City council counters offer, seeks to negotiate deal

By Chad Koenen

Publisher

The Henning City Council has countered a $1.4 million offer from St. William’s Living Center in Parkers Prairie for the city-owned Willow Creek Assisted Living Facility. 

During a nearly four hour special city council meeting last week, the Henning City Council approved making a $1.5 million counter offer to St. William’s Living Center. 

The decision to counter the offer came after Henning Mayor Robert Johnson, several members of the city staff who were in attendance, former city councilman and current Willow Creek Commission member Jim Haberer and reportedly the listing agent, all encouraged the city council to accept the original offer presented by St. William’s Living Center and not counter the offer.

At the start of last Monday’s special city council meeting, which just revolved Willow Creek, Tim Kelly of St. William’s Living Center in Parkers Prairie gave an overview of the facility and the opportunity to purchase the city-owned assisted living facility. Kelly said St. Williams understands the importance of running the facility like a small town business, as well as the importance of supporting local businesses and the community as a whole. He also emphasized the facility’s quality of care as it is ranked as a five-star facility.

“We are interested in keeping all of the residents and all of the staff,” said Kelly of Willow Creek residents and staff. “We are a small business in a small town just like Henning so we understand the importance of supporting local businesses so we would do the same thing here.” 

Kelly presented the city council with a non-binding letter of intent that stated the Parkers Prairie-based facility was interested in coming together with the city to explore purchasing Willow Creek. Kelly said he knows the facility is in need of some major upgrades in the near future, including new windows, doors and a new roof. He said St. Williams staff members have looked at the city’s financials and used those numbers, as well as future upgrades needed at the facility, to determine the purchase price.

“If we buy this business we want it to be for the long run. We want to do well, provide good quality care and be around for a long time,” said Kelly. 

If the city were to sell the building to St. William’s Living Center the building would then come onto the city’s tax rolls for an estimated $16,000 per year, plus have a different entity pay for things like electricity, water, sewer and more. 

Johnson said the city could realistically expect to get an additional $30,000-40,000 a year in additional revenue through the utilities and taxes by selling the facility. 

Henning Clerk/Treasurer Jenna Kovarik said in the past, when Willow Creek losses piled up, the city did not collect money for things like utilities at the assisted living facility so it could pay its other bills. That would no longer be the case should the city sell Willow Creek. 

Another option presented to the city council from Kelly would be to purchase Willow Creek for just over $1.6 million, provided the facility would qualify for tax abatement. While the city could get more money upfront, St. Williams would be able to offset the higher purchase price by delaying the city, and potentially, county portion of the taxes for a set period of time. 

Citing a projected loss of approximately $120,000 this year alone, Johnson recommended moving forward with one of the proposals presented by St. William’s Living Center.

“Here is my recommendation. I’ll be honest with everybody up here. We accept this and move on and be done with this,” he said.

Johnson also said the listing agent from Weichert Realtors, Clay Houselog, encouraged the council to accept the offer from St. William’s Living Center as there are several other former healthcare facilities that have also recently come up for sale. However, several city council members questioned if that was Houselog’s professional or personal opinion. He was not at the meeting for that portion of the discussion.

“I don’t know if it is his personal opinion, but he has stressed to me very strongly that you should accept the offer,” said Johnson of Houselog. 

Haberer also encouraged the city council to accept the offer and not only stop the losses in net income at the facility, but also collect additional taxes. He said the city council should accept the $1.4 million offer and begin collecting taxes on the facility right away.

“In 10 years that bill is completely paid off and then some, just taking utilities and just a couple of things out of the equation. In less than 10 years all this money that is lost it is all coming back,” he said. 

Currently the city owes just over $1.7 million on its bond, which doesn’t include inter-fund transfers from funds like the city-owned utilities that have been used to cover the losses. 

Henning City Councilman Jesse Hermanson was a vocal opponent to the proposal as presented by St. Williams at the meeting. He had originally phoned in to the meeting from another location, but said he was unable to hear what was happening at the meeting. He eventually attended the latter part of the meeting in person.

He said selling the facility without taking a harder look at ways to turn a profit, or hiring a management company like Knute Nelson in Alexandria, Minn., was short sighted. He also said selling the building for $1.4 million will not recoup the prior losses to things like the electric company. 

“This short sighted look at things does not factor any of this into it,” he said. 

If the city were to move forward with a management company it would likely need to make all of the necessary repairs to the roof, windows, doors and other things that come up over time. 

The city council eventually approved moving forward with a counter offer of $1.5 million.

Previous shortfalls at Willow Creek

Since it opened approximately 20 years ago, continued losses at Willow Creek Assisted Living Facility has resulted in a statement of net position in the negative of over $1.5 million. The facility is also expected to lose approximately $120,000 again this year, when taking into account the bond payment for the facility. 

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.However, even with the increase in revenue the city-owned facility has yet to show a profit. 

Last year the city showed 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.

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 in 2022 did not include an approximate $100,000 annual bond payment for the facility. When adding in the bond payment, Willow Creek has not made a profit in at least 10 years. 

At a special work session in September, 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 to Otter Tail County in lieu of taxes and averaged about $17,500 per year from 2018-21. 

According to the statement 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 in September 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 the enterprise funds in the city. For example, earlier this year the city council 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. 

Willow Creek is approximately 20 years old and in need of repairs in the near future. Some of the repairs include a new roof, new windows, new doors and routine maintenance on the 20-year-old building. 

During September’s work session, 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. 

In other news

• Approved paying Willow Creek Executive Director Lisa Augustus an additional $3 an hour in call pay for shifts that would normally be covered by a second RN. The pay would be for approximately 15 1/2 hours per day. Throughout much of the discussion, several city staff members and city council members said they struggled with how this would be different than the utility department and police department who do not receive call pay to perform duties that typically falls outside of the normal work day. Augustus continually brought up that the difference was that her on call pay was in her budget and would have been paid to a second RN anyway, since an RN must be on call 24 hours a day. The council approved her call pay dating back to October and encouraged other city staff members to come up with their own plan for call time if they wanted to be compensated for being on call moving forward. 

• Approved putting the Willow Creek Commission on hold moving forward. The move was made due to a lack of interest in filling open positions on the commission. Augustus will meet with up to two city council members at a time to discuss issues at Willow Creek in place of the commission moving forward. 

• Approved hiring a full-time maintenance person at Willow Creek for a wage of $25 per hour. The total cost, if the person worked 40 hours per week, would be $52,000. The facility employed a part-time maintenance person several years ago, which was eventually cut due to budget constraints. 

• Approved increasing the starting wage for a part-time nurse by $4 per hour to $34 per hour after Johnson cited several advertisements in the Citizen’s Advocate that stated starting pay for RNs at other facilities in the area was at, or above, what Willow Creek was offering. The move will cost an additional $5,000 per year if a person is found the fill the position.

• Approved a $2.40 per hour raise for full-time employees, which could increase an additional $.50 per hour based on a performance review, as part of an increase in Elderly Waiver compensation. The increase in Elderly Waiver compensation must go directly to staffing. 

• Approved a budget for Willow Creek that shows a deficit of approximately $105,000 for next year. The deficit includes the bond payment for the building.