One-day bonds for schools require no new tax increases

Hill City, a small northern town along Highway 169 is about 80 miles west of Duluth. There are a few diners, gas stations and an old Army helicopter on display at a roadside park - but nothing that makes Hill City appear all that prosperous.

But a few blocks off the main drag, superintendent Scott Vedbraaten is more than happy to show off the town's 25-year old school that houses about 300 students in kindergarten through high school. There's almost one computer for every student and a few rooms have Smart-boards - which put old-fashioned chalkboards to shame. And new boilers a few years ago drastically lowered utility bills.

All of these projects have been paid for by what's called a one-day bond. The last one passed just last month, but another bond is set to go on next month's ballot.

Vedbraaten says one classroom will get windows if this next new bond passes, and the school's science labs and front office would also be renovated. He can sell this to district voters as a question that won't require a tax increase.

He can do that because, even though the school is asking for money, it actually already has the money.

"There are two ways of looking at it," Vedbraaten noted in an interview in his office, which overlooks the school's parking lot (which was resurfaced with one-day bond money) "To the school, is it a good thing? Yeah, because we don't have to have a [tax-increasing] referendum to cover some of the needs of the district. Is it a bad thing? Yeah, because I have to over-tax the taxpayers of the district."

The key phrase there is that he 'has' to over tax the district. That's because the state of Minnesota sets the tax rate.

Hill City and 20 other districts, mostly in northern Minnesota, are part of the state's Capital Loan Program. Its aim is to help less-wealthy districts afford expensive construction projects by having the state loan them money.

The state, in turn, requires those districts to charge a specific property tax rate that will raise enough money for loan payments.

The issue in Hill City and these other districts is that property values have gone up in recent years, but the tax rate has stayed the same. That leaves districts with more money than they need for loan payments.

The law, though, doesn't allow that extra money to be given back to taxpayers. Instead, districts either have to give it to the state or they can ask voters to approve the one-day bond, which will keep the money locally to be used for other construction projects.

Voters in the Barnum, Kelliher, Littleforks-Big River and East Central districts will all see one-day bonds next month.

If it seems like a no-brainer, it is. Keep the money here, or send it back to the state? All of the nearly 20 one-day bonds that have gone on ballots in the past three years have passed. But that doesn't mean everyone's pleased.

"It just seems to me it aught to be fairer," according to Fred Nolan, superintendent of the Foley School District near St. Cloud. Foley is one of the districts that passed a one-day bond last month and will buy new school buses as a result.

"It's not adversely affecting the school district, it's adversely affecting our taxpayers," Nolan said.

So, why should that matter to the leader of the school district?

"You do want to advocate as a superintendent for the entire district, not just the students here," Nolan says.

The state should change its formula to require districts to charge a rate to garner an amount of money closer to what's owed on the loan, Nolan adds. That would reduce - but probably not totally eliminate - the need for one-day bonds, he says.

Minnesota's Deputy Education Commissioner, Chas Anderson, agrees. She can't blame the districts for finding a way to capture more money - and the state doesn't really have a beef with that. What she's worried about is the fact that there are only 21 districts that can do this - so what about the other 320 districts in Minnesota?

"Not every school district has an opportunity to issue these one day bonds and so we have general concerns about the equity among school districts," noted Anderson, in an interview. "But I do not believe any of the 21 school districts are using those excess funds for anything other than to repair their buildings, which I'm sure is needed."

Any effort to change the tax rate should be part of a wider effort to reform the way school construction projects are paid for in Minnesota, Anderson says.

The discrepancy that allows for the one-day bond seems like small potatoes when compared to the larger issue that's coming up next year at the state Capitol.

The next session is sure to see efforts made to change the way the state funds all school districts - not just a small handful that have found a quirk in the law that lets them make some extra repairs.

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