Cloquet School Board votes down bond saleBy a 3-3 vote, Cloquet School Board members rejected the sale of general obligation bonds to help finance the district’s post employment benefits on Monday night.
By: Jana Peterson, Pine Journal
By a 3-3 vote, Cloquet School Board members rejected the sale of general obligation bonds to help finance the district’s post employment benefits on Monday night.
“I think we’re responsible to pay as we go,” said board member Jim Crowley, who voted against the measure. “This [bond sale] is still using the plastic and passing [debt] on to our kids.”
Approximately $6.6 million in bonds were to be sold with the cost of the bonds to be paid back in taxes levied on school district residents, with the first levy set for the 2009 tax period.
The option was brought to the table in response to 2006 findings by the Minnesota State Auditor showing that 343 local government entities, including Cloquet and 215 school districts, had unfunded liabilities for non-pension retiree benefits.
The levy was expected to cost $57 a year for a homeowner whose home is valued at $150,000, and $76 a year for a home valued at $200,000. The funds garnered through the sale of the bonds would have gone into an irrevocable “other post-employment benefits (OPEB)” trust and pay the school district’s OPEB liability in the sum of approximately $430,000 a year over a period of 32 years. That would have freed up $430,000 in the general fund, which could have been put toward funding educational programs.
Board member Ron Gittings voted for the measure and said, “This is a vote we take with somewhat of a gun to our head, but [the sale] takes care of a burden made before we got here. It frees up money for the general fund and I don’t want to leave this dangling to haunt future boards.”
Jim Schmitt of Springsted, the school district’s bond consultant, brought information from the two bidders who expressed interest in purchasing the bonds, Northland Securities and BMO Capital Markets GKST, Inc.
Based on an interest rate low bid of 6.828 percent, Schmitt recommended Northland Securities for the sale.
“Every district at this percentage has sold the bonds,” he related.
He also told board members the bids were only good for that day but rejecting them would not necessarily reflect negatively on Cloquet if they decided to try the sale at another time.
Duane Buytaert, board treasurer, made the motion to approve the sale, with a second by Gittings. Buytaert, Gittings and board member Stephanie Hammitt voted to approve the sale, while board members Jim and Sandy Crowley and Gary Huard voted against it.
Board members discussed offering the sale at a future date, but did not decide whether to do so.