Blaine council discusses rate increases at senior apartments

The Blaine City Council is contemplating rent increases of over 3 percent at the two senior apartment buildings it owns, but says the rates will still be very competitive with privately-owned facilities.

Representatives from the Blaine City Council and city staff meet with residents at Blaine Courts and Cloverleaf Courts each year to make them aware of proposed rate increases and to answer questions. File photo by Eric Hagen

Representatives from the Blaine City Council and city staff meet with residents at Blaine Courts and Cloverleaf Courts each year to make them aware of proposed rate increases and to answer questions. File photo by Eric Hagen

“We have to keep the buildings functional,” Councilmember Dick Swanson said. “We can’t put general fund tax dollars into it.”

Finance Director Joe Huss said the plan is to consider a 3.5 percent rent increase at Cloverleaf Courts and a 4 percent increase at Blaine Courts in 2014.

The council has yet to approve the increases and city officials will be meeting with residents at both apartment buildings sometime this month.

In 2013, the range of a two-bedroom apartment at Blaine Courts was $770 to $793 per month, while the range at Cloverleaf Courts was $1,006 to $1,292 per month.

If the council approves the increases for 2014, a two-bedroom apartment at Blaine Courts would cost between $801 and $825 and a two-bedroom unit at Cloverleaf Courts would cost between $1,041 and 1,337 per month.

The 102 units at Cloverleaf Courts have generally been leased out at higher rates than the 52-unit Blaine Courts because the building is 10 years newer, the units are slightly larger and there are more amenities, according to Community Development Director Bryan Schafer. Blaine Courts is 23 years old and Cloverleaf Courts has been open for 13 years.

Jeanne Thompson of Avinity, which manages both facilities, said Cloverleaf Courts has an underground heated parking garage and a library separate from the community room, for example. Each resident gets a free outdoor parking spot, but pays an additional fee for a garage space.

Both facilities have the use of one 14-person van that takes multiple trips to stores and clinics throughout the week. The activities coordinator also sets up field trips to ball games, museums and much more, according to Thompson.

Maurice Selander, a Blaine Courts resident since the spring of 2000 and former maintenance worker at the building for 12 years, said the van is used all the time.

“(The residents) couldn’t get along without it,” he said.

Although Cloverleaf Courts is a larger building with more amenities, Schafer and Thompson said the facilities cost about the same to maintain on a day-to-day basis, so that is why the council is considering a half-percent larger increase at Blaine Courts for 2014 to bring the rents of the two facilities closer together.

Selander has served off and on the resident council for four years and was recently re-elected back on the council after a year off. He has no problem with the 4 percent increase and said he has not heard many complaints from residents about past increases.

“As long as I’ve been here, I feel the rate increases have been justified,” Selander said. “I felt like (the city) has wanted to do the best they could to hold it down.”

On the other hand, Cloverleaf Courts resident Shirley Wilcox feels the 3.5 percent increase “is ridiculous given the current status of the economy.”

Wilcox said she will get a 1 percent increase in her retirement and 1.5 percent increase in Social Security, but her health insurance costs will be increasing by $50 in January.

In the last five years, the city most often imposed increased that were less than the amount that Social Security went up.

In 2009, Social Security increased 5.8 percent and the council increased the rental rate by 3 percent. The council kept the rates flat when there were no increases in Social Security in 2010 and 2011.

The rental rate increases in 2012 and 2013 were 2 percent and 3 percent. Social Security in those years increased by 3.6 percent and 1.7 percent.

Mayor Tom Ryan said the council “did a real disservice” in those years when there was no increase or a very small increase.

“That set us back,” Ryan said.

According to a 2014-2018 spreadsheet the city’s finance department prepared, Blaine collects enough from the residents to cover expenses for the management contract with Avinity, insurance, utilities, building maintenance, property taxes and licenses, city staff time and depreciation.

Where the city falls short is when it factors in the costs of debt service transfers and capital maintenance and projects.

Huss said the final debt payment is due in 2020.

Capital maintenance includes purchase of equipment in residential units or common areas such as appliances or furniture along with replacement of flooring materials. Capital projects are the largest items such as roofs and siding.

The city spreadsheet shows the net additional fund balance decreasing annually over the next five years even if the rate increased by 5 percent in each building, which the council said it would be willing to consider starting in 2015. This would be up to the councilmembers in office at that time, however.

Councilmember Dave Clark said arguing over a 4 or 5 percent increase is not going to solve the problem. He calculated the city would need to increase the rental rate for both buildings by 16 percent to cover the shortfall at the end of 2014.

The finance department told the council the fund balance would decrease by $258,330 this year if there was a 3 percent increase in both buildings and by $247,270 if there was a 5 percent increase.

According to Clark, the council is making it difficult for other apartment building owners when the rates are set so low. Blaine staff provided 2012 and 2013 rate comparisons for three senior apartment buildings in Blaine, Fridley and Spring Lake Park and Blaine Courts and Cloverleaf Courts had lower rates.

“We’re affecting the apartment market with how we’re pricing these,” Clark said. “I understand political realities. I’m just pointing out some numbers.”

Blaine’s senior apartments account does show year end fund balances of more than $1 million in 2014 and 2015, but it is slated to go below $900,000 in 2016 and 2017 and the city’s goal is to have a capital reserve of $980,000 each year.

Capital projects in 2014 are only budgeted to be $19,500, but could increase to $56,600 next year and $160,300 in 2016 once the city needs to take on major items such as 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.

“I’ve always been against doing this, but my eyes have been opened,” Councilmember Mike Bourke said of the rate increase. “I don’t want us going backwards and I want to make sure we’re whole. I still think it’s a good deal regardless.”

According to Ryan, a lot of people are on the edge between nursing and assisted care, which costs a lot more than living independently. His aunt is paying $5,800 a month for assisted living.

Ryan said the city needs to be honest with the people on what the costs are.

City Manager Clark Arneson said the city needs to make the point that increases could be 5 percent in the next four years, starting in 2015.

“I think by being dishonest with them, we’re not doing anybody a favor,” Ryan said.

Eric Hagen is at eric.hagen@ecm-inc.com

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