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Minnesota Auditor's Office review fails to mollify critics of Duluth's Red Plan

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Duluth News Tribune
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Duluth Minnesota 424 W. First St. 55802

A financial review by the Minnesota Office of the State Auditor of the Duluth school district’s $315 million Red Plan revealed few new details, to the disappointment of the plan’s opponents.

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Past Duluth School Board candidate Loren Martell spent about 18 months working to gather more than 2,000 signatures that would guarantee a “petition engagement.” The state office spent more than a year examining financial records of the construction and consolidation plan, from its 2007 inception through 2013. Representatives from State Auditor Rebecca Otto’s office presented a report to the School Board on Tuesday, but gave no opinion. Findings did reveal that more than $6 million remained in Red Plan coffers through Dec. 31, 2013. The final two schools — Myers-Wilkins and Congdon Park elementaries — opened last fall.

“I was hoping for some clarity and truth,” Martell said, noting there were only a few things in the report he found worthwhile, such as the confirmation of certain figures.

Martell had hoped for a full audit, and was disappointed that his request had been narrowed. The office has legal authority to restrict the scope of its review when citizens

petition for an examination of city, township or school district finances. The office examined only the areas of main concern to Martell.

Reviewed here were soft costs, the source of general fund transfers to help pay construction debt and the amended review and comment plans sent to the state education department in 2011 and 2012. In 2012, the plan increased from $296 million to $315 million.

It was revealed that roughly $224.6 million was spent on construction as of Dec. 31, with about $84.2 million in “soft costs,” or those that pay fees for architects, engineers and anything else not considered a direct construction cost. Of that, $56.5 million went to plan manager Johnson Controls, who paid a percentage of that to sub-consultants, said Dianne Syverson, audit manager for the state office.

School Board members Harry Welty, Art Johnston and Bill Westholm asked for the amounts that went to sub-consultants, of which there are about 20. The state didn’t have that information, Syverson said.

The report confirmed that planned yearly general fund transfers from closing and consolidation savings to pay construction debt didn’t entirely pan out, because of the failure to sell properties and smaller-than-anticipated energy savings, for example, and left a $9 million deficit in 2013’s designated general fund account. Taxpayers have been tapped to help solve that problem until properties are sold.

Johnston and Welty, dissatisfied with the report, had several questions for the presenters.

Johnston, mentioning the petitioners, said it appeared that a lot of their questions have gone unanswered.

“We always look at issues we can measure against a standard or document or some other criteria,” Syverson said. “We typically do not respond to issues in terms of, ‘Is this a good decision or a bad decision.’”

Welty, after the meeting, said the report was “extremely limited.”

“Like all good auditors, they don’t answer the most obvious question if it wasn’t in the scope of their investigation,” he said.

Board Chairman Mike Miernicki, in obvious disagreement with Welty and Johnston, said the report puts questions to rest.

“I am happy this confirmed the information we have been providing to the public for many years,” he said.

Martell later said his motivation behind the petition was to ensure public money was spent in the right way. He sees Johnson Controls as “at the minimum, taking advantage of the school district.”

“If you don’t have good public policy, you’re susceptible to making another mistake down the road,” he said. “I’m not sure I got good accountability here, but I did the best I could as a citizen.”

Superintendent Bill Gronseth, who has held his current position since 2012, said the report confirms what the district has shared “many times.”

“I hope it confirms for people that what the district has done has been right and hopefully we can keep our focus on classrooms and improving instruction and student achievement.” 

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Jana Hollingsworth
(218) 279-5501
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