCS) which, given the long delays in mental health services audits, may mean that the state now wants more documentation than Mendo has, or more accurately more than what they got when the Ortner contract ended without renewal in 2016 after a parade of local cops, doctors and patients complained about their inadequate services.
Long time readers may recall that the Supervisors were assured by CEO Angelo and Mental Health Director Dr. Jenine Miller back in 2016 that all required documentation was being provided by Ortner. They even paid Ortner an additional $464k to finish it and provide it.
From our report of the June 2016 Ortner status Supervisors meeting:
“Supervisor McCowen asked why Ortner seemed to be slow in providing various documents that the County wanted. Dr. Miller explained that if Ortner had not been terminated prematurely, these documents would have been due in a matter of years, not right away, due to the long delays in billing and reimbursements. But since Ortner is being terminated, Ortner needs to provide the docs earlier than expected, and it’s taking time. So much time that Ortner needs an extra $64k (over the $400k they already got) to maintain staff to provide the billing documents before Ortner becomes one more sad chapter in Mendocino County history, bunco division. Dr. Miller’s boss HHSA Director Tammy Moss-Chandler added that ‘these items are being resolved and OMG is working cooperatively to deliver all the items called for’.”
Mendo paid Ortner about $464k on top of their contract value to finish up the paperwork and deliver whatever documentation was required.
CEO Carmel Angelo justified the additional expense: “I am in communication with Mr. Ortner,” said Angelo. “So these questions are being asked. I have assurance for a successful closeout. What you will see on June 21 is the [$64k] four-month contract [extension] to cover staff to continue billing for rest of the contract.” That $64k was in addition to the $400k Ortner previously got for “a successful closeout.”
Supervisor Dan Gjerde said he would “reluctantly” vote for the additional $400k and the $64k, adding, “But staff should hold back additional funds to make sure documents are submitted in timely manner.”
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Now it looks like Ortner failed to submit some records, much less in a timely manner. So there must be remaining info gaps stemming from Ortner’s tenure that the State is finally getting around to asking about via a belated audit. In theory, if Mendo can’t prove that it provided reimbursable mental health services, the State can refuse to cover it — as they had done prior to Ortner — creating another large hole in Mendo’s post-Angelo general fund. If Ortner can’t provide the required info, it’s possible that Mendo would sue Ortner to recover whatever funds the state refuses to pay. But all of this will take a long time to sort out.
At the time that CEO Angelo engineered the privatization of mental health services in 2012 and 2013 by hiring former Ortner executive Tom Pinizzotto to make sure Ortner got the adult services half of the mental health contract, her primary stated reason was to avoid just this kind of state-imposed “audit exceptions” problem. Reportedly, the Schraeder monopoly that expanded to replace Ortner in 2016 is better at paperwork and billing. But then, that’s what they said about Ortner at first.
Angelo could have “privatized” the mental health billing to a contractor that specialized in such arcana without privatizing the whole mental health department, but she wasn’t interested in solving the actual problem. She wanted to farm out the entire $20-plus million operation to her friend at Redwood Quality Management Services. Since then millions of additional sole source contracts and amendments have been added to the Schraeders’ portfolio without competitive bidding, mostly on the consent calendar.
This inconvenient history of Ortner’s services failures and Angelo’s and Miller’s dubious assurances in 2016 that the paperwork was in order and the transition was “smooth” will of course not come up on Tuesday. Instead, poor Ortner, which got off to a bad start and was never really qualified for Angelo’s novel privatization experiment, will be made the scapegoat for Angelo’s and Miller’s mistakes.
Frankly, we’d be surprised if Ortner et al can provide all the stuff the County is now asking for some six or seven or more years after the fact. So, this exercise of trying to put Ortner on the spot looks more like an attempt to shift the blame to them, and then hoping that the state will be easy on Mendo when the info DHCS wants is unavailable.
If we had to guess (and thank you for asking) since this is now sounding very legalistic, we’d expect that Ortner will hire an attorney to appear before the Supervisors for them. Ortner might even counter-sue trying to blame Mendo for at least part of the problem. Millions of dollars are at stake. Then County Counsel Christian Curtis will hire an expensive outside law firm to handle the case, and legal costs will escalate and Curtis will get another raise, and… Everything will work out fine!
PS. According to available on-line info Melissa Lance is a CPA, now Chief Financial Officer for “Horizon Management & Consulting” with an address in San Marcos (San Diego area) but Horizon is listed as based in Yuba City, the same city where Ortner is based. On line info also indicates that Ms. Lance is/was also known as Melissa Ortner. And before that she was known as Melissa Callicott, CPA, MSA, Chief Financial Officer of OMG. She may be Ortner’s wife or sister or ex-wife. Thomas Ortner is listed as 72 years old and Ms. Lance/Ortner/Callicott is 47 years old.
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FORMER THIRD DISTRICT SUPERVISOR JOHN PINCHES of Island Mountain on the Eel River told us last Tuesday that there are “thousands” of abandoned vehicles and equipment and trailers and ATVs and so forth littering the County roads of the Third District, most of it abandoned by pot growers who have abandoned their grows in the collapsed pot market and much of what they had there, including many angry unpaid workers. The vehicles are themselves environmental hazards with hazardous fluids and tires and the rest. Pinches also said that the battered and depleted Eel River is now increasingly becoming a trench for dumping abandoned gro-garbage and gro-trash much of which can be seen floating down the Eel. “Where are the environmentalists?” asked a seriously perturbed Pinches. “This is the biggest environmental disaster I’ve ever seen in Mendocino County!” “What about the County’s Abandoned Vehicle Abatement program?” Pinches added, obviously rhetorically, because Pinches knows perfectly well that the County’s “AVA” program is overwhelmed and underfunded and mostly unmanaged — last we heard there were no wrecking yards left in Mendocino County taking wrecked vehicles. “This has nothing to do with covid, and everything to do with local officials’ misplaced priorities,” said Pinches. Pinches also said he’d noted that there are hundreds and hundreds of abandoned hoop houses in the area.
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