Consolidation talks between the Carlton and Wrenshall school boards received a double dose of bad news during a consolidation referendum committee meeting Monday, Oct. 12.

First, a wide gap remains between the two districts on the issue of debt sharing. A tax impact study showed Carlton residents’ property tax bills would rise disproportionately to Wrenshall residents' if the debt of both districts is shared equally in a consolidated district.

The study — conducted by Ehlers, the districts’ financial advisor — showed if the districts consolidate and share existing debt equally, Carlton property owners with a residential property valued at $150,000 would see a tax increase of approximately $63, an increase of about 12% over the district’s 2020 levy. A similarly valued property in Wrenshall would see a decrease of $97, a drop of more than 14% over the 2020 levy.

In 2020, a Carlton taxpayer with a residential homestead worth $150,000 owed an estimated $505. In Wrenshall, the owner of a similar property owed $666, according to the study.

The two districts have negotiated for more than a year to develop a nearly $40 million facilities plan that would expand and upgrade Wrenshall School and South Terrace Elementary School in Carlton. Wrenshall would become the new middle and high school for the consolidated district, and South Terrace would be the its elementary school.

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Ehlers estimated the tax impact for the facilities plan on a $150,000 residential homestead is $202, bringing the total tax increase for a homeowner in Carlton to $265 — a more than 50% increase over the 2020 levy.

A Wrenshall property owner with a similarly valued home would see an increase of $105, or about 40% of what those in Carlton would have added to their tax bill.

The numbers will have to be recalculated after the 2021 levies in each district are set, according to Jodie Zesbaugh of Ehlers. The change could be less with the new figures, but there would still likely be a significantly larger increase for Carlton taxpayers, Zesbaugh said.

Carlton Superintendent John Engstrom said he doubted the Carlton School Board would approve a consolidation agreement that shared the debt equally between the two districts.

“I don’t think there is majority support on the Carlton board to accept an option of sharing the debts,” Engstron said. “Even if there were, I can’t speak for the board, but I know I personally have received enough feedback from Carlton taxpayers that I believe a plan of sharing the debt likely to be rejected by Carlton voters if we went down that road.”

Similarly, Wrenshall Superintendent Kim Belcastro said the Wrenshall School Board agreed the debt needed to be shared between the districts.

“I’m confident there will not be a consolidation unless the debt is split between the two districts,” Belcastro said.

Carlton school board member Ann Gustafson said she hoped there might be a way of lessening the impact of consolidation on Carlton taxpayers, but Zesbaugh said the only choice the districts had as far as taxation was whether to share debt.

Wrenshall school board member Janaki Fisher-Merritt said the reason the change was so drastic for Carlton taxpayers was the $9 million health and safety bond approved by his board to make improvements to the building in Wrenshall — something that will benefit Carlton students in a consolidated district.

“The thing we’ve always tried to do is just abide by the principle that at the end of the day, property taxpayers in each district should be paying the same rate for the same value of property,” Fisher-Merritt said. “That’s what we’ve always done in the past, even though it’s meant — in the past — Wrenshall people see a bigger increase than Carlton.

Gustafson understood that aspect but was concerned a survey sent to Carlton and Wrenshall residents didn’t present the whole tax picture. Majorities in both communities supported nearly $40 million in upgrades, but the additional tax increase for Carlton property owners was not factored into the calculation.

Legislation not included in latest proposal

During the discussion over debt sharing, Belcastro received a text from Reid LeBeau — the districts’ lobbyist guiding enhanced service debt equalization aid legislation through the Minnesota Legislature. LeBeau said the latest proposal from the Minnesota House to the Senate stripped all funding for debt equalization aid from the bonding bill.

Enhanced debt service equalization would require the consolidated district to take out the full bond amount, but the state would pay up to 46% of the annual bond payment. Currently, schools can only use the mechanism if there is a natural disaster. Officials in Moose Lake took advantage of the legislation after the old building was damaged in the 2012 flood.

Representatives of Carlton and Wrenshall have indicated they do not want to move forward on consolidation without enhanced debt equalization.

During a meeting between LeBeau, Engstrom and Belcastro Tuesday, Oct. 13, LeBeau told the superintendents he believes all the money for debt service equalization aid was taken out of the nearly $1.4 billion bonding bill the House is expected to vote on Wednesday, Oct. 14, according to Belcastro. LeBeau said he believes there is support to pass the bill.

If that happens, the schools would be forced to wait until the next regular legislative session to get the change made.

If the Oct. 14 vote fails, the districts could try to get the legislation included in an expected special session in November, but that would “almost certainly push out the referendum vote timeline back until April,” Engstrom said.

During a Carlton School Board meeting in July, board members whittled down contingency options if the legislation was not passed or if a referendum failed.

If the legislation is not passed, the board developed two options for moving forward:

  • Wait until the next legislative session to try again to get enhanced debt service equalization aid passed; or
  • The Carlton and Wrenshall districts would abandon consolidation efforts and move forward independently.