School Board contemplates bond sale for retiree benefits

Talk about it

Cloquet School Board members deferred a decision Tuesday about whether to take advantage of a new tool for school districts which would allow them to issue bonds, without an election, to help fund post-employment benefits.

Instead, they vowed to do more research this week and come back to the board room during a special meeting at 5 p.m. Tuesday, Aug. 19, in the Garfield School Board Room, to discuss and take action on the proposed plan.

In essence, the idea, put forth as an option by this year’s Minnesota Legislature, allows counties, cities and school districts as of July 1 to issue bonds to help fund post-employment benefits over the next 30-40 years, according to Cloquet Schools Superintendent Ken Scarbrough.

In 2006, the Minnesota State Auditor found that 343 local government entities, including 215 school districts, had unfunded liabilities for non-pension retiree benefits.

The proposed bond sale for the Cloquet School District would amount to just over $7.2 million, which would result in an initial deposit, after fees, of just over $7.1 million into an “other post-employment benefits (OPEB) trust account.

The trust account would then pay $430,000 of the district’s OPEB liability on an annual basis for 37 years, freeing up that same amount for general fund expenditures.

“This is an outstanding way to help our general fund now,” Scarbrough said. “More importantly, this is a way to provide future boards more financial stability in regards to OPEB liabilities.”

Taxpayers would be affected by the sale as the bonds would be paid back over 20 years. This bond would reportedly cost a residential property with a $150,000 estimated market value about $8.08 per month or $97 per year. The respective numbers for a residential property valued at $200,000 would be $10.83 per month or $130 per year. The levy would affect homeowners, commercial/industrial properties, apartments with more than four units, seasonal/recreational properties, agricultural homestead and agricultural non-homestead properties.

Kim Josephson, Cloquet School District chief financial officer, told board members that this would be the most important financial decision they would make that could positively impact the district for the next 30 years.

“We are limited as to increasing revenues,” he said. “We have referendums and we now have this,” he said referring to the plan. He also said approving the sale would only be the first step in a multi-step process and that board members would need to approve all steps for the plan to actually move forward.

The district is under some pressure to make a determination, however, because as board member Ron Gittings pointed out, “the legislature can take away our ability to do this as early as next year.”

He also called the plan a “less-than-perfect” tool that would give the district $400,000 per year to use to educate students.

Board member Jim Crowley aired concerns about the tax increase.

“I don’t like putting taxes on the citizens of Cloquet,” he said. “But right now, I don’t see any other solutions. We have workshops the next three days, however, and I’d feel better about making a decision after getting other opinions [on the matter].”

Board member Sandy Crowley said, “There’s always a pay-as-you-go-system.”

Tags: cloquet, school, board, bond, sales