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Neilson Place plan gets county OK

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Bemidji, 56619
Bemidji Pioneer
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Bemidji Minnesota P.O. Box 455 56619

North Country Health Services' request to proceed with bonding for an addition to Neilson Place moved forward Tuesday, despite efforts by Beltrami County Commissioner Jim Heltzer to derail the project.

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NCHS won approval in a 3-1 vote, with Heltzer dissenting, for a resolution to proceed with about $16.5 million in tax-exempt revenue bonds to be issued by the Beltrami County Housing and Redevelopment Authority and the city of Wilton.

Heltzer's motion to table the resolution "for more information" failed for lack of a second. Commissioner Ron Otterstad motioned, and seconded by Commissioner Joe Vene, to approve the resolution pending a review by County Attorney Tim Faver that the county and the city of Wilton would not be obligated to pledge property tax dollars should the bonds default.

Otterstad added to the motion that Faver could hire outside counsel to make that determination, if needed.

NCHS "plans to construct 107 units of senior housing attached to Neilson Place, its existing skilled nursing care facility," according to National Healthcare Capital, the bank guarantor of the bonds. Planned are 27 units for "memory care" and 80 units of catered living to the southwest.

The project would be owned by a newly created limited liability corporation, which will in turn be owned by NCHS. Construction is slated to begin this fall, with completion by the end of 2009.

With a total cost of $20 million, NCHS with provide a $3 million-plus equity contribution while desiring to finance the balance of about $16.5 million on a tax-exempt basis, National Healthcare Capital said.

Plans call for the Beltrami County HRA to issue $7 million in senior housing revenue bonds and the city of Wilton to issue $10 million in senior housing revenue bonds, it said.

Heltzer gave Tucker Plumstad of National Healthcare Capital a list of eight questions about the project, including why isn't the city of Bemidji the so-called "conduit" for the bonds instead of the county and Wilton.

At first, the city of Bemidji didn't have the bonding capacity for the project, Plumstad said, capacity it was saving for the regional events center this year. Later, it could have provided some bonding capacity, but project developers didn't want to have three bonding entities.

Heltzer also questioned the HRA's role in providing revenue bonds when its mission is to fund affordable housing.

"This in no way is" affordable housing, he said. "The cost to residents of Neilson Place and this addition is way beyond the cost a person of modest means can afford. ... I'd feel better if the city (of Bemidji) did this rather than the county."

And while Plumstad assured Heltzer the final documents would hold the county and city of Wilton harmless in case of any bond default, Heltzer said he wanted that up front in writing.

"We need a letter on bond counsel's stationery, telling us that neither the county nor Wilton can be held responsible for repayment of the financing in the event of default by the borrower," Heltzer said.

National Healthcare Capital of Minneapolis is a small investment bank-qualified financing company, Pllumstad said. In the case of default, NCHS would be responsible for about 10 percent the banks the rest. The county and Wilton would not be liable, he said.

"We've always included that, and we've built health care facilities in Wadena, Staples and Eagan," Plumstad said.

"I do not rely on the advice of people hired to do the development," Heltzer said. "I'd want our bond counsel to tell us the same thing. As President Ronald Reagan said, 'trust but verify.'"

Otterstad, however, said that Faver's review should suffice and if he needs a second opinion, he should be given authority to seek outside counsel.

Heltzer also questioned the ability of NCHS to repay the bonds, citing figures that Neilson Place is $1 million in debt, and asked to see financial statements for both NCHS and Neilson Place. "I don't feel comfortable about getting stuck with this if the hospital goes under."

Jim Hanko, NCHS president and CEO, said he would provide financial statements to Murphy, but added that Neilson Place has always run in the red because state reimbursements don't match expenses.

"North Country Regional Hospital offsets the losses," Hanko said. "The corporate entity is solvent. We have had an A stable bond rating, one of only a handful of hospitals our size in the nation to have that."

When Heltzer questioned how the new assisted living facility would compete with current "mom and pop" facilities, Hanko said NCHS' marketing would be targeted to independently living people who would have choices.

Even if a patient leaving the hospital needs a referral to an assisted living arrangement, Hanko said that by law NCRH would have to provide a list of all such living places for the patient to choose.

"We would not refer unfairly," Hanko said. "This project is more readily helping us sustain 24.7 services to the community."

"We need the mom and pop facilities, as well," Vene said.

It was operators of such facilities that issued their concerns to Heltzer, he said.

Also Tuesday night, commissioners unanimously approved a resolution supporting the Bemidji School District's effort to pass an operating levy referendum on the Nov. 4 ballot.

Motioned by Otterstad, the resolution defines the issue as "renewal of an existing levy" that will not raise property taxes. Commissioners passed the resolution after hearing a school district presentation on the referendum.

The district seeks to renew a $501 per student levy first approved in 2003 and which expires this year.

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