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State Representative David Dill
100 Rev. Dr. Martin Luther King Jr. Blvd.
651-296-2190
For more information contact: Sandy Connolly 651-296-8877
NEWS COLUMN
UNIQUE FUNDING PROGRAM AVAILABLE FOR PROPERTY POOR SCHOOL DISTRICT
On Wednesday, members of the Minnesota House of Representatives voted on their Capital Investment Bill. Included in this bill was a project for the Nett Lake Independent School District that provides state bonding money for improvements to the existing Nett Lake School. I was able to include this request in the bonding bill because of a unique program that Nett Lake qualifies for, the Maximum Effort Capital Loan Program. This bill is being carried by Senator Tom Bakk in the Minnesota Senate.
Since 1959, public schools in Minnesota that are unable to finance construction projects through conventional bond sales because their property tax base is too small qualify for funding assistance from the state. Under the Maximum Effort Loan Program, the state borrows money via bond sales and lends it to qualifying school districts on favorable terms. The school in turn agrees to make payments to the state for the next fifty years.
To understand why Nett Lake qualifies for this funding option, it helps to compare the market value of the Nett Lake School District to the market value of the St. Louis County School District. For Nett Lake, the market value is $4,630,600. The St. Louis County market value is $2,049,352,990 (billion). When considering tax capacity, Nett Lake School District has $515 per pupil, while in St. Louis County, there is about $15,500 per pupil. Nett Lake's tax base per pupil is one of the lowest in the state while the St. Louis County school district tax base is one of the highest per pupil tax bases in the state.
In addition, the state limits the amount of bonded debt to which a school board may obligate the district and its taxpayers. This limitation is based on 15% of the market value of property within the district as modified by the sales ratio. Based on this limit, Nett Lake's gross maximum bonded debt limit is approximately $1.1 million, which is much less than required to complete the proposed construction project. St. Louis County School District's gross maximum bonded debt limit is $394.9 million. Of this capability, the current debt for the St. Louis County School District is $740,000, well less than the $394.9 million that is available. (Based on the annual district financial statement as supplied by the Minnesota Department of Education Program Finance Division.) In addition, the district's bond payments are supplemented by the Taconite Bond Fund at 80%, so local taxpayers pay only 20% of the current annual debt levy. Taconite bond payments originate with taxes on the production of taconite pellets at area taconite mines.
This low tax base and state limit help to explain why the Nett Lake School District qualifies for this program, while a school district such as St. Louis County does not. There are many schools throughout the state that have qualified for the Capital Loan Program: Lake of the Woods, Roseau, Warroad, Big Lake, Barnum, Kelliher, Little Fork/Big Falls, Foley and South Koochiching County Rainy River District, to name a few.
Audrey Bomstad, who works in the Finance Division of the State Department of Education, said that the request for bonding money by Nett Lake School District is a reasonable request that is justified by their student growth. She believes that they have tried to do their best to secure funding from many sources; she was aware of at least three other loans or grants they have applied for. Because of their efforts, as well as their need, the Nett Lake project was the number one pick for funding by the Commissioner of Education.
This high priority was echoed by Carolyn Drude, who works for the financial consulting firm of Ehler's and Associates and has many years of experience with the Capital Loan Program. Drude said that Nett Lake School District is an excellent candidate for this program, which is why it received the recommendation of the Department of Education. It has been her experience that if a school district qualifies and receives the recommendation of the Department of Education, the State Legislature has always approved it. However, sometimes this process can take 2-3 years.
Some concerns have been expressed that with the additional funds, the Nett Lake School District may choose to expand their curriculum beyond the 6th grade. Presently, Nett Lake district students attend 7th through 12th grade at the Orr Public School. During the House Education Finance Committee, Rep. Karen Klinzing asked that specific question. Nett Lake Superintendent Strong assured the Committee that the district had no intention of expanding beyond 6th grade. In response to the Superintendent's strong assertions, I asked that language in the bill reflect her testimony: "It is the intent of the legislature that this appropriation fully completes the funding for construction and renovation costs and related improvements to the district's kindergarten through grade 6 facilities."
For school districts that don't qualify for the Capital Loan Program, bonding and referendum is the designated path to fund and improve schools. However, with a school district as large as St. Louis County, this path faces significant challenges of its own. For instance, it is difficult to get voter approval for a bonding referendum for a school that their children will not use and is over 100 miles away (as an example, voters in the Albrook area voting for a new school in Tower or Orr). The St. Louis County School District is the largest in the country, and I know many of the residents are troubled by the difficulty of getting school referendums passed. However, the Maximum Effort School Capital Loan Program is not a solution to that problem.
Every student in our state deserves a good public education. The Maximum Effort Capital Loan Program was implemented for this very reason, to ensure that children who live in property poor districts have the same high quality education that students who live in communities with higher property values receive. I am pleased that a program such as the Maximum Effort Capital Loan Program is in place to help districts such as Nett Lake.
If you have any questions about this project, the bonding bill, or on any other issue, please do not hesitate to contact me. I can be reached at 315 State Office Building, 100 Martin Luther King Blvd., St. Paul, MN 55155, by e-mail at rep.david.dill@house.mn or by phone at 1-800-339-0466.
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