Residents at Village Shalom like to say that something special happens there every day. Earlier this year, something truly remarkable took place that underscores not only the special nature of Village Shalom, but of the Kansas City Jewish community that supports it.
The continuing-care retirement community recently culminated a quiet, two-and-a-half-year effort to reduce the $40 million in capital debt on its 26-acre campus. Through the efforts of members of the Kansas City community, local funding agencies and the organization’s major creditor, the behind-the-scenes, albeit aggressive campaign has reduced the organization’s debt to a more manageable $16 million. Matthew E. Lewis, president and CEO of the 501(c) (3) not-for-profit organization, said, “It is the community’s most ambitious and successful fund-raising effort in recent memory.”
The issue of Village Shalom’s debt has not been a secret; in fact, three years ago, The Chronicle published an interview with Lewis and then-newly elected Chairman of the Board James Klein about the financial challenges facing the organization. They openly discussed the situation and how Village Shalom’s debt arose from a broad and longstanding array of factors, including higher labor costs, a higher percentage of residents on Medicaid and lower Medicare reimbursement rates, and lower proceeds from the sale of Shalom Geriatric and Shalom Plaza at 78th and Holmes. The collapse of the financial markets in the fall of 2008 seemed to cast a final pall on any immediate prospects of initiating a broad-based debt-reduction campaign.
Amid this environment, however, the newly constituted board appointed a debt-restructuring subcommittee, led by Klein, to develop a strategy to establish Village Shalom’s financial stability once and for all.
“In a strange way, the financial crisis gave us the clarity of what needed to happen in order to achieve our goal,” said Klein. “In the same way a conventional fund-raising campaign was a non-starter, the idea of combining the collective efforts of several different constituency groups began to take shape.”
A Shared Commitment
Village Shalom opened in June 2000 as an innovative retirement community offering a continuum of living options that enables residents to “age in place.” Its Overland Park campus consists of 64 independent-living villas; 54 assisted-living apartments; two 26-unit skilled-nursing floors providing both short-term rehabilitation and long-term care; and assisted living, skilled nursing and adult day programs for senior adults with memory loss and dementia-related illnesses. The facility also meets the needs of non-residential senior adults through its wellness center and outpatient therapy services. In addition, the facility provides more than $1.6 million annually in financial assistance to nearly one-third of its main-campus (assisted living and skilled nursing) residents who rely on Medicaid or other subsidy for their care.
While Village Shalom’s early years were marked by lower-than-expected occupancy rates and high staff turnover, changes in management prompted a reversal of those trends starting around 2005. Village Shalom has averaged 95 percent occupancy over the last four years and has a waiting list for its popular assisted-living apartments. Staff turnover has declined substantially, and efficiency measures now rank high, based on national figures.
The $40 million in debt being carried by Village Shalom as it marked its first decade of operation was, however, more than twice the amount it could financially support. After running multiple financial models and getting input from community funders, the board of directors determined that reducing the debt to a figure nearer $16 million would give Village Shalom the necessary financial flexibility to operate in the highly competitive senior-care industry in which it had otherwise made great strides. Thus, Village Shalom would need to reduce its debt by $24 million.
The magnitude of this figure led the debt-restructuring subcommittee to conclude that help must come from every possible avenue. It would require debt relief from the creditors of Village Shalom as well as contributions from the community in a variety of creatively conceived formats. Negotiations began with the largest creditor, a global bank, to write down a significant portion of their debt.
The community effort was proposed as a matching-gift challenge in which funds raised from major gifts would be matched by grants from the Jewish Heritage Foundation and the Menorah Legacy Foundation. Lastly, additional debt relief would result from Village Shalom’s repurchase, at a discount, of bonds originally issued in the retail market on its behalf. The lynchpin of the plan was that each group’s commitment was contingent upon the success of all the others.
After nearly two years of discussions, the bank agreed to a write-down on the debt; both the Jewish Heritage and Menorah Legacy foundations pledged their side of the community-matching grant; and with deadlines looming, the major-gifts campaign exceeded its $8 million target in a matter of weeks, in an extraordinary display of generosity and community leadership.
Reason for Being
“We were fortunate to have some truly dedicated and visionary community leaders who literally made house calls to ensure we could garner the support we needed,” said Lewis of the community-based campaign. “Much of the success is due to the fact that we remained focused on Village Shalom’s reason for being, and that message was reiterated to everyone we approached for support.”
The senior-living community traces its roots to the Moshav Zkeinim (home for the aged), chartered in 1912 to care for elderly Jews in Kansas City who lacked personal financial resources. The organization provided housing and care for residents in the Michael Appleman Home for Jewish Aged and later the Jewish Geriatric and Convalescent Center and Shalom Geriatric Center. Village Shalom maintains the organization’s longstanding commitment to Jewish traditions and values, and continues to be largely supported by the Kansas City Jewish community. Approximately 75 percent of Village Shalom’s residents are Jewish.
The success of this year’s debt-reduction campaign comes at a particularly momentous time in Village Shalom’s history: The organization will mark its centennial year in 2012.
“While we certainly serve a much broader senior population than we did 100 years ago, and offer a full range of options for elder living and care, we have never lost sight of the organization’s original commitment,” said Michael J. Abrams, chairman of the current Village Shalom Board of Directors. “We are dedicated to ‘honoring our parents’ by providing them with the best possible quality of life. This can happen only with the support of a cohesive, caring community.
“We owe a tremendous debt of gratitude to all parties involved in this monumental campaign,” Abrams added. “That we were able to pull together and succeed on so many fronts underscores the dynamic nature of the Kansas City community. Our visionary board and subcommittee, our funding organizations, our community leaders, our generous donors — they all worked hand in hand to ensure that Village Shalom will continue to thrive and grow.”
Lewis commented that the campaign’s success enables Village Shalom to look toward upcoming generations of senior adults: “We’re extremely proud of our past, and now the organization is in a position to think more strategically about our future as well. Many more people are living longer, and demographic trends ensure that the number of people needing long-term care will increase significantly. As the baby-boom generation ages, it will present the industry with formidable challenges, but also opportunities. We can now begin to envision the next phases of Village Shalom’s presence in meeting the changing needs of our community’s seniors.”
As the situation stands, the bank debt has been paid in full; $1 million dollars in bonds have been repurchased in the open market at a substantial discount; and residual funds reside with the Jewish Community Foundation to retire additional bond holdings. The total reduction of debt from this effort currently exceeds $25 million.
But the job is not yet complete, Abrams noted. “The first stage of this campaign exceeded all targets, but Village Shalom wants to keep up the momentum and expand this campaign to the broader community. The recent 11 percent cut in Medicare payments to skilled-nursing facilities is a timely reminder of the challenges we face in the health-care business and the importance of doing everything we can to further solidify our financial base.
“Kansas City’s Jewish community has a long history of banding together to overcome challenges and obstacles,” he added. “I’m proud to say that we have accomplished that on behalf of Village Shalom’s residents and their extended families. In fact, we’ve done what other Jewish communities across the country have not been able to do. Cities like Pittsburgh and St. Louis have faced similar situations in recent years, yet were unable to maintain their Jewish community-supported long-term care facilities as independent not-for-profits — forcing them to sell to for-profit groups. The campaign we’ve undertaken here in Kansas City points to the particular strength of this community. As a result, we are strongly positioned to uphold the Jewish tradition of caring for our elders in generations yet to come.”