CHEDA Board says selling the house is most important, not maximizing the bottom line
Once the house built by the 2015-16 Crookston High School Construction Trades class sold and all of the bills were paid, the program that year – a partnership between the school district and Crookston Housing & Economic Development Authority – made a profit of around $7,000. Financially speaking, it was one of the program’s most successful years in memory, and CHEDA and the school district split the profits.
The 2016-17 house that teacher Travis Oliver and his CT students are currently finishing up on Barrette Street has already been sold and likely will make a tidy little profit, too, which the two collaborating entities will likely share once again.
But could the program be more profitable? Should it be a goal to make the program more profitable?
That’s a question CHEDA Executive Director Craig Hoiseth poised to his board of directors this week, after he said school district officials asked CHEDA staff to go through the program’s budget and other numbers to see what works, what doesn’t work, and what could possibly work better to potentially generate a larger profit.
Board members were leery about tinkering with a program that seems to have found its footing once again in recent years, and said they’d prefer to maintain the status quo for the foreseeable future.
“The program’s working; I don’t know why we’d want to change it,” Craig Morgan said. “It was their program, and we kind of came in as the white night. They have all the right in the world to take the program back if they want. But if we’re going to continue, why don’t we continue down the path that’s been successful?”
Hoiseth said he agreed with the board’s train of thought.
“We’ve never tried selling the houses with profit number one in our mind; we’ve tried to sell them to add to the local housing stock, the inventory available,” he said. “We’re OK about talking about more profitability with the school, but CHEDA has the burden of the liability as we move along.” Hoiseth also noted that he checked with school district Business Manager Laura Lyczewski on a potential desire on the school district’s part to take back the reins of the Construction Trades program, and she said the district’s preference was to maintain the partnership with CHEDA.
How it works
For many years, a CHS course was centered on the construction of a house. Back in the downtown Central High School days, the home was built on one end of the swimming pool parking lot and, when it was purchased, the house was moved to its permanent home.
That pattern continued when Crookston High School opened, with the home being built on CHS property and moved when sold. But several years ago, the decision was made to ramp-up the program by having the students construct a more substantial house on an actual cement foundation on-site. With lots available on north-end subdivisions, that was the target area.
Several years ago, the partnership with CHEDA was born. In order to take some of the pressure off the students themselves, a licensed general contractor – Jeff Fagerstrom of the Northwest Minnesota Housing Cooperative – was brought in to oversee the overall home construction, and if the students and their didn’t quite finish the house within the confines of the academic school year, the contractor saw to it that everything was finished.
With the City of Crookston launching Barrette Estates Subdivision, that street’s been a popular location for the past couple homes, and Oliver, Hoiseth and CHS Principal Eric Bubna are currently working to secure a $500 lot for the 2017-18 house, which also will likely be built on one of the two remaining lots in Barrette Estates.
The 2016-17 house sold for around $200,000. If the program is to generate more profit, Hoiseth said the most straightforward way to do that is to seek a higher sale price for the home. But, he cautioned, if word gets out that the stakeholders involved are looking to generate more profit, potential buyers who catch wind of that fact might know going into negotiations that the price has been inflated simply to make more money.
Board member and city council member Dale Stainbrook wanted profit motive kept out of the equation. “I think a fair price is most important; the profit comes over the long term with tax revenue,” he said. “I think if you break even on this, it’s a good day.”
Hoiseth noted that the CT homes built in the years the two entities have worked together are now generating around $17,000 a year in property tax revenue, which goes to the school district, City, and Polk County. “The students and the program are definitely driving revenue back to the taxing entities,” he said.
Each year of the partnership, CHEDA takes $10,000 of the proceeds from the sale of the house to cover CHEDA staff time, resources and other logistics the agency handles. Hoiseth expects this year’s CT house to clear around a $7,000 profit like last year’s. Profits in the years prior to that were in the $1,000 to $2,500 range, but, he noted, the partnership is still running an overall deficit that dates back to the last home built on CHS property that didn’t attract a buyer. CHEDA stepped in, bought the house, relocated it, and CT students added a double-car garage, he recalled. The net loss that year was $25,000, Hoiseth said.
If the house doesn’t sell, the program and the partnership are in jeopardy, he stressed.
“Selling it is the most important part of the deal,” Hoiseth said. “If there’s no sale, there’s no next house.”