By a tie vote, Cloquet School Board members turned down a proposal to sell $3.9 million in bonds to help finance district employees' other post-employment benefits (OPEB) during a special meeting held Monday.
The board rejected a $6.6 million OPEB proposed sale of bonds in late October but agreed to consider an alternative proposal. The option to sell bonds without an election was put in place by the Minnesota Legislature as of July 1 to help cover unfunded liabilities for past non-pension retiree benefits (mostly health care insurance, life insurance and/or dental insurance) incurred by cities and school districts across the state.
The current proposal would have reduced the original bonding amount by almost $3 million and would have allowed the district to negotiate a sale that would have capped the interest at 6.25 percent. The $3.9 million would also have been paid back through taxes levied on school district residents over 12 years, instead of the 20 years originally proposed.
Before board members voted, Scarbrough said he recommended the bond sale.
"I don't expect the state to fund us adequately," he said. "We'll be OK this year but two or three years down the road we'll be in another real real tough situation [financially] and that $430,000 starts to look much better."
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The bond sale would have allowed the district to keep $430,000 per year in their general fund, freeing up that amount for school programming, instead of putting it toward the OPEB funding.
Board member Ron Gittings also spoke in support of the plan, saying the money couldn't really be seen as "extra."
"I think it will save us from spending more and more of our reserves," he said. "Without doing something, our programming will suffer. We have a responsibility to taxpayers that goes beyond looking at one issue ... to provide as strong an academic base as we can to build our community and keep it strong."
Board Chair Gary Huard questioned whether a universal health care plan would make a difference while board member Sandy Crowley wondered if people should be asked to pass a referendum on the issue.
The additional taxes under this plan would have amounted to about $32 per year for a home worth $150,000 and would have increased to about $45 per year for the second year and beyond, Scarbrough said.
Since the unfunded liability now must be reported on financial statements as a negative balance, it may look less favorable on audit reports and could lead to higher interest rates on bonds for building projects in the future.
Board member Ron Gittings made the motion to approve the $3.9 million negotiated bond sale, with board treasurer Duane Buytaert's second. Board Clerk Stephanie Hammitt also voted in favor, while Board Chair Gary Huard and board members Jim and Sandy Crowley voted against.
Four members of the public attended the meeting.
