Costs of retirement fund, hockey facilities dominate debate

Talk about it

The Cloquet School Board voted to stay the course at its Monday night meeting, opting not to make a change in fund managers for its $6 million Other Post-Employment Benefits (OPEB) trust.

After a series of presentations from local and regional financial managers over the summer, as well as some heated debates, the board voted 4-1 to continue working with PMA Financial Network, the trust’s current fund manager.

Complying with a board request from its Sept. 10 meeting, Business Manager Kim Josephson presented the board with direct fee comparisons between PMA, PFM Financial Management and Wells Fargo, who were the three remaining bidders.

The comparisons were based on two scenarios – Scenario One for a portfolio with 5 percent anticipated growth and Scenario Two for a balanced portfolio containing 30 percent equity investments and an 8 percent maximum balance in cash.

“The [fee] structure is slightly different between PMA, PFM and Wells Fargo in terms of how they charge,” Josephson told the board. “Taking a conservative look, 30 percent equities is the maximum I would recommend, so that was one reason to pick the scenario.”

According to the three proposals, PMA offered the lowest fees in both scenarios, especially the second. Instituting that portfolio would incur a fee of $29,050.

Josephson noted that the other two firms would have had to generate greater return to make up for higher fees.

“PFM would have needed to earn an extra 1 percent return to balance out their fee and Wells Fargo would have needed to earn an extra 1.5 percent,” he said.

Board member Jim Crowley then asked for a vote, saying he wanted to get the school board on the record on the issue. He moved to continue working with PMA – and then provided the only vote against his own resolution, which passed 4-1. Board member Sandy Crowley was absent but all other board members voted in favor of the motion.

Josephson said that a transition to a different portfolio with PMA would be a smoother process since that company already handles the trust and its investments in fixed assets.

“It could be implemented as CDs come due,” he said. “The transition would be smoother.”

Josephson also noted that the district will have to change its investment policy. State law allows OPEB trusts to make certain types of investments generally prohibited to municipal governments, county governments and school districts, so the district’s policy will have to be changed before shifting into different types of investments.

The board also voted 3-2 to accept the Cloquet Amateur Hockey Association’s proposal for a 4 percent annual increase on a three-year arrangement to use Northwoods Credit Union Arena.

According to figures provided by CAHA, the district paid $101,430 for use of the arena last year. The CAHA proposal accepted by the board calls for that figure to rise to $105,487 this winter, $109,707 in 2013-14 and $114,095 in 2014-15, for a total of $329,289 over the life of the contract.

Board member Duane Buytaert said that initially the board had wanted to pursue a flat agreement with CAHA, which countered with a 5 percent increase. The difference between the board’s eventual 3 percent compromise and CAHA’s 4 percent counter-offer was $6,457 over the life of the contract.

“They also said we could look at splitting the gate,” Buytaert said, but Superintendent Ken Scarbrough disagreed.

“We don’t want to do that,” he said. “The gate is going, indirectly, to fund our athletic programs. If we split the gate we split our revenue.”

Jim Crowley said he couldn’t support the higher 4 percent amount.

“I’m not happy with what they are proposing, since all our employees will get 1.5 percent, 1 percent and 1 percent over their contract,” he said.

In an e-mail to Scarbrough, CAHA President Mick Maslowski noted that higher costs, especially for utilities, and the need for a new electric Zamboni to comply with a new state clean-air law made it necessary to ask for more money.

“I don’t have a problem with the 4 percent,” Buytaert said. “It would be nice to see it lower but it would be nice if everything was at zero and we all got 4 percent raises. [CAHA has] expenses and they are huge.”

Board Chair Gary Huard, who joined Crowley in voting against the 4 percent offer, wanted to know what concessions CAHA was making.

“They are getting money from [Northwoods Credit Union] and the [Minnesota Wilderness] junior hockey team is also helping,” he said. “What concessions does [CAHA] make? Nobody seems to know that.”

Tags: cloquet school district, news, education