School board approves bond sale for retiree benefitsCloquet School Board members unanimously approved a motion Tuesday to issue bonds to help fund post-employment benefits. Cloquet residents will see tax increases as a result.
By: Jana Peterson, Pine Journal
Cloquet School Board members unanimously approved a motion Tuesday to issue bonds to help fund post-employment benefits. Cloquet residents will see tax increases as a result.
Last week, board members deferred the vote to do more research and set a special meeting held Tuesday evening. After talking with other school board members from around the state, Cloquet School Board member Jim Crowley said Tuesday he would support the bond sale.
“I don’t know any other solution but to vote yes on this ... but it’s squeezing the people,” he said.
Taxpayers will be affected by the sale as the bonds are paid back over 20 years. This bond sale will reportedly cost a residential property owner 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. It will affect homeowners, commercial/industrial properties, apartments with more than four units, seasonal/recreational properties, agricultural homesteads and agricultural non-homestead properties.
The new option to allow a sale of bonds, without an election, was put into place by this year’s Minnesota Legislature, and as of July 1, allows counties, cities and school districts to issue bonds to help fund post-employment benefits over the next 30-40 years, according to Cloquet Schools Superintendent Ken Scarbrough.
This was done in response to 2006 findings by the Minnesota State Auditor that 343 local government entities, including 215 school districts, had unfunded liabilities for non-pension retiree benefits. Cloquet is among those school districts, according to Kim Josephson, Cloquet School District chief financial officer.
“I believe any school district that offered post-employee benefits would be on that list,” he said.
The bond sale for the Cloquet School District will amount to just over $7.2 million, which will result in an initial deposit, after fees, of just over $7.1 million into an irrevocable “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.
“I think [the bond sale] puts us in a much better place and we can look at a few years of no [budget] cuts, said School Board Treasurer Duane Buytaert. “I don’t think we can do it without it.”
Josephson told board members last week 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 will 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 was under some pressure to make a determination, because the legislature could decide to take away the option as early as next year.