A rescue plan for the city-affiliated Neville Center nursing home that involved a controversial $2.5 million city grant didn’t make it to a vote at the City Council meeting Monday. But the setback could be temporary.
City manager Yi-An Huang sought $1 million for a new roof and other upgrades and $1.5 million to pay off part of a loan from Rockland Trust to the beleaguered nursing home. Councillors didn’t vote on the request because councillor Patricia Nolan exercised her “charter right” to put off a decision. The next meeting at which the request can be put to a vote is Jan. 27. “Follow-up discussions are expected to take place before and at that time,” city spokesperson Jeremy Warnick said Wednesday.
Nolan had objected to the loan payoff part of the plan last spring at a committee meeting. She and other councillors said then they couldn’t support using city money to repay a private bank. Shortly after, the council approved an order sponsored by Nolan and councillor Sumbul Siddiqui calling on Rockland Trust to forgive part of the loan.
That has not happened. Instead, Huang and his aides came to the council Monday with a proposal that the city give $1.5 million to Neville Center to be used to pay down its loan by that amount. Also, at the bank’s request, the mortgages to the facilities will be combined into one loan, which Neville Place will pay; that reduces Neville Center’s operating costs because it won’t have any debt to repay.
The bank agreed to charge a lower interest rate, which will save $1.4 million over the 10-year term of the loan, assistant city manager for finance Claire Spinner told councillors. “They have improved their terms,” Spinner said. She pointed out that the savings was about the same amount that the city would be providing to reduce the loan.
It didn’t satisfy Nolan. “I remain uncomfortable with the idea that we as a city would be using our tax dollars to hand over and pay down a loan to a bank that has made millions of dollars off of interest from a nonprofit. Of course, we all want to support and recognize this nonprofit and recognize the services provided to low-income seniors,” Nolan said. “There’s some questions that have not been answered, so I will exercise my charter right and hope to get those before the next meeting.”
The nursing home and assisted-living center were not private corporations like most nonprofits, Warnick said. The state law that established them requires that they be governed by “public entities” and also made them “subject to affordability covenants in furtherance of [the law’s] purpose to ensure ‘accessible, affordable and high-quality nursing home care and mixed-income assisted living for the residents of Cambridge and its surrounding communities,’” he said.
“To ensure the viability of Neville Center’s 5-star operations and to preserve its mission and services to the community, the city is seeking to provide funds in support of Neville that will help them reduce their debt more quickly – while, separately, helping maintain the integrity of their building,” Warnick said.
Intertwined with the city
Neville Center and its sister facility, Neville Place assisted living, were built with help of city and state funds on the site of the city’s former municipal nursing home, Neville Manor, which had significantly deteriorated. The two senior care projects at Fresh Pond are unusual in that a certain number of beds must be reserved for lower-income residents in the case of the assisted-living center and Medicare or Medicaid patients in the case of the nursing home.
The facilities are not city-owned, but they are on city property and representatives of the city, the Cambridge Housing Authority and the Cambridge Health Alliance sit on the board of the nonprofit corporation that governs them, Neville Communities.
Both facilities suffered financially during the pandemic, and the nursing home has more long-standing problems because of low government reimbursement rates and increasing expenses. The city’s Affordable Housing Trust has agreed to lend $5.7 million to Neville Place so the assisted-living center can replace its roof and make other upgrades. The trust was asked to help the nursing home as well but can aid only housing projects, not medical facilities. Assisted living is considered a form of housing.
Intertwined in finances
Almost two years ago, both facilities’ financial situation came to a head because their 2013 mortgages from Rockland Trust were due and needed to be refinanced. A tangled relationship between the two facilities meant that the bank would not refinance one loan without refinancing the other, and the Affordable Housing Trust wouldn’t close its loan to Neville Place without new loans to both facilities from Rockland Trust.
So, with no overall agreement, the Rockland Trust loans have not been refinanced and the Affordable Housing Trust loan to Neville Place has not closed. Neville Place has begun its roof replacement project, thought, the trust was told at its meeting Dec. 12.
Though Spinner said the lower interest rate that Rockland Trust agreed to charge would save $1.4 million, Huang’s request for city funds said the “overall savings” would be $2.3 million. Warnick said Huang’s figure included the effect of lowering the size of the loan as well as the lower interest rate, while Spinner was referring only to reduced interest.
Variable interest rate
The interest rate of the new loan may change often because it’s based on a variable rate set by the Federal Home Loan Bank of Boston, which provides funding and liquidity to member financial institutions. Rockland Trust is a member. At the current Federal Home Loan Bank rate, interest for the new loan would be 6.6 percent, according to information from Spinner. That is higher than the 6 percent interest that Neville Center is now paying for its loan and lower than the 8 percent for Neville Place’s mortgage, she said.
Neville Place will be the one to benefit from an interest rate reduction and lower loan because, if the planned refinancing goes through, Neville Place will hold the combined mortgage for both the nursing home and the assisted-living center. Neville Center, the nursing home, will benefit from having its sister facility take over both mortgages; Neville Center won’t have debt to repay, though it will be a guarantor of the combined loan.
The Affordable Housing Trust was told at its December meeting that Neville Place had the financial capability to pay the new loan. The combined mortgage will total $13.8 million instead of about $6 million, according to a staff report.
Rockland and the community
Nolan had asked city officials for information on Rockland Trust’s lending record to Cambridge residents and businesses. “Since Rockland, like all banks, is required to work with communities, we should know what their actions have been in our community – how does the approval rate for loans in Cambridge compare with their entire loan portfolio? How satisfied are Cambridge-based businesses and residents with Rockland?” she said in an email Tuesday.
Spinner said at the Monday meeting that city staff hadn’t had time to obtain the information, though she and Neville board chair Andrew Fuqua noted that Rockland provided a $1.7 million Paycheck Protection Program loan to Neville Center during Covid. “It did enable the center to make it through the first two years of the pandemic,” Fuqua said – a specific that didn’t answer Nolan’s broader question.
“Rockland appears to have made millions from Neville, and since the provision of nursing services is important and will continue, the bank should be willing to negotiate a fair loan restructuring,” Nolan said.
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