Lawsuit weighs in on cost of Tri-County Health breakup
Of all the political controversy the coronavirus has caused in Colorado, Douglas County’s removal from the tri-county health department — and the domino effect it’s had on Adams and Arapahoe counties — may be the action that ends up having the biggest impact on some Denver metropolitan governments.
The costs of Arapahoe and Adams counties opting out of Tri-County Health could run into the millions. And the situation could become much more costly – possibly for all three counties – depending on what one court has to say about an alleged $50 million fee that Tri-County Health and the counties may owe another. government agency if counties continue to withdraw.
This is a payment the health agency may possibly owe to the Colorado Public Employees’ Retirement Association, or PERA, which provides retirement and other benefits to employees of Colorado government agencies and public entities.
PERA members include public school teachers, many university and college employees, judges, state troopers, and other types of public employees.
If Tri-County Health is “allowed to withdraw from PERA without paying withdrawal liability, all PERA members and employers will be adversely affected,” said a complaint in a lawsuit filed by the pension association.
PERA filed the lawsuit in the Feb. 1 lawsuit against Tri-County Health and Adams, Arapahoe and Douglas counties.
Adams and Arapahoe are still members of Tri-County Health, but Douglas County has already officially left Tri-County and formed its own health department.
Douglas County leaders have long clashed with Tri-County Health during the coronavirus pandemic, announcing plans in July 2020 to begin the process of withdrawing the health agency after its decision to require mask-wearing in public.
Some of the Adams County leaders had also felt frustration with Tri-County policymaking, but Adams’ message was not against mask orders. Arapahoe appeared reluctant to sever ties with the health agency, with officials in that county saying they had no choice but to go solo after Douglas pulled out and after Adams announced that he would also step down.
Although Douglas County officially split from Tri-County — opting to form its own board of health responsible for issues such as countywide public health orders — the county decided to continue receiving services. Tri-County Health Board through 2022, approving a Sept. 28 deal.
The other two counties are expected to withdraw from Tri-County Health by the end of 2022, although the health agency does not appear to consider this a certainty, according to a document the health agency filed in the judicial affair.
“TCHD has not ceased operations and the finality of the county withdrawals remains in question,” Tri-County Health wrote, arguing that events that would trigger the health agency and counties’ obligations to pay the payment of withdrawal from PERA did not occur.
PERA is a Social Security substitute for most of its public employees, according to PERA’s website. Benefits are pre-funded, which means that while a member is working, they are required to contribute a fixed percentage of their salary to pension trust funds. Employers also donate a percentage of their salary to the trust fund, the website says.
Under legislation enacted in 2018, parts of the PERA program — such as employer contribution rates and member contribution rates — are adjusted automatically in certain circumstances, according to PERA’s complaint in the lawsuit.
That’s a situation Tri-County’s exit could trigger, PERA argued.
“Because of this automatic adjustment provision that now exists in the PERA statute, all employers and members of all divisions will potentially face increased contributions and reduced pension benefits to pay for the lack of funding caused by TCHD’s illegal withdrawal,” the pension association’s complaint said.
The Douglas agreement brought to light
Adams, Arapahoe and Douglas counties argued in a March 14 court filing that they were not responsible for covering any money Tri-County Health might owe.
But PERA’s complaint points to an agreement reached by Douglas County that could challenge that argument.
According to the complaint, the following events led to the Douglas County settlement:
• In January 2021, Tri-County Health inquired with PERA regarding the effect of Douglas County’s planned withdrawal from Tri-County Health and the potential dissolution of the health agency.
• Some time later, PERA advised Tri-County that the “cost of required reserves” would be determined by PERA’s actuary. An actuary is someone who analyzes statistics and uses them to calculate insurance risks and premiums.
• On September 2, an official from the three counties contacted PERA to ask who they could “engage as soon as possible to determine an estimate of the [cost] reserve requirement if the Tri-County Health Department ceases to exist. The tri-county official stressed that the actuarial report was needed as soon as possible because it was for the county commissioners to determine “whether they will stay with TCHD or start their public health service”.
• PERA then arranged for its actuary, The Segal Company, to prepare an actuarial report estimating Tri-County’s disaffiliation costs.
• On September 7, Douglas County’s elected leaders, the Board of Commissioners, formalized their withdrawal from Tri-County.
• On September 14, Douglas County appointed its Public Health Agency Board of Directors and officially created the Douglas County Health Department.
• On September 24, PERA provided Tri-County with Segal’s actuarial report. The actuarial report calculated Tri-County’s initial withdrawal liability at $50,235,215, subject to a final determination on the disaffiliation date.
• On September 28, Douglas County and Tri-County Commissioners reached what is called an Intergovernmental Agreement, or IGA.
The IGA expected Douglas County to agree to “pay for the services and costs associated with its removal,” the complaint cited.
He added, “Most importantly, Douglas County has agreed that if TCHD is dissolved in 2022 or 2023, to pay its proportionate share of all expenses incurred as a result of the dissolution… These costs may include… payment of any debt or penalties imposed by Colorado PERA.’”
The complaint also argued that Adams and Arapahoe counties are “third-party beneficiaries of the IGA and therefore similarly acknowledge the existence and enforceability of the termination provisions of the PERA.”
The three counties, in their filing, pointed to “Article XI, Section I of the Colorado Constitution, which prohibits a county from being liable for the debt of any ‘person, firm, or corporation, public or private'” , they argued.
The case was filed in Adams County District Court.
dark path forward
When asked if Tri-County Health would have to cut some of the funding for public health services the health agency would otherwise provide in 2022 if a court rules Tri-County owes PERA $50 million, Tri- County declined to comment, citing ongoing litigation. .
The health agency also declined to say whether it had enough savings to spare for the payment or whether Arapahoe, Adams and Douglas counties would be required to pay a portion of the $50 million from their own budgets.
For context, Tri-County’s 2021 budget total expenditures were approximately $55 million, according to the health agency’s budget document.
The health agency argued in the legal case that there is uncertainty regarding the counties’ decisions to opt out of Tri-County.
“On July 10, 2020, Douglas County gave written notice of its intention to withdraw from TCHD… The Complaint (PERA) omits the fact that Douglas County rescinded that notice on November 10, 2020 and stated that it would remain with TCHD until at least December 31, 2022,” the health agency wrote in a March 11 court filing. “On September 1, 2021, Douglas County declared its intent to rely on its notice of withdrawal rescinded on July 10, 2020, but that TCHD may continue to provide public health services in the future.”
The health agency continued, “The complaint also omits the fact that Arapahoe County filed a lawsuit challenging Douglas County’s removal of TCHD due to Douglas County’s (alleged) non-compliance with the statutory requirement of one year’s written notice.”
Tri-County questions the legal validity of the Tri-County withdrawals by Adams and Douglas counties.
On October 26, the Adams County Board of Commissioners passed a resolution that Adams County would withdraw from Tri-County effective December 31, 2022, according to the cited Tri-County court filing.
“The resolution further provides that ‘staff shall give legal notice of withdrawal to the Tri-County Health Department…'” the health agency wrote. “The Complaint does not, and could not, allege that the legal notice [one-year’s notice] was provided by Adams County to TCHD, as such notice was not in fact given.
The counties court filing appeared to address this topic, saying, “Although each of the county defendants served their one-year statutory notice of intent to leave TCHD, the removal of all county defendants did not yet to take place and TCHD currently remains operational and an affiliate member of PERA.
The Tri-County filing notes that Arapahoe County pointed to the possibility of Tri-County continuing to exist in a different form.
“On December 20, 2021, Arapahoe County gave TCHD one year’s notice of withdrawal, which notice also provides that “Arapahoe County plans to work with TCHD and the other counties to explore the possibility of continuing TCHD as a provider of public health services, but as a different form of legal entity, after December 31, 2022,” the filing reads.