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Lutheran Home tabs new CEO
St. Mary school eighth-graders Mark Misch, left, and Derrick DeJesus were among the thousands of local students to return to school last week.  The pair are pictured working on social studies homework Tuesday afternoon at the Crown Point Community Library.


By Andrew Steele

Star Managing Editor

CROWN POINT -- A new chief executive officer/administrator took over the reins at the Lutheran Home of Northwest Indiana on Tuesday, one year after a state investigation sparked a crisis that included suspension of admissions to the home and a criminal indictment.
    U. Lloyd White, a veteran retirement facility manager from Elkhart, was named CEO/administrator by the Lutheran Home's Board of Directors Aug. 18.
    Most recently, White served as regional director of Diversified Health Services, overseeing seven hospital-based skilled-care units.
    White succeeds Kevin Hagen, who resigned after two years as administrator of the home, located east of the intersection of Indiana Avenue and Greenview Place.
    "I've been through a lot here," Hagen said. Leaving "is just something I need to do."
    Hagen admitted from the beginning of the Lutheran Home's current troubles that the home made mistakes in several instances, but said "a lot of this has been blown out of proportion."
    Hagen said the home has received much more press and public attention than other retirement facilities that have similar compliance problems.
    "This is a wonderful facility, with a lot of dedicated, caring employees," he said.
    The Lutheran Home's problems began when the Indiana Department of Health alleged six incidents of patient neglect occurred in the spring and summer of 1998. The findings led to a suspension of new admissions to the facility.
    While the suspension was partially lifted last fall, and fully lifted early this year, a Special Grand Jury handed down a six-count criminal indictment against the Lutheran Home in March.
    The home is currently negotiating a settlement in the criminal case with the Lake County Prosecutor's office, Hagen said.
    Earlier this year, the problems led the Lutheran Home board to contract with the Lutheran Home of Arlington Heights, Ill., to provide administrative oversight. Donovan Gardner was named interim CEO and has been spending three days per week in Crown Point.
    The two companies also began talking about merging at that time.
    That process is continuing, said Gardner. The investment banking firm B.C. Ziegler and Co. has been hired to put together a financial package for the transaction, which would take the form of the Arlington Heights facility purchasing the Crown Point facility.
    Hiring an outside company to handle the transaction was necessary because "there are some rather strict IRS rules and laws," Gardner said.
    Among other things, the facility's sale will need to be open to other potential buyers, Gardner said.
    In the meantime, Gardner will continue an oversight role in Crown Point, "to make sure everything goes smoothly," he said.
    In addition to Hagen, three other administrators have resigned from the Lutheran Home. They are Arthur Beckman, medical director, and nursing supervisors Shannon Niles and Beth Wanatowicz.

 

 


School Project's cost debated


By Andrew Steele

Star Managing Editor

(Editor's Note: This is the second in a series of stories on the proposed new high school.) CROWN POINT -- Nobody knows exactly what it will cost to build a 465,000-square-foot high school on 117 acres at Burrell Drive and Main Street. Even a preliminary figure won't be known until bids are received, possibly next spring.
   But a cost estimate and financing methods need to be known before a decision to build can be made, first by the School Board, which committed to construction in June, and then by property owners, who will have the final say on the project during a petition drive beginning this weekend.
   School corporation officials say they presented the most reliable numbers at a public hearing in June, where the board committed to borrowing $64 million and spending up to $2 million from its regular accounts and $2 million in interest earnings.
   The $64 million figure came from a 1997 study by the architectural firm Odle, McGuire and Shook. Starting the project in 1999, the firm said, would mean a construction cost of $51 million and a total project cost of $64 million.
   That figure, along with almost $39 million to renovate other schools and convert the high school to a middle school, was used in the 1997 preference poll that showed a majority in favor of construction.
   In 1998, a new School Board committed to limiting borrowing for the project to the $64 million figure contained in the Odle, McGuire and Shook study.
   At June's public hearing, the $68 million was broken down by financial advisors from Municipal Consultants. The school corporation would spend $56,983,829 on construction; $1,994,434 on other costs related to construction; $2,000,000 on loose equipment and technology; $4,192,600 on non-construction and non-financing costs; $1,329,137 on the cost of issuing the project bonds; and $1,500,000 on a capitalized interest plan that provides a method for some money to be collected for the project before bonds are sold.
   The borrowed money -- $64 million -- would be paid back over 27 years. An interest rate of 6 percent was used to calculate repayments, which would begin at $3,365,000 in 2000 and rise in steps to the final payment of $8,230,000 in 2026.
   Municipal Consultants also calculated the tax impact for the average residence in 2000 and 2026. For those projections, they used the 1998 figure of $12,537 for an average residence, and the 1999 figure of $227,737,496 for the total community assessed valuation.
   For 2000, this meant a $184.37 tax impact. For 2026, it meant $439.86. The latter number was not adjusted for growth in the community.
   Municipal Consultants also provided estimates of the tax rate increases caused by the new school project over the next 27 years. They projected a 3 percent annual growth in the community's assessed valuation.
   With that growth, the impact of the new school project on the tax rate in 2026 would only be slightly higher than it was in 2000, even though the actual debt payment that year would be more than twice as high as in 2000.
   School Board member Michael McCormick said the board's commitment to the $64 million borrowing cap along with conservative interest estimates and assessed valuation growth projections mean "the tax impact ... is if anything overstated."
   At Monday's School Board meeting, McCormick said "the board has firmly held to (the $64 million) cap."
   The projection of 3 percent annual growth in assessed valuation "is less than the average growth over the last 25 years in the community," McCormick said.
   And the 6 percent interest rate used to calculate bond repayments is more than 1 percent higher than current market rates, he said."
   The new school ... is a prudently-sized, curriculum-driven facility," McCormick argued. "The board has chosen the least expensive, least disruptive and most prudent path available to us."
   New school opponents accept virtually none of this, however.
   They say the school corporation's numbers underestimate project costs, try to fool residents by "skewing" the loan repayment schedule, and fail to include the cost of facility renovations that will have to follow construction of the new school.
   The construction manager, Skillman Corp., originally estimated that the $64 million limit would allow a 435,000 square-foot school. The School Board decided to push ahead with a 465,000 square-foot school on the grounds that Skillman's cost-per-square-foot estimate could be reduced.
   But project opponents have stuck to the original cost-per-square-foot and what they say were the original projections for "soft costs" and "contingencies" to come up with a total cost of $85 million for the new school.
   Subsequent estimates by school corporation consultants showing the project can be completed with the $64 million in borrowed funds and $4 million from other sources is "playing with numbers," project opponent Michel Nikolich said, "and I think it's going to backfire on them. There's no way you can hold that figure to $68 million."
   Also, the repayment plan that increases annual payments from $3.4 million to $8.2 million over the life of the bond wastes money, because paying later increases interest costs by more than $15 million, Nikolich said.
   New school opponents also say that future renovation costs at Taft and the current high school will boost the school corporation's debt in coming years.
   "Something's got to give," Nikolich said. "They're going to have to get more money somewhere."

 

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