Dear members of council and Mr. Bridge,
I was unable to attend the most recent council meeting, but I hope you'll accept this email in lieu of any presentation I might have given. I have entered retirement after a career as a Certified Public Accountant this month, so I will no longer be paying city income tax. However this doesn't remove my sense of obligation to voice my opinion regarding the acceptance of the Belle Manor building.
I expected this issue be put to a public vote given the magnitude of the decision, and I urge you to do so, regardless, here's my input for your consideration.
I've attached the One Dollar Buildings Report.pdf which analyzes arts organizations acquiring $1 buildings. Although we are not an arts organization I think there are a lot of basic lessons we could learn from these studies. I hope you'll take the time to read it as I found tremendous insight there. I'll share some of the major ideas below.
This building acceptance seems to be driven by the cost savings in rent on our current building,which today totals $21,600 (1800/month rent x 12 months.) Our only risk in maintaining the status quo is rent increases. We bear no burden if the building is damaged beyond our control. We bear no burden for building upkeep. Our utility, janitorial and insurance costs are known. It is a very safe choice to stay in the current building. The city is not in peak financial shape (we'll be paying off the Twin Creeks bonds until 2035, Madison school's expenses are ours indefinitely) and unknown obligations invariably pop up periodically.
Accepting the building comes with multiple areas of risk, the greatest of which is financial.
I'll quote the $1 building study and then add my considerations:
"Three striking findings emerged from this research. First, the stakeholders in these $1 building deals had different motivations for involvement. Original building owners, public and private funders, and community stakeholders were motivated by community impact. In contrast, arts organizations were swayed by the appeal of “a great bargain” and the opportunity to accelerate their art. Stakeholders rarely discussed their motivations upfront."
I and others in the community cannot understand why we would trade the Bell Manor-related $18,000 per year in tax funding for the risk inherent in acquiring the nursing home. This will be lost revenue for the city, county and school district. We should also be doing our due diligence regarding the status of a building that is 70 years old and precisely identify all maintenance costs. The current size of 2,329 sq. feet versus the Belle Manor size of 29,345 sq. feet is a 10 fold increase. What revenue sources will cover additional expenses? Have tax revenues been projected? While arts organizations focus on raising money through charity and grants, our city can only choose increased taxes or fewer services. We all understand that costs will increase with a 10 fold increased size. While some can hope the city will grow, we all know that the city's population is shrinking and aging. As each taxpayer retires, their incomes become non-taxable. What are our new funding sources?
"Second, this report debunks of the myth of the $1 building. For the arts and cultural organizations in this study, the short- and long-term costs of acquiring $1 buildings were significant, and often much larger than expected. In fact, these $1 buildings resembled more traditional facilities projects – they were expensive propositions that required rigorous upfront evaluation and planning. Yet these projects were often undertaken without significant planning. As a result, organizations acquired $1 buildings without a clear understanding of their financial needs or a constellation of supporters in place to fund those needs over the long-term. For these organizations, the $1 building has proved to be a conundrum. Organizations experienced many of the benefits associated with facility acquisition, but at incredible cost. Several decades after acquisition, many are still working to attain financial sustainability."
These costs may be broken into short term, medium term and long term. Short term - Most companies that are giving away buildings have deferred routine maintenance costs for many years.The county's appraisal of the Bell Manor main building fell from over $1.2 million from 2007 through 2012, to $687, 000 in 2013 and remains there today. The reasons for this nearly 43% decrease in value should be investigated thoroughly. Due diligence would also require cost estimates for current and future maintenance. This is in addition to the initial costs of re-configuring the building to the best use of space, including architects and interior designers to ensure code compliance, and major reconstruction. Also, additional IT staff for rewiring the building to fit city configurations . After the reconfiguration, add moving costs. Medium term - Fixed costs, new building manager position, increased utilities, insurances, janitorial and maintenance. Long term - new roof, new environmental controls, replace parking lot. Where are the studies or profit and loss statements showing all these expenses can be met without raising taxes or losing city services?
"Third, these projects sparked significant organizational change.
As these arts groups took on the responsibility of facilities, they shifted away from operating models dependent on sweat equity and professionalized. These shifts not only had financial, but also impacted organizations’ cultures..."
The purpose of city government is to provide essential services to its citizens in an efficient and fiscally responsible manner. Governments have a poor track record when attempting to operate facilities like swimming pools and recreation centers as businesses. Taking possession of Belle Manor will require massive resources we simply don't have and either shift the focus of our current city employees or, worse, force the city to hire even more workers just to manage this huge new facility. A building this size with the multiple tenants Mr. Bridge envisions will require a building manager, maintenance staff, and janitorial services as well as extremely high insurance costs.
Finally, we must understand the motivations of Belle Manor's owners. They are successful business operators who are willing to give away an asset valued at $718,900 (land plus building) by Clark County in 2015. If this building was a viable business option, would they really be giving it to the city out of pure philanthropic charity? What is their reason to give away this valuable asset.
When they announced their expansion at Dayview and the eventual closure of Belle Manor, they talked about the huge growth in the need for senior care services. If the current facility was viable, and already operating as a nursing home, why not continue to operate it or renovate it? Is it because the building is 70 years old and too expensive to renovate? They walk away from the county tax liability while leaving a failing building for the citizens of New Carlisle to deal with for decades to come. Meanwhile, they take a huge tax loss against future profits. It's a win-win for Belle Manor's owners. It's another risky real estate venture for New Carlisle and we cannot afford it.
D. M. Carsey