Long time coming, but tax relief for Caledonia area school district is finally a reality

By Daniel E. McGonigle

General Manager

The Caledonia Argus

With the passage of a $650 million tax bill, perhaps no constituency like residents of the Caledonia area school district will see greater tax relief.

The highlight of this year’s tax bill follows last year’s education bill tax relief which amounted to approximately $3 million in tax relief for the district.

In this year’s bill, the district will see about $7 million in tax relief, meaning where we had owed $15 million just two years ago, we now only owe the state about $5 million in taxes for the construction of the school.

The district also benefits from $2.5 million at $495,000 per year, thanks to last year’s education bill which dissolved the ability to seek a One Day Bond, but left in place the funding stream for the next five year’s for those districts who had utilized the resource.

Timeline

In 2002, voters of the Caledonia area school district voted to approve the construction of a new school building.

The construction was funded by a local bond and a loan from the state of Minnesota.

A group of community members lobbied hard to get the money and help build the district a new school facility.

Using the state funds, however, meant that the district had to tax its residences at 29 percent of annual net tax capacity (ANTC).

In poorer districts in the state, that ANTC usually meant that the loans could not be paid as land values of those districts never rose up to the value of the dollars the state lent.

However, Caledonia was a rare case in that its land values were assessed rather high.

This meant a significant burden being borne by owners of agriculture land as it relates to the building of the school.

“When I started four years ago we took a look at that,” said superintendent Ben Barton. “Early on, I’d say within my first three or four months on the job I had meetings and conversations with Senator Jeremy Miller and Rep. Greg Davids.”

Barton worked to educate our elected officials on the complex and complicated formulas that led the district to the place they were back in 2012-13.

A bill had passed that allowed for forgiveness of interest paid on the loans known as Maximum Effort Capital Loans which is the funding mechanism that Caledonia used to build its school.

However, that legislation was for buildings built before the year 2000.

The middle school/high school was built in 2002.

So Barton, Davids and Miller spoke early on about proposing similar legislation for schools built after 2000.

Political climate

In 2014 the Democrats controlled the house, which meant Davids, a Republican, was no longer chairman of the tax committee.

“At the time he spoke very openly about it not being the right time,” Barton recalled. “He was very open and honest with us about how it works at the capitol.”

So the legislation was put on hold again.

Meanwhile, the district dug itself out of a hole thanks to the passage of One Day Bonds which meant the district could hold back up to $500,000 of the money they collected for payment on the interest of the loans.

“It was key to helping us dig out,” said Barton. “The money helped with fixing our buildings, doing repairs, things like that.”

Programs, which had been cut, now had some money to slowly be brought back.

“It was a win for students,” Barton said.

In 2016, the Republicans won back the house, which meant Rep. Davids was once again chairman of the tax committee.

He worked to put language into the tax bill that would’ve meant forgiveness of over $7 million in interest paid for the Caledonia area school district.

Barton spent a lot of time testifying up at the capitol explain to lawmakers the complex nature of the problem.

Rep. Davids got the legislation into last year’s tax bill, which 89 percent of the members of the house and senate; democrats and republicans supported.

The governor, however, did not sign the bill and it did not pass under a “pocket veto.”

“The community worked hard,” Barton said. “That was tough for us.”

However, Caledonia did get about $3 million in tax relief and were able to refinance the remaining $12 million under historic low interest rates. Things were looking up.

Crosses the finish line

The problem with politics is its politics.

In 2017, Barton testified, Davids lobbied representatives, Miller lobbied senators, it wasn’t ground hog day but it sure was de-ja-vu.

“We started from scratch at the beginning of this year’s legislative session,” said Barton. “I took many more trips to the capitol to testify again.”

Davids worked tirelessly to see the bill through.

“This is huge for the taxpayers of the Caledonia school district,” he said.

This time, while the governor didn’t sign the bill, he did allow it to  become law and be “enacted.”

So many people deserve credit for the passage of this tax relief.

“Folks, pinch yourself because you are not dreaming!” smiled Barton. “This happened! Big time tax relief coming for our community.  Thank you to all that assisted in this process.  A huge thank you to our legislators that fought for us!”

  

Highlights:

Language specific to Caledonia in the bill includes:

– 2016 legislation to forgive interest above the principal and crediting the district with any principal paid bringing what is owed from 15.5 million to a little over 12 million.

– 2016 legislation to provide the district $495,000 for five  years in incentive aid for capital improvements.

– Refinance the $12 million owed at record low interest rates. Saving residents additional dollars.

– 2017 legislation to provide close to 6.5 million in property tax credits back to Caledonia residents to pay down what we currently owe of $12 million down to $5 to 6 million.

In addition to the capital loan provisions,  Ag2School legislation passed that will bring 40% additional tax relief on all agriculture and timber land owners.