Carlton School Board members gathered virtually to discuss their next moves after a needed legislative change was left out of the $1.9 billion bonding bill approved by the Minnesota Legislature Oct. 14.

For more than a year, Carlton and Wrenshall school board members have worked to hammer out a consolidation agreement to merge the two small school districts. The plans included nearly $40 million in renovations and expansions to Wrenshall School and South Terrace Elementary School in Carlton. The plans presented to voters also assumed the Legislature would change a 2014 law making school consolidations eligible for enhanced debt service equalization aid.

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.

A survey completed in January showed majorities of both communities supported up to $40 million in construction, but the survey also factored in state aid.

The failure of the legislation likely moves any potential consolidation back to at least July 2022, Carlton Superintendent John Engstrom said, leaving the district scrambling to develop a long term plan for its aging facilities and declining enrollment.

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“We're probably going to have to get to a place where the board offers the community a couple of very stark choices, “ board chair LaRae Lehto said. “I don't know if we're at a place where we have to say the board is going to move forward with A or B, or C. We kind of did that with the consolidation route, but now I think we have to ask people do you want to continue down that route.”

Board member Tim Hagenah also said they needed to investigate where the community stands after the legislation failed and consolidation will be delayed.

Combining the districts is still an option, but the board also discussed the possibility of converting South Terrace to a K-8 school and negotiating a tuition agreement for students to go to high school in Cloquet.

Consolidation with Wrenshall is certainly still an option, Engstrom said, but with a large bonding bill approved late in 2020, the Legislature might not be inclined to pass another next spring.

Even if a bill is passed in the spring, a referendum likely wouldn’t take place before August or November 2021, pushing formal consolidation of the districts until at least July 2022.

“I don’t see how you get outside of that timeline,” Engstrom said.

What’s more, consolidation negotiations hit another stumbling block late in the summer. A 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.

Combined with the estimated impact of the facilities plan, Carlton taxpayers with a home valued at $150,000 would see an increase of $265 in a combined district. 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.

Carlton board members inquired about a consolidation agreement where residents of each district continued to pay the districts’ existing debt separately, but Wrenshall Superintendent Kim Belcastro said she did not believe the Wrenshall board would agree to such a plan during a consolidation referendum committee meeting Oct. 12.

Another option for Carlton is a partnership with the Cloquet School District. Residents would be asked to support an estimated $14 million addition to South Terrace to convert it to a K-8 school. Carlton officials would negotiate a tuition agreement with Cloquet to allow high school students to finish their education in Cloquet.

Cloquet is a logical partner for Carlton in this scenario. A total of 304 students — more than 50% of those living in Carlton — open-enrolled to other districts in the 2019-20 school year, according to the Minnesota Department of Education. Of those, 170 enrolled in the Cloquet district. In addition, 90 students from Cloquet open-enrolled into Carlton last year.

By comparison, just 14 students in Carlton left the district for Wrenshall in 2019-20, and 24 students left Wrenshall for Carlton.

Information provided at a Carlton meeting in June showed a $14 million addition to South Terrace would have a similar effect on Carlton taxpayers as the $38 million plan with Wrenshall. Under the plan with Cloquet, a Carlton taxpayer with a $150,000 home would see an additional $191 in taxes.

However, unlike the plan with Wrenshall, Carlton would remain an independent district with its own property tax levy.

Cloquet Superintendent Michael Cary has said his board would be interested in such an arrangement, provided there is a tangible benefit to the Cloquet district.

In a tuition agreement, Cloquet would receive the bulk of state and federal funding for each student who attends Cloquet High School. However, the Carlton district would still receive some revenue because the students would remain Carlton students. Students open-enrolling out of the district take all of the state and federal funding with them to their new school.

The board also discussed a worst case scenario — the possibility of dissolving the district. If that happens, Carlton residents would continue to pay the district’s existing debt in addition to any property taxes levied by their new school district.

School board member Ann Gustafson said dissolving the district — as well as building a new, K-12 school building at South Terrace — has been rejected by the community.