PATTERSON TOWN BOARD MEETING

PRESENTATION – PLAZA AT CLOVER LAKE

PATTERSON TOWN HALL

1142 ROUTE 311

PATTERSON, NY 12563

December 22, 2010

MINUTES

PRESENT: MICHAEL GRIFFIN, SUPERVISOR

KEVIN BURNS, COUNCILMAN

JOSEPH CAPASSO, COUNCILMAN

GINNY NACERINO, COUNCILWOMAN

EDMOND O’CONNOR, DEPUTY SUPERVISOR

ANTOINETTE KOPECK, TOWN CLERK

TIMOTHY CURTISS, TOWN COUNSEL

Salute to the Flag and Roll Call.

Mr. Griffin stated good evening. The first thing on the agenda is a presentation from the Plaza at Clover Lake.

Mr. Charles Edouard Gros stated I represent Center Management Group. It is a Queens based long term care provider. We specialize in providing all aspects of long term care starting from independent living through skilled nursing all the way to ventilated dependent residents. Our specialty and our focus are in the State of New York and we try to stay closer down State. We don’t come further North than Putnam County where we started servicing about two and a half years ago.

Mr. Griffin stated the Board has been briefed that you are working with the idea in an attempt to help what is virtually an insolvent business or business that is marginal and try to make it successful. There is a lot of working and moving parts here. I’ve been to Smithtown to see Mr. Gros’ facility and I have to tell you I was very impressed. It’s a beautiful facility and is immaculately kept and very well run. Everyone I spoke to even liked the food. I think that is quite a statement.

Mr. Gros stated that is an amazing accomplishment.

Mr. Griffin stated Bert Houseworth from Putnam County I.D.A. and I have had numerous conversations. Could you give us a little background on how Clover Lake got to be in the situation it is in.

Mr. Gros stated we got called into Clover Lake and took over on November 1, 2008. We are finishing our second year as managers. Prior to us arriving, the management and the whole transaction was put together through a group out of California called AREI and they had a management company called Oakdale Heights. The exact details are not known to me; I actually never met them and came in to take over. My understanding is that the ownership of AREI and Oakdale Heights both were indicted for putting ponzi schemes or the sort that focused on assisted living. They put together a group of 46 individuals, multi-senior citizens who took their retirement money. Many of them sold their businesses and took money from each one of them with the hopes of giving them an investment with guaranteed returns in which the investors I don’t believe ever saw returns. After the indictment of their management company and the people that put the deal together, they reached out to the New York State Department of Health as well as other attorney’s and people in the long term care industry and requested a recommendation for a management company that was both licensed and operated in the State of New York that had other facilities with a good background and good survey histories. After looking at a few companies we were honored with being chosen as the new management of the Plaza at Clover Lake. Very specifically we were very much a resident oriented management company. We are there to provide the right care to the residents and to do what is right for the facilities and not to promote our management company. We have Susan Bay who is the Administrator for many years. When we walked in day one the only thing I saw in the whole facility was Oakdale Heights, Oakdale Heights, Oakdale Heights. The facility is the Plaza at Clover Lake. Oakdale Heights is the management company. You can walk in today and you will not see one piece of paper besides our Regional Director who is here with us tonight who comes up at least once a week often more to check up on it, that says our management company name. We are not here to promote ourselves. We are here to promote the facility and to make sure it stays solvent and we are honored to have a team that is dedicated and is doing a wonderful job and to be able to pull through to the point that we are without any of the residents being affected or knowing. We came in within 48 hours of being requested by the ownership when they took away the power from AREI and Oakdale Heights. We were up and running with new computer systems, had dislodged everything from them and cut their access off to the facility. We haven’t heard from them since then, not that we miss them.

Over the years we realize that Putnam County needed the Plaza at Clover Lake and as good as it was it wasn’t as good as it needed to be. The main reason for that was that it was set up as an independent living facility which was very important but the ability to be served at the Plaza at Clover Lake was limited to people that would have the income to pay for it. It is a private

paid-for facility. I am a licensed Nurse and Home Administrator in the State of New York and also licensed in Long Term Care Facility Operator in the State of New York. My background previously was in assisted living and when I finished my masters in Public Health with a specialty in long term care, my thesis was on the need for affordable assisted living. As good as the Plaza is, it is only good as it stands today for people who have the money to pay for it. Which is very nice for those who have it, but it is a big problem for those that don’t. As the economy has shifted downwards and people are not able to sell their house, it has affected the Plaza tremendously. It has not allowed us to fill up our census close to capacity. It has created a lot of financial burden. The owners did come to me and asked me as the manager to give them options.

The options that we found, many of them were not good. The owners have invested their life savings in this and they don’t want to lose their life savings. One chiropractor who sold his building and his business together and put all his money into this and now has to go back and work in a school as an Executive Director Administrator because his money is not producing what he had expected. They are all turning to me to find out what to do. There were some options we really didn’t want to look at. Some purchases or offers by non-for-profits for use as different rehab centers for alcohol or drugs. That is not where we wanted to go. We wanted to save the facility and help the residents of Putnam County.

Around the same time I took over management, there was a new program that was being pushed over by the New York State Department of Health called the Assisted Living Program. A very important and beneficial program. It was extremely in demand and requests for proposal or competitive bid by the New York State Department of Health, and I do not have the exact numbers in front of me, but I can tell you it was one of the most demanded public bids in the long term care and health care industry. Thousands of demands for beds by hundreds of different long term care providers. What came out during the research and during this proposal and since then on many of the State levels is that many people today who are middle class who are not poor who worked their whole life and paid taxes look at the Medicare system as a long term care insurance. At $10,000.00 a month you can stay at a nursing home for one, two, three years. What happens after that.

As we were doing research and preparing actually ourselves as a company to prepare and answer to this bid, we saw over twenty percent of people that are currently living in nursing homes shouldn’t be there. That is something I believed in and knew based on my masters and on my research and knowledge of the field. I looked into it and looked into the homes that we run and I said these people shouldn’t be here. They should be in a more community like setting. What happens now is you have a lady whose children moved out to North Carolina, Texas, Florida or wherever it is and she is having trouble and forgetting some medications. She can’t shower, she can’t close some of the buttons on her shirt and she doesn’t have any money or limited income or she can sell her house and get a few hundred thousand dollars but maybe she has a mortgage left on it. It is not going to be enough. This poor lady will end up in a skilled nursing facility. She doesn’t need it. She doesn’t need wound care, she doesn’t need nursing care, but there are no options today in Putnam County for this lady to go to. Not only in Putnam County, within the State of New York. There are no proper options. For people who don’t need skilled care but they need a little helping hand that is when an idea came to my head.

The idea was if we could secure some beds for the Plaza at Clover Lake for Assisted Living especially in the Assisted Living program we can really bring something that is extremely valuable to the entire Putnam County. We started working on this and we worked very closely with the nurse at the Department of Health and we had their support. We were able to secure beds under this competitive bid. We were able to potentially deliver these beds to Putnam County. I spoke to the current ownership of the facility and I told them I think I have a solution. Out of the 46 members I expected after a few years of having zero return on their money and having gone through a terrible crisis that maybe some of them would want to sell out and have nothing to do with it anymore. We made an arrangement where I would purchase part of the facility and I expect that besides what we would purchase that quite a few people would want to leave. To my great shock when we had a conference call and spoke to people and it was a vote to go with Charles’ plan and try to save the facility and does anyone want to bail out now, I would have guessed 20, 30 or 40 percent would bail out. Even if I get fifty cents on my dollar at least I know I got something. One hundred percent of investors backed me. Not one of them said I want to sell or go out. Honestly, I was so shocked and so honored and that is how we continued together.

At this point, I stand before you with an opportunity for me personally to become the licensed Property Owner of the Plaza at Clover Lake and an opportunity for me to purchase a majority of the shares, if not the majority between my percentage and the board’s which are the other owners that have agreed to follow my lead and allow me to be the managing member of the facility and to be the licensed holder of the license to provide care. We can hopefully save the facility and allow the people to remain there but most importantly bring the most needed service to the long term care community. That not only offers assisted living for resident services but also offer the same service to people no matter what their pay class is. I have been granted the opportunity to open 65 ALP beds and if this works out those special ALP beds will be brought to the Plaza at Clover Lake. That means that the same services that has been given will be given to people that are paying $4,000.00 to $6,000.00 per month and will be given to people that are low income and don’t have the money to pay for it themselves. To me that is the most important thing I can do personally. If you want to discuss need or what happens I do have Lauren and Susan here.

Mr. Griffin stated I think at some point we should get into the nuts and bolts. One of the things that needs to happen at the Plaza is a very significant investment needs to be made in the building to satisfy State requirements for the Assisted Living Program. There is currently 80 residents of 120 beds. You and I have a little debate as to whether it is 120 or 165 people, we can get in the facility. That is a minor issue. In terms of getting over the bigger hurdle, we recognize your investment. At this point, a five year zero tax abatement with a 15 year total program, you are asking the residents of Putnam County to give up about $250,000.00 to $260,000.00 a year in current tax revenues. That is our look at it.

Mr. Gros stated we have done everything we can to be good neighbors. As you know every year the New York State Department of Health updates their codes. Going for a new license we will be forced to update to the latest code requirements which will be significant improvements. Not many that one may see. Extensive sprinkler work or fire prevention work. We need to make sure that the facility is stabilized. The whole process between starting and being in a mortgage is a five year process. After that hopefully slowly but surely as we build and fill up and start paying back the debt that has been accumulated we really hope in 15 years to be at a point to return to paying the full taxes. Again, we understand it is a burden. Let’s look at the other side of the coin. We are proud to bring this much needed service to Putnam County and to the local Town.

Mr. Griffin stated I want to make sure everyone has an understanding of what we are being asked to do. It is a five year plan with zero taxes involved and then in the sixth year there would be $15,000.00 in taxes paid. Graduating up to the 15 year which would be $150,000.00 then in the 16th year it would go to full assessment and full tax valuation. Right now the number is on the order of $250,000.00 to $260,000.00.

Audience member stated $280,000.00.

Mr. Griffin stated it cuts both ways. $280,000.00 is a lot of money for the facility to come up with while you are in an investment stage and at the same time it is a very significant burden to put back on the taxpayer’s of the area. The third consideration is I spoke to the Town Attorney this evening, my mother is a resident at Clover Lake so I will not be able to vote on any decisions the Board makes. I have been advised by Counsel that I should be recused from voting. At this point we will open it up to the Board for questions.

Mr. O’Connor stated one of the things you said was that for these new people the priority of residents will be from Putnam County.

Mr. Gros stated absolutely. We are bringing this to Putnam County for Putnam County. We are not looking for residents outside of Putnam County.

Mr. O’Connor stated the IDA would have a tax participation in this also.

Mr. Gros stated yes. The IDA has voted to approve the project. My understanding at this point is once this Board with the support of the public and the County vote to move forward and agree on the taxes we can immediately insert that number into the documents and the IDA Counsel will go forward and finalize the documents.

Mr. O’Connor stated I just want people to understand that this is not just for residents of the Town of Patterson. The State involvement is subsidizing with money. I’m just wondering are we sure we can make that a priority for Putnam County since this is a State program. I’m not saying that isn’t your intention, but somewhere down the road will someone say this is a State funded program.

Mr. Gros stated the license that would be given is a County license. The State clearly understands and it is their desire that the license be used in that County and the residents of that County.

Mr. O’Connor stated is there something we can get from the State that says yes we agree that you have the right to designate this to be a priority of Putnam County.

Mr. Gros stated I don’t know how simple that would be to get that from the State. You probably know more people there than I know. I haven’t seen a facility that wasn’t filled mainly by the local residents.

Mr. Bert Houseworth, IDA stated I have been working with Center Management for two months. Initially when they came to me I said we cannot do this because the building was up. There was an opportunity because our bylaws permit us to take it case by case. Since the original Plaza at Clover Lake was induced by the original developers as an assisted living project, they never followed through. I checked the County tax records and they never received any tax abatements. It makes me a little more amenable towards the whole project. The people on the West Coast walked away with close to nine million dollars of the investor’s money and left The Plaza at Clover Lake destitute. In the period of 2005 to 2007 they had difficulty paying the taxes and often paid late and paid as much as $42,000.00 in penalty fees. When Center Management was appointed by the management group which remained the 46 shareholders they seemed to straighten it out. However, it was still not out of hot water because in 2009 the 10K which is the annual final statement they file with the government showed that they did $3.4 million in terms of revenues but only made a profit of $4,000.00. Since the residents pay somewhere between $3,000.00 and $5,000.00 per month obviously the loss of one resident would put them deep into the hole. In addition, there is an existence of a $10.5 million mortgage on this property and one of the conditions of Charles’ selection of a part owner is that he resolves that and finds revised mortgage opportunity for the Plaza at Clover Lake. There are some positive aspects as well in that currently Clover Lake employs 30 people and they would add 45 people. Mike and I took a trip of 180 miles round trip to go visit one of the facilities because we wanted to see what Center Management was all about. I have to credit Mike Griffin because he really bent over backward to get all the details and as much information as he could. We went to the Smithtown facility and I was totally impressed. What impressed me the most was the idea of assisted living. When we were in that facility it was very clear that they had a staff and looked to me like they almost had one staff member for every resident and there are 160 residents. Everything was extraordinary. Those things don’t exist at the Plaza. They are not allowed to call the children of the residents that are there. My problem is the degree of financial support he is looking for. It is extreme. Until we get a financial plan and how in fact these monies are going to be used, I don’t know how you make decisions. That is your call.

As far as the IDA is concerned, typically speaking the IDA is authorized by the Town’s and the County to create a tax abatement of 50%. Tax abatement for the first year in a 10 year program is reduced by five percent each year and thereafter to a point it comes down to zero. That result is on a ten year tax basis. The person receiving tax abatements realizes about 27 ½ percent reductions in their total 10 year tax bill. That makes it tough here in terms for what you are asking for. I don’t know how you do this. I would like to find a way because I think assisted living is important.

There is one other key issue. Since they represent and work with some 20 different assisted living firms they have been able to work towards developing a purchasing program on supplies, which appears to be second to none. Some of the areas that we were exposed to when we were visiting, indicated that some of their cost factors on supplies needed to run the operation was as little as one third of what traditional contractors would charge. That is a huge benefit. They are honorable people. I trust them. We all need to come together on a financial plan that makes sense to all concerned. It isn’t that I do not want to see this go through, but I want it to be a smart one for all concerned.

The plan that was presented to us, I asked them to do a preliminary business plan, which they did, indicates that they will form a new corporation. It would be Clover Lake, LLC. The IDA did induce, which means we had a resolution to approve the concept that is really contingent on what the Town decides. We met with the school board of the financial (inaudible) and they seem, although it is not in writing, to want to do what the Town Board suggests and will follow suit.

Mr. Gros stated when you use a number $250,000.00 to $280,000.00 a lot of that is toward the school and not toward the Town. The school board fully supported us and they want it to go through. As far as the number that Bert said, it is clear that if I was opening a Dunkin Donut or a Costco we would get different kinds of funding. We would get the normal 50, 45 and so on over the 10 years. This is not a Cosco or a Dunkin Donuts. This is something that is much more needed.

Mrs. Nacerino stated in many situations Putnam County residents have elderly parents that live in another County or the city and when their parents get to the age or the point they need assisted living, they like to bring them closer to where they live. Under the plan that you have structured, that elderly parent would not be illegible to live in the assisted living facility because they themselves are not residents of Putnam County although their children may be.

Mr. Gros stated we would consider them. If they have a connection to Putnam County we will be more than happy to work with you.

Conversation ensued regarding the Plaza at Clover Lake.

Mr. Curtiss stated they could come in and do a presentation for the public and the Town Board.

Mr. Burns stated I would be a lot more comfortable voting on it if I saw some numbers.

Mrs. Nacerino stated I agree with Councilman Burns. We can’t vote on something we don’t have full knowledge and awareness of.

Mr. Gros stated everything we have been asked for was in the hands of the IDA. I’m not sure that they would have voted without having everything they needed. We will definitely work with the IDA and listen to what they have to say. If you would like more and they want more we will be happy to try to give you whatever we can.

Mrs. Nacerino stated the IDA stated they are not fully comfortable because they too don’t have a financial plan. That is our request and their request and that would most probably be a school board request.

Mr. Houseworth stated I made it clear that we were looking for a financial plan that is long term. I will be glad to submit whoever you want to in order to get the total IDA application which has the details of the project in itself. Here is the copy of the condensed business plan. I can provide you with copies of the County Tax Records that shows what the taxes actually are and have been since 1999. It also shows there have been no abatements.

Mr. Major stated I would hope that this Board would not take action tonight and there is a public period where the public can speak to this. It sounds like a great idea. I do have a friend whose mother is at the facility and it is a lovely facility. I also know that the Carmel School District is going to see a reduction in over $900,000.00 in stimulus money and in the following year they are going to lose an additional $600,000.00. That is substantial money that is going to come out of the taxpayer’s here in Patterson. Couple that with another $200,000.00 of abatements. It really needs a strong look and I think you need the public’s input.

Ms. Susan Bay, Executive Director of the Plaza at Clover Lake stated I have been there since 2002. I am going into my ninth year. I have heard people speak about the need and the financial consideration is out there. I think one of the things you would want to consider is something that I deal with on a daily basis and that is having to stand or sit in front of a family that comes in and they say we love it here but we have been here for four years and Mom’s nest egg is exhausted. We have no answer for that individual. I have that conversation about three to five times a month. That is something I would like you to consider as well when you look at the loss of the tax revenue is also what happens to the residents from Putnam County that are looking for a place to live and don’t have funds any longer. I also think that when it comes to the type of program we are looking at it is not just the assisted living services. Right now as an independent community we don’t provide any personal care. We are basically a premier senior housing for senior residents. We don’t help people with showers etc. because in the State of New York you need to be a licensed facility to provide that kind of care. We need affordable housing in the area. This is a program that would serve those needs.

Mr. O’Connor stated I think it is clear that we need more information.

Mr. Burns stated Tim can we advertise now.

Mr. Curtiss stated yes.

Mr. Griffin stated Charles would you be willing to go back and do this again on January 12. I know you and I had a conversation with Bert about the urgency and the timing of this, I don’t know if you want to speak to that technically or not.

Mr. Gros stated I’m disappointed because we have been working diligently and have done as much as we know and as much as we have been asked for to date with every piece of paper we were asked to submit. Quite honestly we were told that things weren’t provided, this is the first time I am hearing of this. I can’t believe that we would have gotten the IDA vote and the CEO and everyone at the IDA would have approved it if we were missing items. With that being said, if that is the case and we lost out because we were missing items, it is our loss. We do have very tough deadlines where if we don’t get it moving then we don’t secure these beds. It will end up that we will not have time to refinance by the time that our mortgage runs out. Financing today is not what it was before. Currently it is non-recourse financing.

Mr. Burns stated I don’t dispute anything are you saying but we have to do our due diligence for 12,000 residents of Patterson. I want to help you to do that but I need the information. If we took a vote right now, I couldn’t vote for this because I don’t have enough information.

Mr. Gros stated understood. We will try our best to work with you. Thank you for your time.

Mr. Griffin stated will you be able to come back on January 12.

Mr. Gros stated I cannot guarantee at this point. I have to see if it is available and see if whether or not securing them in the specific location risks losing them to the other County. There was a special signature from the Department of Health because of the need that they would approve the change from one County to the other. As we all know, there will be a change.

Mr. Burns stated can he get back to you when he knows.

Mr. Griffin stated we will have copies distributed to the IDA application tomorrow. Everyone take a look at it. I know you are under very tough deadlines along with the refinancing and the commitment with the beds and everything else. Our State Senator is here tonight. Mr. Ball might be able to work some wonders in Albany for you with the Department of Health. He has a good reputation up there. What you are hearing tonight is that there is a lot of support for the project. It is a huge amount of dollars for us to bite off. It is possible that we could have a decision by January 12.

Mr. Gros stated I want to thank all the members of the Board and the public for listening this evening. We appreciate what you do and we understand you are protecting the residents. We hope that our residents and the 80 people at the Plaza are also protected.

Town Board members stated thank you.