The Park Rapids Area Schools will ask voters to approve a $51.65 million bond on Nov. 2, 2021.
In a special meeting Monday, June 28, the school board opted for “Option B” of three funding solutions for a school facility improvement project estimated to cost over $55.2 million.
During three previous weekly meetings, the school board pared down the scope of the project for which they unsuccessfully asked voters for nearly $60 million in November 2020 and again in April.
Despite significant cuts, cost estimates for the remaining construction came within about $5 million of the previous bond proposal. School board chair Sherry Safratowich blamed this on inflation, while ICS educational consultant Jason Splett stressed that lumber prices are not a significant factor in the price increase.
Greg Crowe with Ehlers, Inc. financial advisors estimated the tax impact of each of the three funding options on property owners in the school district.
Option A: One bond
For Option A, with all $55,219,100 of the construction costs covered by a voter-approved bond, Crowe pitched a bond principal of $56.75 million at an average interest rate of 2.5 to 3.25 percent over 24 years.
The impact on taxes payable in 2022 would be about $109 for a home valued at $200,000 – approximately $9.08 per month. Agricultural landowners would pay about 14 cents for each homestead acre valued at $1,000.
Option B: Four buckets
Option B would draw the same total construction cost from four funding sources.
First, it would ask voters for a $51.65 bond to cover approximately $50.6 million of the construction costs, structured over 22 years at the same interest rate.
Also, parts of the project would be funded by a $1.1 million indoor air quality (IAQ) bond at 2.1 percent; a $2.6 million deferred maintenance bond at 2.1 to 31.8 percent; and a $1.1 capital facilities bond at 2.1 to 22.5 percent, all approved by school board action with a 15-year repayment schedule.
Tax impact on the same $200,000 home would be $111 per year, or $9.25 per month. Crowe attributed the slight increase to additional bond issuance costs.
Meanwhile, because the state’s School Building Bond Agricultural Credit applies even to bonds that have no tax impact in themselves, agricultural homesteaders would pay only 10 cents per acre valued at $1,000.
Option C: Six buckets
Option C would further reduce the share of the project funded by a voter-approved bond to about $47 million. The bond principal amount of $48.35 million would be repaid over 22 years.
In addition to Plan B’s board-approved funding sources, this option would also draw on a $1 million abatement bond for parking lot reconstruction, repaid over 15 years at 2.10 percent interest, and a $2.74 million lease purchase agreement, repaid over 15 years at 3 percent.
Crowe emphasized that lease purchase is not a bond, but a method of financing that could be used to build new classroom space.
Despite asking voters for the least amount of money, this funding solution would ultimately have a higher tax impact than the other two options – $123 per year, or $10.25 per month, on a $200,000 home. However, the 13 cent impact on an agricultural homestead acre valued at $100,000 would still be less than that of Option A, thanks again to the Ag2School tax credit.
Settling on Plan B
Board member discussion wavered between Plans A and B. They largely dismissed Plan C, considering it wise to leave some funding “buckets” untouched in order to keep pace with other maintenance costs.
There was a general consensus that Plan A would be “cleaner” and easier to explain to voters, especially regarding the overall tax impact of the project.
However, most school board members followed Safratowich’s suggestion that Plan B would show that the school district is willing to put “skin in the game” by diverting money already in hand to the project from other spending priorities.
Superintendent Lance Bagstad supported this notion, adding that the district’s financial staff has already shown it is capable of managing funds carefully to cover all needs.
Only board member Jay Pike said he would not support Option B, preferring Option A.
Board member Stephanie Carlson moved to choose Option B. The motion passed 4-1, with Pike opposed.
Setting an election date
Given the choice of Nov. 2, 2021 and Feb. 1, Aug. 9 or Nov. 8, 2022, board members quickly came to an agreement. Board member Clayton Hoyt’s motion to set the election for Tuesday, Nov. 2 passed unanimously.
Splett said the board’s review and comment will need to be submitted to the state education commissioner by Aug. 4.
There was also discussion about polling places and times, to be decided at a later meeting. For comparison, board secretary Kim Splett noted that polls for the April 13 school bond election were open from 7 a.m. to 8 p.m. at the Osage Community Center, the Lake George Town Hall and the Frank White Education Center in Park Rapids.
The school board’s next regular meeting is scheduled for 6 p.m. Monday, July 12 at Frank White.