The Park Rapids School Board reviewed plans for school improvements Monday, including a look at the tax impact of a bond issue proposed for a November referendum.

Jason Splett with ICS Consulting and Greg Crowe with Ehlers financial advisers led the school board Monday through a presentation about the facility planning process known as PRoject 309. Park Rapids Area Schools are also known as Public School District 309.

Proposed improvements expanding and reconfiguring the high school for grades 7-12; demolishing the Frank White Education Center; repurposing Century School for early childhood through grade 6; and making pickup and dropoff, parking and security upgrades.

Regarding the schools’ educational adequacy assessment, Splett told the school board that the improvements would change all the “red” and “yellow” flags (areas not meeting or partially meeting Minnesota Department of Education recommendations) to “green” (meeting state standards).

He said the improvements also achieve the goals identified last year during a series of community listening sessions.

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Why move grades around?

Splett said the grade reconfiguration opens up space at Century School, which along with the Frank White building have run out of room to grow.

He said it also gives seventh and eighth graders access to hands-on career courses offered at the high school; it gives Century students more room for projects and small-group learning; and it improves the transitions from pre-K to kindergarten from grades 7-8 to high school.

Two ballot questions

Splett read two proposed ballot questions to the school board, noting that Question 2 is contingent on Question 1 passing.

The first question asks district voters to approve a property tax increase to fund a $54.5 million budget for the school improvement projects described so far. Question 2 calls for a $3,715,000 bond issue to build a new bus garage and replace the tennis courts at Century School.

According to Splett, the district currently pays $18,000 a year to lease the bus garage at the county fairground, and the district is also responsible for maintenance.

The existing, 14,000 square-foot garage does not meet the school’s needs, leaving 10 buses parked outside and requiring them to cross State Hwy. 34 at times of day when traffic makes this difficult.

The proposed, 22,400 square-foot garage will have enough space to park, maintain and wash all buses, and will be located on district property adjacent to Century School.

Regarding tennis, Splett noted the existing courts have deteriorated beyond repair and are unsafe to use. Replacing them was a priority frequently stressed at the listening sessions.

Tax impact of the bond

Splett noted that in a scientific survey of the school district conducted in late June, 21 percent of respondents said they would support a school tax increase of $6 per month; another 21 percent would accept an increase up to $12 per month; 11 percent, up to $18; and 6 percent, up to $24.

Asked whether they would support a tax increase for certain projects, Splett said, 19 percent of those surveyed were for all the projects; 54 percent for some; and 26 percent against all.

Crowe, a senior municipal advisor with Ehlers, presented financial strategies to fund the project, including:

  • Using interest earned on project funds to help pay construction costs.

  • Issuing two bonds, one in 2021 and another in 2023 – “so that you don’t have to start paying interest right away on a portion of the funds,” Crowe said.

  • Using capitalized interest to keep the tax rate level from 2023 to 2025, compensating for a temporary “bump” in the district’s debt structure.

Crowe shared tables showing the estimated tax impact on various properties. For example, passing both ballot questions would add a total of $7 per month to the property taxes on a house valued at $150,000, and $10 per month on a $200,000 house.

He noted that commercial/industrial, agricultural, and seasonal/recreational property taxes break down differently, and resorts fall into a unique category. He said Ehlers will be available to help property owners determine how the bond issue(s) will affect their taxes. Also, a tax impact calculator will be posted on PRoject309.org.

In a comparison of annual school property taxes on a home valued at $200,000, Crowe said Park Rapids (at $551) is currently toward the low end, and passing the referendum will move it toward the middle ($667) – about the same rate as Detroit Lakes and Waubun, and significantly less than Bagley ($714), Laporte ($783), Menahga ($836) and the statewide average ($822).

Estimating the sources of tax payments on the bonds, Crowe said 35 percent would come from residential landowners, 34 percent from seasonal/recreational, 18 percent from commercial/industrial and 13 percent from agricultural land and buildings – with this last amount split between the owners (4 percent) and the state’s Ag2School Credit program (9 percent).

“So, if you borrow $50 million, it’s going to be $5 million over the life of the bond, of principal, that ends up being paid by the state on behalf of those taxpayers,” said Crowe.

In a chart showing the estimated amount of school debt taxes per $3,000 agricultural homestead acre, Crowe noted that the amount dropped significantly from 2017 to 2018, when the Ag2School Credit was phased in, and the landowner’s share of the payments continues to go down annually.

So, he said, even with the new bond being added in 2021, “that tax payment is actually lower than that property owner was paying on your existing debt before the credit was in place, and by the time Pay 2023 rolls around, with the credit reaching 70 percent, the total tax bill on that acre will be less than the check they’re writing this year, in 2020.”

Review and comment

At a special meeting on Thursday, the school board called for a November referendum on the two proposed ballot questions, and submitted a “review and comment” about the project to the state commissioner of education.

School board members Clayton Hoyt and Dennis Dodge moved and seconded approval of the resolution, which passed unanimously.

“While our current school buildings have served us well, education has changed dramatically in the past few decades, and we have the good fortune of growing enrollment,” Superintendent Lance Bagstad said in a press release after the meeting. “After listening to our community, we have worked hard to create a plan that reflects the priorities of residents while providing the best value for taxpayers.”

Bagstad added that the bonds for building Century School will be paid off in 2025, “so we are turning our attention to our next set of building needs. The COVID-19 pandemic underscores the need for safer schools and adequate space for our students, staff and community. This plan will achieve that.”

According to a timetable that Splett presented on Monday, the school board must:

  • Publish its review and comment between Sept. 4 and Oct. 14.

  • Hold a public meeting before the election to discuss the commissioner’s response.

  • Post an election notice at the school district office by Oct. 24, and publish it twice by Oct. 27.

  • Post a sample ballot at the district office and each polling place by Oct. 30.

  • Notify the education commissioner of certified vote totals as soon as possible after the election.

Election day is Tuesday, Nov. 3. Early voting begins Friday, Sept. 18.