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School borrows less for cash flow

The Park Rapids School Board awarded the sale of $3.78 million in general obligation aid anticipation certificates Monday night and got some free advice on the side.

The Park Rapids School Board awarded the sale of $3.78 million in general obligation aid anticipation certificates Monday night and got some free advice on the side.

Gary Olsen of Ehlers and Associates, Roseville, presented the results of bids for the aid certificates sold as a way for the school district to meet its cash flow obligations.

Olsen explained that several years ago, the state changed the way it sends cash to schools. "The timing may leave the district with a deficit," Olsen said. "This is the least expensive way of dealing with it."

The district can invest money that isn't needed. Even though rates on investments are low, he said, they should be higher than what the district will pay, allowing the district to recoup its expenses.

A year ago, the district sold $5,225,000 in general obligation aid anticipation certificates to the same successful bidder, Janney Montgomery Scott, LLC of Blue Bell, PA.

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The firm offered the best net interest rate at 2.38 percent.

Although Olsen hasn't been working directly with Park Rapids on plans to establish a redevelopment tax increment financing (TIF) district, he is with the same firm.

School business manager Carol Hutchinson invited him to address questions school board members might have about the TIF plan and its tax impact on the district and voters.

"From a revenue point of view, it means nothing," Olsen said.

The project (J&B Foods' plan to build a new store near Highway 71 south and 3rd Street) wouldn't happen without the incentive, he said. Establishing the TIF district means the value on the net tax capacity at the location is frozen where it is, he explained. The full value is taxed but the difference between the unimproved property and the development is redirected to help finance the project.

"For the (school) district it is as though the project never occurred," Olsen said. "When the TIF district expires the value comes back on and the school district gets access to it and there's a little benefit to everyone.

"At full value," Olsen continued, "it would only change the taxes by about a buck. Compared to the total value of the district with all your lakeshore, it's a relatively minor piece."

According to Olsen, operating referendum levies are excluded so once the property is developed, the owners will pay referendum taxes to the district and help reduce others' share. "But it's still a relatively small piece," he said.

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"Tax increment districts don't have an impact on schools generally," Olson said.

"It's a win-win deal for our school to support something like that?" asked board member Frank Schaap.

"Some people don't like incentives," Olsen explained, adding most of downtown Minneapolis is a TIF district as is the Best Buy world headquarters in Richfield and Medtronic in Minneapolis. "It is not going to take any money away from your district."

"And it's a positive for the community and that's a positive for us," added board chair Sherry Safratowich.

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