By Louis Hoglund

Selling city hall, the whole kit and kaboodle, seemed like a good idea to some Pelican Rapids City Council members, at the time.

Until the numbers came into focus a little clearer; and a number of people questioned the deal at a public hearing Sept. 13.

Two proposals from Larson Funeral Home, and its parent company Vertin, have been introduced over the past three months. 

—To acquire just the upper level, and co-own with the city through basically a condominium arrangement. The city would retain ownership of the lower level. Under this plan, the city would basically “give” Larson the upper level—which is completely unfinished and would require a six-figure investment by Larson-Vertin to convert the space into a funeral home and chapel. 

Joint meeting with city council may bring agreement over city, funeral home deal

A deal between Larson Funeral Home, left, and its parent company Vertin, and Pelican Rapids city, could be completed by the time this newspaper is in mailboxes.

A special joint meeting, with city and Larson officials, was set for Wednesday, Sept. 21, at 2 p.m. at city hall. Both parties are planning to meet in a work session format, with limited public input.

—A subsequent plan to buy the entire building, with Larson-Vertin becoming landlord—and renting the lower level to the city for about $4,000 a month. Vertin offered the city $150,000 for the building and property. 

Several business and property owners voiced concerns at the Sept. 13 hearing—regarding both plans. 

Looking at the big picture, the main problem is the outstanding debt from the city hall renovation. In total costs, about $890,000 was invested in the city hall’s exterior and interior renovations.

As it stands, the service on the debt costs taxpayers about $50,000 a year, principal and interest—for another 20 years. 

“The city put a lot of money into this facility,” said Paul Evenson, speaking at the hearing, further suggesting that the funeral home counter offer with something that would defray the city’s existing debt. 

Initially, the Larson proposals were fairly well-received by the council. The city has had no viable plans, or outside interest, in the redevelopment of the top floor. In its completely unfinished condition, there has been little motivation for a private party to consider the cost of refurbishing the space—until Larson-Vertin came along. 

Now, there is reportedly a second party interested in a deal on city hall. 

Larson Funeral Home

Wayne Johnson, speaking from the audience, suggested that the city consider a sealed bid transaction. In addition, he noted that Larson’s present funeral home is valued at about $196,000, and could be renovated into “desperately needed housing.”

The funeral home improvements would add considerably to the commercial tax base in the city.

Councilman Kevin Ballard, and others at the meeting, emphasized the importance of the funeral home in the community. Larson marked its 75th year in Pelican at the recent Chamber of Commerce annual meeting.

”But personally, I think it would be a mistake to sell the whole building,” said Ballard. “Looking at the debt service, I don’t think it is prudent.” 

If the entire building was sold, the taxpayers would be shouldering about $10,000 a month, combining the existing debt payments and monthly rental costs. 

Ballard likened the situation to paying a house mortgage, while paying rent on your own house. 

“It doesn’t make sense to me,” said Ballard. 

“We haven’t settled on anything yet, but we’d like to figure out a way to honor the taxpayers—while hopefully helping a local business prosper,” said Councilman Steve Foster. 

“Everybody wants the funeral home to stay—no ifs, ands or buts about that,” said Wayne Johnson.

Jade Petznick, Larson director, said the company wants what is best for the city, as well as the funeral home operation.

Looking closer at the math, city administrator Don Solga broke out the city hall renovation expenses—trying to identify those related to the lower level improvements, for city hall. Further, breaking out the costs more directly associated with the upper level. 

Lower level: $493,000

Upper level: $279,000

The rationale for the break-out was intended to illustrate the costs the city would have likely incurred regardless of what transpired with the top floor. 

Meanwhile, the upper level is essentially gutted, so the cost to convert to useable funeral home space is substantial. 

Numerous ideas were tossed around at the hearing—including the idea of Larson relocating, but the city renting the space to Larson. Or, a “rent to own” contract. 

A “trade” of some form, with the city getting the present funeral home property in exchange for city hall’s top floor, also surfaced. 

But, regardless of the arrangement, the top floor still has to be finished. 

On death and dying … and the uncommon business model of funeral homes

Serving the deceased—and their families—is an unusual business model. 

That became evident during in depth discussion Sept. 13 of the proposals to bring Larson Funeral Home to a “main street” location at city hall.

Small-town funeral homes are vanishing in many rural market areas. 

Barring the Russians bombing a civilian target in Pelican Rapids, a terrible natural disaster, or a horrible typhoid fever epidemic…well…people don’t tend to die at an accelerated pace. 

Revenues at a funeral home are somewhat “fixed” year to year. The largest share of business volume is generated death by death, funeral by funeral, casket by casket—or cremation by cremation.

“We’ve been in the community 75 years, and we’re not going anywhere soon,” said Jade Petznick, who has been the local face for hundreds of families, often in distressing and even tragic times.

However, “we don’t see investments in new funeral homes in small towns. Margins are tight…construction costs are rising,” added Petznick. 

Across northern North Dakota and Minnesota, rural areas are losing funeral homes, he noted. 

The upper level of city hall is well-suited for conversion to a funeral home—considering square footage, parking, access, and other factors. 

But the near-term investment by Larson and its parent company, Vertin, requires a long-term payback—funeral by funeral. 

Vertin has discussed a new facility for years, but because of the stable and rather predictable business volume, it hasn’t been feasible. 

Larson’s present location, in the middle of a residential neighborhood in east Pelican, is not ideal. Parking is a problem, and the capacity for funeral visitations and ceremonies is limited. 

Vertin executive Chris Smith said that, without city compromise on the concept, it would be difficult to feasibly invest hundreds of thousands—including exterior garage construction, and major interior work for chapel and other amenities.

City hall is an attractive location, said Smith. 

“Occupying a space on main street, in the middle of town, is always better,” said Smith. However, construction costs have increased dramatically, 20-25 percent higher than ten years ago, he added. 

Hypothetically, Larson could continue to operate indefinitely at its present residential location. 

The cost of relocating to a convenient main street location—and what the city is willing to surrender to accommodate the move—is up for negotiation. Both parties were expected to discuss in more detail this week.

Meanwhile, winter is on its way. Larson would like to break ground and begin preliminary work before the snow flies. 

—Louis Hoglund, managing editor