Council to keep options on the table for keeping, selling

By Chad Koenen

Publisher

With years of mounting losses, as well as looming repairs on the horizon, the Henning City Council took a hard look at the city-owned Willow Creek Assisted Living Facility on Thursday night.

A special work session was scheduled as a way for the city council to look at the long-term viability of the facility, while also looking back at how the city got into a precarious financial position of having a total net position of $1.5 million in the red. Despite the challenges facing Willow Creek, several city council members applauded the efforts of the current city staff and Willow Creek employees for increasing revenue over the past two years. 

On a positive note, Willow Creek has almost doubled its revenue since 2019 when it took in just over $469,000 and underwent several changes at the executive director position in just a few short months. In 2022 the revenue of the facility grew to $916,209.

“The reason we are seeing the gains we are in the last three years is number one the census. The census has been growing since I have been there. The other one is we are collecting elderly waiver. We are actually capturing money for the services we are providing.”

Lisa Augustus, Willow Creek Executive Director

Elderly waiver is a federal Medicaid waiver program that funds home and community-based services for people 65-years of age and older who are eligible for Medical Assistance. Augustus said there were several years in which the city did not collect this funding prior to her arrival at the facility. 

The city has also increased rent in recent years and raised the prices for things like meal plans and garage rent. Even with the increases the facility has reached a break-even point of turning an unaudited profit of $46,414 following a transfer into the Willow Creek fund of $15,000 in 2022 and a profit of $14,044 in 2021 for operations. That followed losses by as much as $187,193 in seven of the previous eight years dating back to 2013. The losses have resulted in a total net position of negative $1,517,072 since the facility opened approximately 20 years ago, which was actually an improvement from 2021 which showed a total net position of negative $1,563,486.

However, the profit from operations over the past two years may not necessarily include all of the total expenses at Willow Creek. For example, the $46,414 that the facility made in operations did not include a better-than $150,000 annual bond payment for the facility. When adding in the bond payment, Willow Creek has not made a profit in at least 10 years. 

Henning Mayor Robert Johnson said the city must also take into account that it is responsible for a Pilot Payment to Otter Tail County, which had not been paid from 2018-21. The payment is made out to Otter Tail County in lieu of taxes and averaged about $17,500 per year from 2018-21. 

According to the state of net position, Willow Creek has been advanced just over $990,000 from other city funds like the electric fund in order to keep it afloat through the years. That number has not changed on the Willow Creek statement of net position since 2017, despite several years of losses since 2017. As a result, some members of the city council asked whether that number was actually higher, but just not recorded in the city’s books as an inter-fund transfer. 

The transfers from funds like the electric fund are reportedly beginning to take a toll on other enterprise funds in the city. For example, the city council recently approved a $250,000 bond to fund several electric and utility projects in the city limits in order to preserve its remaining balance, as opposed to just taking that money out of its savings account to fund the projects. 

Henning Police Chief Mike Helle, who also assists with the utility department, informed the council that utility rates are being affected due to a lack of reserve and future projects on the horizon.

“Remember, as we bonded for the electrical (project), the electrical moved money to keep Willow Creek going and now we are bonding on the electric side, the water side and those things. So as we have moved money there (to Willow Creek) we are bonding and raising the rates on this side to keep it going,” said Helle. “The reason we are bonding this much on the electrical is we had money, we saved it there and it is gone.”

As a result of the transfers out of the utility funds, utility supervisor Ted Strand said the city needs to take steps to ensure that Willow Creek can support itself financially.

“I am not for or against selling Willow Creek, but we need to stop the bleeding,” he said. “If it wasn’t for the electrical and gas (funds) today, (Jenna Kovarik) wouldn’t have the money to write the checks. If it was not for those rates you would not have what you have today. That’s why I said the bleeding has to stop.”

While several city council members discussed potentially selling the facility to a company that could operate Willow Creek moving forward, Henning City Councilman Scott Hart said the council needs to keep the residents of the facility in mind as well. He said the facility is an asset to the community, but agreed that the city council needs to explore all avenues at its disposal, including a potential sale of the facility. 

“We have to think about the people there too at the same time and the people (in Henning) as a whole. That is the hard part,” said Hart. 

City Councilman Jesse Hermanson agreed with Hart that the city has done a lot of work in recent years in increasing revenue at Willow Creek and quite a bit of the losses go back long before the current staff and city council were in place. Hermanson credited the current staff for getting the facility closer to a break even point, but he continued that the city must look at all of its options, including potentially selling Willow Creek to a company that could run the facility if it made sense for the community as a whole.

“A lot of this goes back to 6-7 years ago and we are trying to make it better and you can see where the revenue has gotten better,” he said. 

When the facility was constructed approximately 20 years ago, Hermanson said the city council likely thought the assisted living facility would help to provide additional revenue for the city, much like the city’s water, sewer, electric and natural gas funds. 

“I think somebody came through and said this thing is going to be awesome for you guys. Look at all of this money you are going to make. It is going to subsidize your utilities and work the other way,” said Hermanson. “Well it hasn’t worked that way, clearly. So we got talked into building something we didn’t know how to run. It hasn’t worked, we continue to pile money into it.”

He went on to say that the inter-fund transfers stopped in 2017, which was the same year that his dad who was the longtime mayor in Henning, passed away. Hermanson said the inter-fund transfers and how to deal with that money will need to be addressed in the future, but will take time to sort out. 

During the discussion of a potential sale of the facility to an advanced care company who could not only keep the facility open, Augustus cautioned the city council that selling the building could result in its ultimate closure down the road. 

“We thought that about the nursing home and how long did that last,” she said. “We are so small and so rural…even if a bigger company does come in, I don’t know how long it will last until maybe it is sold again.”

However, several city council members and even the city staff said it will need to keep all options on the table moving forward in light of the losses at the facility. 

As the council discussed potentially selling the building, one of the big questions on Thursday night revolved around the refinancing of the original $3 million bond from 2003. That bond was refunded in 2017 for $2.3 million at a lower interest, but in doing so, the city cannot pay off the remaining balance of the bonds prior to October 1, 2025 without issuing a defiance. That is when the city would deposit enough money into an escrow to pay off the remaining principal balance due on the 2017 bond. 

At the time of the meeting the city council was unsure about a potential penalty in paying off the bond early, or if it would need to come up with the remaining balance of the bond should it decide to sell the building to another company prior to October 1, 2025.

In addition to the bond, the city council also discussed a number of repairs that are needed in the near future at Willow Creek. Those repairs include a new roof, new windows, new doors and routine maintenance on the 20-year-old building. 

Johnson said the new roof alone will cost around $125,000 and that doesn’t include the cost for windows that also need to be replaced. He said all of the future maintenance costs must be considered when discussing the future of Willow Creek as a city-owned facility. 

Moving forward the city council said it will investigate whether the facility can be sold before October 1, 2025, as well as work with the Willow Creek Commission to investigate the total cost for repairs and what needs to be done in the near future.

The city council said it will bring the information forward at a future meeting to discuss Willow Creek.