School district grappling with debt and burden on taxpayers
By Emily Bialkowski
The Caledonia Board of Education is facing tough financial decisions as they continue to pay off a $14 million state-funded capital loan. Stipulations within the loan have the district taxing property owners to the max, based on property valuation, while not addressing upcoming needs.
A presentation by Fred Nolan, executive director of Minnesota Rural Education Association, offered insight into how the district can fund upcoming projects without burdening the taxpayer. Nolan was the superintendent in the Foley School District when they negotiated their way out of a similar quagmire.
By the end of the meeting, the board unanimously agreed to seek voter permission to issue a one-day, $495,000 bond. The request will be put on the Nov. 6 ballot.
The kicker is that the board will not likely go after the bond right away. By reserving the authority to do so, the district can withhold a payment of $495,000 to the state.
Does this action push off payment to the state? Yes.
Does it give the district some breathing room to replace boilers and address other maintenance needs with out increasing the tax burden? Yes.
“You have the most complex, intricate funding formula in state of Minnesota, and if you don’t go away with a headache you weren’t paying attention,” Nolan said.
Prior to the board’s decision to ask voters for the authority to sell a bond, Nolan suggested the board has three options: do nothing and continue to issue one-day bonds to meet the district’s needs; refinance/refund the capital loan immediately; or try and hold out for a year while negotiating the terms of the capital loan with the legislature.
Option 1: do nothing
If the district decides to do nothing and continues to pay on the capital loan, residents will continue to be taxed to the maximum without freeing up dollars for school needs and projects.
Option 2: refinance/refund
In option two the board would pay off the capital loan with another bond. The problem here is there would be no money available – for approximately 18 years – to maintain facilities or purchase technology, etc, without referendum. A very minimal savings is predicted in this option for the taxpayer.
Option 3: re-negotiate
Option three is probably the most complicated but bides the district time. The board agreed this is the best option right now.
The board requests permission from the voters to seek a $495,000 one-day bond. They hold this authority while letting the state know that this dollar amount will be subtracted from their next loan payment, as is permissible by the loan’s stipulations.
Meanwhile, the board enters into negotiations with the legislature and tries to decrease the balance of the loan. This effort is predicted to be worthwhile because – and this is key – the Caledonia School District has paid more into their capital loan than any other district in the state; so much so, the principle has actually started to be paid down.
The situation does not have an easy out by any terms. “It’s a major task for you and your board,” Nolan said.
Board President Michelle Werner echoed his thoughts and said, “We know we have needs. The question is where are we going to get the money.”
The recurring sentiment expressed by meeting attendees, including those from the public, was the district needs to provide the best education and atmosphere for students while not over burdening the taxpayer.
Contact Emily Bialkowski at firstname.lastname@example.org