Why should one of Polk County government’s business enterprises, a lime quarry, have three reserve funds while its other business enterprise, a nursing home, does not have a reserve fund for capital improvements?

The current consensus of the Golden Age Manor governing board seems to be that that county-owned nursing home, in Amery, should have a capital improvements reserve fund to be able to meet its improvement and replacement needs in a self-sufficient manner.

At its monthly meeting last week, the five-member Manor Board decided it will review one or more proposed resolutions at its February meeting.

Gerry Newville will draft a resolution that would seek to establish a Golden Age Manor capital improvements reserve fund that would be funded each year by an amount equal to the total of the previous year’s capital depreciation. Depreciation for 2008 was $123,000.

Worried that the 23-member county board may not approve such a plan, other Manor board members argued it may be wise to suggest alternative ways of stocking a reserve fund.

Board member Bob Blake said that while it would be fine for the board to consider three or four proposed resolutions, he believes that sending more than one resolution to the county board would not be in Golden Age Manor’s best interest.

“I agree,” board chairman Bob Dueholm said. “I do not want to forward three resolutions on (to the county board).”

Balsam Lake area resident Jim Drabek, who uncovered the land transfer deed that eventually led to the voidance of a Golden Age Manor sale, brought up the reserve fund issue at the May 2009 county board meeting.

Speaking during the public comment period, Drabek called attention to Wisconsin Statute 46.18, paragraph 13, which concerns building reserve funds for county-owned infirmaries, or nursing homes.

“The county board shall maintain as a segregated cash reserve an annual charge of 2 percent of the original cost of new construction or purchase or of the appraised value of existing infirmary structures and equipment,” the statute reads.

Blake said at last week’s Manor Board meeting that they have a legal opinion that the County’s general fund undesignated reserve fund meets the state’s building reserve fund rule.

Based on Golden Age Manor’s current value of about $4.5 million, 2 percent would be about $91,000, which would be less than the depreciation amount.

“I don’t see us making it less than what we’re taking for depreciation,” Newville said. “We need to at least put in equal to the depreciation. Or we could take 120 percent of the depreciation, or 110 percent, because we know it’s going to cost more to replace things.”

After experiencing significant operating losses each year between 1999 and 2007, Golden Age Manor had an amazing turnaround in 2008, showing a profit of $616,000 for the year.

That entire surplus was transferred to the County’s general fund, though some $70,000 of it was allowed for Golden Age Manor’s share of a new countywide time clock system and $82,000 for new carpeting. According to Manor administrator Gary Taxdahl, that carpet installation should be completed this week.

Taxdahl said last year was the first time the nursing home’s previous-year surplus was transferred to the County’s general fund. Before the down years began and the facility made money most years the surplus remained with Golden Age Manor.

While the 2009 numbers have not yet been audited, Dueholm said preliminary indications are that there will be a profit of about $240,000 for 2009.

At the December Manor Board meeting Newville made a motion to establish a capital improvement fund with $150,000 of the 2009 profit. That motion was defeated by a 3-2 vote, with only Dueholm joining Newville in favoring the idea.

Dueholm appointed Blake and Dave Ollman to look into the issues and come up with some recommendations, as a two-person subcommittee.

At a Jan. 20 meeting, Blake and Ollman concluded that Golden Age Manor should create a capital improvements/building reserve fund, and that the Manor Board should determine and recommend funding sources and amounts. They also recommended that Golden Age Manor create a capital improvements plan and update it annually.

There has been a five-year capital needs plan for Golden Age Manor since June 2007. That was updated most recently in February 2009. According to Manor Board member Pat Schmidt, though, that plan does not conform to the format now required by the County.

At last week’s meeting Dueholm proposed his own plan for a reserve fund. The initial funding would be the approximately $160,000 used to purchase two items with some of the nursing home’s 2008 surplus. There would be one or two loans structured to match the depreciable life of those items. Each year’s depreciation would be added to maintain the fund while capital acquisitions and principal and interest debt payments would be subtracted.

“The only way anything is going to work is if you get it past the full board,” Newville said of Dueholm’s proposal. “If you go the full board and start giving them all of this they’re not going to buy it. ... It’s got to be simple or you’re not going to get it done.”

Dueholm argued that from an economic standpoint, and for taxpayers, it would make more sense to borrow money.

“I recognize that that’s not going to be an easy sell,” he said.

Since the new county administrator will have budget authority, Schmidt proposed tabling the issue until an administrator is in place — something that has already been done with other issues.

“I think that the Board has to be pro-active in making recommendations rather than saying, ‘well, we’ll let somebody else decide on that.’” Dueholm said. “And somebody else is going to [ultimately] decide.”

Dueholm argued against the notion of having a reserve fund be dependent on operating profits or losses, saying an ongoing business needs to continue spending money to maintain and improve itself.

“This is somebody’s home — somebody’s home — just like your home, my home or anybody else’s home,” Jim Drabek said in an interview. “And being it’s somebody’s home you’ve got to treat it a little different.”