Residents in the Blaine Courts and Cloverleaf Courts senior housing facilities in Blaine will be paying a little bit more rent per month starting in March.
The Blaine Economic Development Authority (EDA) Jan. 3 unanimously approved a 3 percent rent increase, but not without some trepidation. The new rates go into effect March 3 because a 60-day notice is required, according to Finance Director Joe Huss.
A resident in the smallest one-room apartment at Blaine Courts would pay $19 more a month. The new rate for the 696 square-foot apartment would be $656 a month.
The largest two-bedroom apartment units at Blaine Courts, which are 903 square feet, will cost $793 per month to rent in 2013 compared with $770 a month in 2012.
Cloverleaf Courts has higher monthly rents because it has more amenities, more common spaces and some of the rooms are larger, according to Huss.
Cloverleaf Courts offers small studio apartment units that are less than 600 square feet. The smallest one-bedroom apartment is 706 square feet and its monthly rent of $707 will be increasing to $728. The largest two-bedroom apartment is 1,030 square feet and its monthly rent is increasing from $1,253 to $1,291.
Councilmember Russ Herbst said he understood the 3 percent rent increase, but to him it seemed like every time somebody got an extra nickel in Social Security, somebody wants to get that nickel.
On the other hand, Herbst and other councilmembers said they want this facility to be self-sustaining so the general tax base is not financially supporting it.
Huss told ABC Newspapers that the facilities are self-sustaining and not subsidized by the general tax base.
According to the U.S. Social Security Administration, the cost of living (COLA) Social Security increase in 2013 will be 1.7 percent. The COLA percent increases from 2005 through 2012 for each year were 2.7 percent in 2005, 4.1 percent in 2006, 3.3 percent in 2007, 2.3 percent in 2008, 5.8 percent in 2009, no increase in 2010 and 2011 and 3.6 percent in 2012.
Huss said the annual rent increases since 2005 were 2.5 percent in 2005 and 2006, 2 percent in 2007, 3 percent in 2008 and 2009, no increase in 2010 and 2011 and 2 percent in 2012.
According to Councilmember Dick Swanson, there are some residents in these buildings that are still working, so not everyone is only drawing Social Security income.
“We’re at a point where we need to be concerned that our revenues are enough to maintain the operations within the fund,” Huss said.
According to Huss, the available capital reserve is expected to decrease by $52,020 by the end of 2013 to an amount of $1,110,255. Even with the city currently projecting a 3 percent rate increase every year through 2017, the fund balance is projected to decrease the next three years and drop below $1 million until starting to rebound in 2016 and 2017.
Huss said city staff has had discussions with others who run senior housing facilities to see if Blaine has a reasonable fund balance assumption of 10 percent of the net assets of the building, which is about $1 million.
He told the council that others in the senior housing business said there is no magic formula, but the 10 percent goal seemed good.
Huss told ABC Newspapers that this $1 million goal is just for the capital reserve. The city would also like have a smaller cash flow reserve and a bond payment reserve.
Blaine is budgeting for everything from management fees, to utilities to property taxes to increase. Blaine is also expecting some sizable capital projects in 2015. The major items currently budgeted for 2015 are parking lot overlay and replacing monument sign at Cloverleaf Courts, replacing siding and entry doors at Blaine Courts and replacing garage doors at both facilities, according to Huss.
Swanson made a motion to have staff review the capital reserve policy for Blaine Courts and Cloverleaf Courts and bring more information back to the council.
Mayor Tom Ryan said he would like to see a zero percent increase, but when you do zero percent increases, “it comes back to bite you.”
Ryan said if a roof needs to be replaced, it would likely cost $300,000 to $400,000. The roof on Blaine Courts was replaced about 15 years ago when it was damaged by a hailstorm.
“If that storm wouldn’t have happened, we would have had to pay for the roof,” Ryan said. “I’d hate to pray for hail.”
Community Development Director Bryan Schafer said you do routine maintenance on the inside of the facility to avoid doing major one-time expenses. Roofs, parking lots and boiler systems are the big ticket items.
Councilmember Mike Bourke said he was struggling with approving the rent increase. He actually voted against the 1 percent increase last year, but approved this year’s increase.
He said he wants to make sure the EDA is just managing and not subsidizing these two buildings.
“We tried to keep from doing it as long as possible,” Councilmember Kathy Kolb said regarding the rate increase. “We’ve got to do it so it’s self-sufficient. It’s hard to do it when people are involved.”
Keeping the management
The EDA Dec. 6 unanimously approved a new management contract for the two city-owned senior living facilities.
The winning bidder of the five-year contract was Avinity, which is the current provider and was formerly called Twin Cities Christian Homes.
In talking about the request for proposal process itself, City Manager Clark Arneson said that it may be best in the future to identify a base staffing level the council wants to see a management company employ so there is more of an apples to apples comparison.
Councilmember Dave Clark said if the specifications are too tight, there is no room for creativity and different ideas on how to best manage the facilities.
Arneson said the city could ask for a bid based on a minimally required staffing level and then ask the companies to submit a separate bid with ideas they have.
Eric Hagen is at [email protected]