Memorandum
Date: October 6, 2026
To: The Honorable Lake County Board of Supervisors
From: Elise Jones, Director of Behavioral Health Services
Subject: Consideration of two proposed options for Amendment No. 3 to Resolution No. 2025-74 establishing a seven-year repayment plan for the outstanding $2,000,000 General Fund loan to Lake County Behavioral Health Services
Executive Summary
Lake County Behavioral Health Services (LCBHS) previously experienced significant cash-flow constraints associated with implementation of the California Mental Health Services Authority Semi-Statewide Enterprise Health Record, delayed Medi-Cal claiming and reimbursement, Medi-Cal payment reform, Intergovernmental Transfer requirements, and timing delays associated with State and federal reimbursement.
On or about March 19, 2024, the Board of Supervisors adopted Resolution No. 2024-32 authorizing a short-term General Fund loan to LCBHS to support operational cash flow during a period of delayed claims processing and reimbursement. LCBHS subsequently repaid a portion of the original loan amount, leaving an outstanding balance of $2,000,000 owed to the County General Fund. This chronology is also reflected in the recitals of both proposed resolutions.
On June 17, 2025, the Board adopted Resolution No. 2025-74 authorizing a $2,000,000 short-term General Fund loan to LCBHS. On September 16, 2025, the Board adopted Resolution No. 2025-115 extending the repayment deadline in recognition of continued cash-flow constraints associated with the Medi-Cal Intergovernmental Transfer process and timing of reimbursements.
LCBHS has continued to prioritize service continuity, provider stability, workforce payroll, mandated behavioral health services, and required Medi-Cal financing obligations while working toward fiscal stabilization. The Board subsequently considered repayment options for the outstanding $2,000,000 balance and directed staff to return with a formal mechanism providing for repayment over a seven-year period.
Both options presented in this item require repayment of the full $2,000,000 principal balance over a period not to exceed seven fiscal years, with a minimum annual principal payment of approximately $285,714.29, subject to final accounting confirmation by the Auditor-Controller. Both options also permit accelerated or lump-sum repayment when sufficient available revenues are received and cash capacity allows.
The distinction between the two options is whether prospective simple interest will be charged on the outstanding principal balance.
Option 1 - Seven-Year Repayment Plan with Prospective Simple Interest
Under Option 1, LCBHS would repay the $2,000,000 outstanding principal balance through annual payments over a period not to exceed seven fiscal years. The minimum annual principal payment would be approximately $285,714.29, subject to final accounting confirmation by the Auditor-Controller.
Prospective simple interest would accrue on the outstanding principal beginning on an effective date established by the Board. The Board would establish the applicable interest rate or direct that the County Treasury pool rate, as determined by the Auditor-Controller, be used. Interest would apply prospectively only; no retroactive interest would be charged, and interest would not compound. These provisions are reflected in the proposed interest-bearing resolution.
LCBHS could make accelerated or lump-sum payments when delayed revenues, one-time revenues, administrative claiming revenue, quality assurance/quality improvement revenue, Medi-Cal reimbursement, or other available funds are received, provided sufficient cash capacity remains for payroll, provider obligations, mandated services, Intergovernmental Transfer/local-match requirements, and other required operating needs.
Accelerated or lump-sum payments would first be applied to accrued interest, if any, and then to outstanding principal unless otherwise directed by the Auditor-Controller.
LCBHS would provide updates no less than quarterly regarding repayment status, cash-flow conditions, reimbursement activity, accrued interest, and anticipated accelerated repayment opportunities.
Option 2 - Seven-Year Repayment Plan Without Interest
Under Option 2, LCBHS would repay the $2,000,000 outstanding principal balance through annual payments over a period not to exceed seven fiscal years. The minimum annual principal payment would be approximately $285,714.29, subject to final accounting confirmation by the Auditor-Controller.
No interest would accrue or be charged on the outstanding loan balance during the repayment period.
LCBHS could make accelerated or lump-sum payments when delayed revenues, one-time revenues, administrative claiming revenue, quality assurance/quality improvement revenue, Medi-Cal reimbursement, or other available funds are received, provided sufficient cash capacity remains for payroll, provider obligations, mandated services, Intergovernmental Transfer/local-match requirements, and other required operating needs.
LCBHS would provide updates no less than quarterly regarding repayment status, cash-flow conditions, reimbursement activity, and anticipated accelerated repayment opportunities.
The proposed no-interest resolution contains these repayment, accelerated-payment, reporting, and accounting provisions. Signed Revised Resolution No. 2…
Department Recommendation
LCBHS recommends Option 2 - Seven-Year Repayment Plan Without Interest.
Option 2 provides for full repayment of the $2,000,000 principal balance while avoiding an additional financial obligation that would increase pressure on a reimbursement-dependent behavioral health delivery system. The proposed repayment structure establishes a defined seven-year repayment schedule, requires quarterly fiscal and repayment reporting, and permits accelerated repayment when sufficient revenues and cash capacity are available.
The Department believes this structure appropriately balances accountability to the County General Fund with the need to preserve sufficient cash capacity for mandated behavioral health services, provider obligations, workforce payroll, Medi-Cal financing and Intergovernmental Transfer/local-match requirements, and continuity of care.
The Department's recommendation does not seek forgiveness or reduction of the principal obligation. Under Option 2, the entire $2,000,000 principal balance remains due to the General Fund, and the Department may accelerate repayment when fiscal conditions permit.
Both proposed resolutions authorize the Auditor-Controller to make the accounting entries necessary to implement the repayment plan selected by the Board. The resolutions have been reviewed for accounting purposes by the Auditor-Controller and approved as to form by County Counsel.
FISCAL IMPACT
The outstanding General Fund loan principal is $2,000,000.
Under either option, the repayment period would not exceed seven fiscal years, and the minimum annual principal payment would be approximately $285,714.29, subject to final accounting confirmation by the Auditor-Controller.
Under Option 1, the County General Fund would additionally receive prospective simple interest on the outstanding principal balance. The total interest amount cannot be determined until the Board establishes the effective date and applicable interest rate or directs use of the County Treasury pool rate. Interest would be prospective only, would not be assessed retroactively, and would not compound.
Under Option 2, no interest would accrue or be charged. LCBHS's repayment obligation would therefore consist of the full $2,000,000 outstanding principal balance.
Both options permit accelerated repayment when sufficient available revenues are received and the Department maintains adequate cash capacity for required operating and financing obligations.
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Recommended Action: Review the two proposed repayment options and adopt the Department-recommended Option 2 - Amendment No. 3 to Resolution No. 2025-74 establishing a seven-year repayment plan without interest for the outstanding $2,000,000 General Fund loan to Lake County Behavioral Health Services.