If approved, the two referendum questions will cost taxpayers a total of $74.7 million over the next decade.
The first question on the ballot is a bond referendum to restructure district debt. It will move $21,800,000 worth of bond debt, currently being paid out of the district’s budget, to the taxpayers. The two bonds named in the ballot question are 2019A and 2021B. The bond issued in 2019 was refinanced from an earlier Red Plan bond, but it took some time to determine what debt taxpayers would cover for 2021B.
Because another bond issued in 2021–designated 2021C–was debt incurred for two new buildings recently constructed on the Central campus, I thought 2021B might also be debt owed for those buildings. In the past, the district has often issued two bonds for construction projects: one for taxpayers, another paid out of the budget. The ones paid out of the budget were always given a “B” designation.
I contacted a board member, who told me 2021B was a “consolidation” of two other Red Plan bonds. When I questioned her closer, however, she backed off and said she didn’t want to speak inaccurately. I next questioned the Finance Manager, in an email: “Is the 2021B bond Red Plan debt, or is that bond debt owed for the new Administration Buildings and Bus Barn on the Central campus, or some other project?”
She informed me that 2021B “is not part of the new buildings financing bonds,” but in response to whether or not 2021B is Red Plan debt, she equivocated: “The 2021B bond is a Long-Term Facilities bond that was purchased to restructure our facilities management of buildings.”
This was obviously an evasive response, which I pointed out “did not fully clarify whether or not 2021B is Red Plan debt.” I told her I would proceed with the assumption that 2021B is Red Plan debt in an article I was submitting to the Duluth News Tribune. “If my assumption is in error,” I added, “please contact the editorial editor of the News Tribune and inform him of my error.”
She never called the paper to correct the error, because there is no error to correct. The board member I first spoke to was correct: 2021B is a consolidation of two Red Plan bonds. The News Tribune published my article on 10/3/23. Both the 2019A and 2021B bonds–all of nearly $22 million of bond payments the school district is trying to move to the taxpayers with this bond referendum–is Red Plan debt.
The school district is telling the public that this bond referendum, if passed, “would refinance existing debt that is currently paid by our general fund. This would free up $2.6 million in general fund dollars…”
If this referendum passes, the $2.6 million dollar annual debt now being paid out of the general fund would be freed up by moving that debt to the taxpayers. Payments for the new bond issued to restructure this debt will be deferred out to 2029. This is being done because most of the Red Plan debt is finally paid off in 2028, and taxes would drop significantly in 2029. The district is hoping if taxes stay about the same, Duluth citizens won’t realize they are paying millions more for two more years.
This is how the bond broker put it during the July 13 Committee of the Whole meeting, while pitching his plan to the school board: “We’re asking taxpayers to forego a drop of debt for two years.” He added that he was hoping, a few more years down the road, to eventually bring those weary taxpayers “some ultimate relief.” Employing Orwellian doublespeak, he also described this debt shifted to the taxpayers as “structured savings.”
2029 is still five years away and the district is already loading another burden onto taxpayers’ backs, instead of letting them breath a sigh of relief. The bill for the new buildings on the Central campus ($39.5 million on the 2021C bond) is also being deferred out to 2029. For the 2021C bond, taxpayers will pay just shy of $8 million a year for five years. At the moment, any “ultimate relief” for Duluth citizens feels as illusive and transitory as a Lake Superior rainbow.
The Superintendent has publicly stated that if the district “went ahead with a straight technology referendum, it would cost the voters twice as much money…” This statement is reminiscent of past district statements about the district’s tax burden. Just before Keith Dixon left town in 2011, the Red Plan’s budget was increased by millions, but we were told the price increase wasn’t costing taxpayers. The reason that statement could be construed as technically true at the time was because the debt was being deferred out ten years. In other words, it wasn’t costing taxpayers YET.
The debt on that bond–2012A–came due two years ago. Interest cost is 84% of principal ($10,793,673 for a $12,801,327 bond.) The total cost to taxpayers through 2028 is $23,595,000.
A similar situation exists here. Payments for the bond issued to transfer $21.8 million more Red Plan debt onto the taxpayers would also be deferred into the future. Because the district’s tax levy is currently set to drop five years from now, in 2029, many taxpayers wouldn’t even know they are paying millions more. On top of $21.8 million taxpayers would cover in bond payments, there would be other significant costs. In this high interest economy, the interest expense would be considerable, and there are other sizeable expenses in these kinds of financial moves, for the bond broker, bond counsel, underwriter, etc.
Deferring this debt out to 2029 also allows the district to minimize these millions of dollars in its current tax increase estimate. If both referendum questions are approved by the public, the district is claiming a $12.85/month increase on a $289,000 home. In their information campaign, they are attributing only $1.00 of that increase to the bond referendum.
If the bond referendum question is approved, moving $21.8 million more debt to the taxpayers, Duluth citizens will pay a staggering total of $116 million more than they were promised the Red Plan would cost them.
Approval of this referendum will help students, but the only silver lining in this tax cloud exists for the school district. No lasting rainbow with a pot of gold exists for the town’s citizens. Even any “ultimate relief” is in serious doubt. Again, 2029 is still five years away and the district is already loading up a lot of debt into a space where taxpayers would have finally breathed a sigh of relief. Better start doing some squats and strengthening your backs, taxpayers. You’re going to be carrying a heavy weight for some years to come. There are all kinds of other expenses also building up, for maintenance, etc.
The second referendum question asks for a yes vote on a capital levy. If passed, it will increase property taxes by $5.29 million a year for ten years. It will be used by the district for technology investments and various other General Fund expenditures, such as providing more money for programming and student mental health support.
First of all, taxpayers have already borne a tax levy increase of $32 million since the end of fiscal year 2005, when Keith Dixon came to town and started pushing the Red Plan. The burden is already very heavy, and a lot of misleading information was given to the public over those years.
In the current pitch for more money, a fair amount of “information” being fed to the public is again pretty sketchy. This levy request, if it passes, is being touted as an “technology referendum,” but there are also claims of “alleviating pressure on the general fund to free up additional funds for other programming, such as academic and mental health support in our schools.” The district just released its ten-year technology plan, and six out of the ten years use up virtually the entire levy. There isn’t a lot of wriggle room for other expenditures, and the teacher contract currently being negotiated will certainly siphon off some of that money.
A considerable amount of skepticism exists in the community about giving more money to a school district that has so often promised big dividends in the past, then broken those promises.
Part of the money that would pour in from the passage of both levies would go into staving off looming deficits projected from COVID-relief funds drying up. The district has been using this money in its budget and had no off-ramp in place for the day when the bonus money was gone. “The $5.29 (million a year, from the capital levy) is forecasting out the deficit, and we’re adding $2 million ($2.6–from the bond referendum) on top of that” is the way the bond broker phrased it. Superintendent Magas said the deficit could run as high as “$20 million over the next 4-5 years,” during the referendum presentation given at East High.
Will Duluth taxpayers reach deeper and give the district this support? Citizens are very burdened by skyrocketing taxes, and I frankly think the school board’s attitude has been less than empathetic to that burden. The board hasn’t accepted any responsibility for past mistakes and all seven members seem to think what they’re asking for is due to them.
The Duluth school board has also been the most aggressive board in the state when it comes to taking away the public’s right to vote. Local taxpayers should be aware of a taxing authority granted to Minnesota school boards during the last state legislative session. Boards can now renew any property tax levy one time for the same amount and duration. $52.9 million for ten years is likely to become $105.8 million for twenty.
The Superintendent keeps repeating that the district has gotten its “financial house in order.” ISD 709 just received $6.5 million a year in new funding from the state, and is already warning about deficits and asking the public for $7.9 million a year more. Some citizens might legitimately question just how “in order” the financial numbers are. One fiscal problem is the runaway cost for employee benefits, which has spiked by more than eight million dollars (from $25,164,518.00 to $33,217,731.00) in four years. Take away the increase in this one budget line and the district wouldn‘t need to ask the public for $7.9 million.
During an informational meeting in Denfeld High on 10/18/23, the Chair of the school board said the school board is considering a 3% pay raise for each year of the contract currently being negotiated with the teachers’ union. Obviously a fair amount of the levy money raised would be used to cover the cost of that raise.
On top of the $74.7 million this combined levy would cost over ten years, the public will also pay $39.5 million for the new buildings on the Central campus starting in 2029. Tens of millions of dollars of the Red Plan’s original debt also remain to be paid, and taxpayers will continue making payments on the Red Plan over-budget through 2028. The final payment for that bond (due 2/1/28) is $4,470,000.
The Superior School District did much better in making progress on test scores with COVID-relief money than Duluth did. The primary reason for this is because a sizable percentage of the extra money that came to ISD 709 was used to plug holes in the budget, such as covering the exploding employee-benefit expense and replenishing a reserve fund which was nearly completely depleted. During the meeting held in Denfeld High, the Superintendent told the audience that the reserve fund, which was only $.5 million, is now a healthy $10 million.
It is good to have a $10 million reserve, but those millions diverted into the reserve were denied to the students.
The pandemic in one way was a blessing for ISD 709. Without COVID-relief money, our school district would have been hurting very badly financially. The district has been living in fiscal la-la land on that extra money. It’s been apparent for some time that when the money stream finally dried up, we would come back to reality. And the taxpayers pay for reality.
Some good-hearted citizens believe they have a duty to reach deep and support public education no matter what cockamamie thing the school board does, and everyone has a right to vote however he or she wants. The outcome for these two referendums will hinge, as always, on voter turnout. Tell everyone you know who doesn’t plan to vote not to gripe if things don’t come out the way he or she wants.
Combined with a contested mayoral race and several other important races for public office, the district’s referendum questions are likely to draw voters into the polls on September 7th. We may even top 50% voter turnout in an off-year local election for the first time in 16 years, which of course is good for democracy.
Please spur all your friends, neighbors, co-workers and family members to vote. The extra tax burden citizens will bear if these referendum questions pass would be beneficial to our school district, but are you willing to pay more? Do you trust the school board to spend it well?
I personally am voting no on the bond referendum and am leaning heavily against the capital levy referendum. To be fair, I am going to listen to the school board and district administration until election day to see if they can convince me to vote yes on the capital levy money. I don’t think they can, but everyone has a right to gather every bit of information and decide for him- or herself. Again, the combined levies will cost a significant amount of money: an additional $74.7 million of tax burden over the next decade.
The school board is actually giving you a chance to say yes or no on a large tax increase in this election. Don’t waste that chance. Please vote and make sure everyone you know does!!