Training program losses blamed in Howard center closing
HOWARD -- Declining revenue from training programs, high expenses and the economic recession are taking the blame for the imminent closure of the $6.5 million Maroney Commons in Howard.
"If your expenses exceed your income, you just can't continue," said Kathy Callies, acting president of the Rural Learning Center in Howard.
The Miner County Development Corp., a for-profit corporation created by the Rural Learning Center in 2003, recently voted to cease all operations at Maroney Commons on Sept. 3.
Maroney Commons opened with a festive ceremony Aug. 19, 2011, after about 14 months of construction. The facility features a hotel, restaurant and fitness center, as well as classrooms intended to be used for community and workforce development training programs, and meeting space. It was envisioned as an incubator of sorts for rural rejuvenation efforts.
The 17 people employed at the facility will lose their jobs.
"That's one of the personal losses of this thing, knowing what this meant to them," Callies said.
The facility has hosted workforce development classes, but Callies said the recession-related loss of Knight & Carver Wind Group Inc., a wind turbine company that formerly operated on the west side of Howard, led to fewer training classes and, in turn, less revenue for the facility.
Maroney Commons anticipated more wind-industry training programs would be created, Callies said, but those never came to fruition. A large federal subsidy, known as the wind production tax credit, is in danger of expiring later this year and Callies believes the uncertainty prevented companies from participating in the facility's programs.
"Wind development is just that tight right now," she said. "The early developments that were expected just haven't come about."
Training programs were expected to bring in as much as one-third of Maroney Commons' projected annual revenue, or between $300,000 and $350,000. The loss of revenue, coupled with the start-up and operating costs of the facility, led to the Miner County Development Corp.'s decision to close it.
"What's disappointing to me is that this is dollars and cents getting in the way of something very profound," she said. "What you can't replace is the drive and spirit and personality. That doesn't go away."
The namesake of the facility, Pat Maroney, of Howard, said the cost of running a restaurant also contributed to the dire financial situation at Maroney Commons.
"The restaurant was the thing that really bled it to death," he said. "Overhead was so high, we just never got that under control."
Maroney pledged $1 million would be left to Maroney Commons upon his death. Now that the facility is closing, Maroney said he will have to decide what will become of that money.
In addition to his pledge, Maroney has $125,000 in stock in the facility, donated $10,000 for a room in the facility and donated a lot on the south side of the building worth $3,500.
Maroney's Bar, located right next to Maroney Commons on Main Street in Howard, has been in Maroney's family since the 1940s, but was sold to Maroney Commons last year. Ownership of the bar is being returned to Maroney next week. For him, the closure of Maroney Commons came as no surprise. "I was aware of the fact that it wasn't financially sustainable quite some time ago," he said. "I was pretty much preparing myself for the inevitable."
Maroney serves on the boards of both the Rural Learning Center and the Miner County Development Corp.
"I've got nothing but praise for the people that worked so hard for this," Maroney said. "The business plan that was laid out at the time looked very reasonable. I still think it will be back in business."
The facility was largely funded through loans, including a $3.2 million loan from the federal government's USDA Rural Development Program. Up to 90 percent of that money, which is actually loaned by the bank, is guaranteed by the federal government.
According to the USDA's website, "Other funding involved with this project includes an economic development loan from Heartland Consumer's Power District. This money was awarded through a USDA Rural Economic Development Loan in the amount of $740,000 and Grant of $300,000. These funds were awarded out of USDA Rural Development's regular funding directed to South Dakota. The federal funding was leveraged with $100,000 from Grow South Dakota's revolving loan fund, $150,000 from Northeast South Dakota Economic Corporation, equity from the Rural Learning Center, and other investors."
Although those sources are the major lenders associated with the project, Callies said funding came from a multitude of sources, with some 30-plus organizations and individuals contributing.
While the loans are technically not yet in default, the financial problems are apparent, Callies said, and the decision to close was made in light of a worsening financial situation.
"Instead of waiting until we were in really deep water, (the Miner County Development Corp.) did the proactive thing," Callies said.
What options lenders will have to recoup their money remain unclear, Callies said, but she added that decisions will likely start being made once Maroney Commons officially closes on Sept. 3.
Dave Callies, executive vice president and CEO of Miner County Bank, said the $3.2 million loan is "most certainly" a big one for the bank, but he said privacy laws prohibit him from releasing any specific information about the loan.
"It's just a normal loan that we have to support the community, and we'll continue to do that," said Callies, who is not blood relation to Kathy Callies.
Callies, who was born and raised in Howard, expects the community will be supportive as the lenders decide what should be done with Maroney Commons.
"The important thing now is to pull together like we have in the past," he said.
Wednesday afternoon, locals Troy Cleveland, Dan Yunginger and Daniel Feldhaus were working at the Miner County Co-op. All agreed the $6.5 million facility was just too big for a town the size of Howard, population 858.
"I knew it from the beginning," Cleveland said. "It's just too much. The town can't support a café. How the heck are we supposed to support that?"
The three did have some ideas how the facility could be revitalized.
"I think they should turn it into a bowling alley," Feldhaus said.
But local officials are hopeful that such drastic steps will be unnecessary.
"You always look backward and second guess and think what you might have done ..." Kathy Callies said. "You can only look backward so much. You just have to put your energy into moving forward, and that has really always been the story with this."
Moving forward will likely depend on Maroney Commons finding a new owner, and Callies said potential buyers have already toured the building. "In the middle of this whole shutdown, I am very optimistic," she said. Maroney said he doesn't regret investing in the project. "These small communities, they die pretty fast," he said. "If you don't make an effort, they're going to die faster. I think I would do it again."