Red Plan price tag rises by $3.9 millionThe Duluth school district says unsold properties are creating a cash flow problem in the pay-as-you-go facilities project.
By: Jana Hollingsworth, Associated Press
The Duluth school district tonight will ask its School Board to approve an additional $19.3 million for the Red Plan instead of the expected $15.45 million, but the increase isn’t because of project costs.
Most of the extra $3.9 million would cover a cash flow problem caused by failure to sell the Secondary Technical Center and four houses.
The Minnesota Department of Education has asked the district to submit a new “review and comment” for both Myers-Wilkins and Congdon Park elementary schools, because the old plan expired when no construction was done on either school during a two-year span. That means the amended plan for an additional $15.45 million the board approved in June — and which the state has yet to approve — is voided. The new plan asks for $19.3 million, which is made up of construction project requests and the cost to purchase bonds. It includes the original $15.45 million and adds the value of the unsold Secondary Technical Center, which is $3 million, and of four homes for $480,000. The cost to issue bonds, or debt, is $560,000.
The addition of the $3.9 million in the plan up for approval “is not increasing the scope or price of the (actual) project,” Superintendent Bill Gronseth said.
The unsold properties are being rolled in because the money is needed for cash flow. When those properties are sold, the profit will be used toward the total cost of the Red Plan, Gronseth said.
“Construction is pay as you go,” Gronseth said. “We have not sold properties yet that are partially financing the project. We want to be clear we don’t have that money yet.”
The homes — two near the new Lincoln Park Middle School, one near Lester Park Elementary School and one near Piedmont Elementary School — were purchased either for part of the property and not the home itself or were purchased and are no longer needed.
The district is working to sell the school and residential properties, as well as properties such as Central High School and Rockridge Elementary, but it has met zoning and housing market challenges, Gronseth said.
“We’re working with a real estate company and being aggressive with that,” he said.
The additional $19.3 million will not further raise taxes caused by the Red Plan, said Bill Hanson, director of business services for the district.
“It’s within the estimates we had provided before,” in the original plan, he said. “The costs are going to come in at or below that,” based on the expected selling price of the debt.
If the review and comment is approved, the changes will bring the Red Plan to about $315 million.
Board member Art Johnston objects to requesting additional money for the plan, saying he can’t make a decision until he’s been shown more detail on why the money is needed. He noted that costs for both elementary schools have gone up, but the majority of changes aren’t evident.
“I don’t see justification on why it’s $15.4 million, no less the $19 million,” Johnston said.
The plan up for approval makes changes to both elementary school projects, as requested by the state. The Congdon Park project is about $15 million and Myers-Wilkins about $20 million. The projects were estimated in 2007 to cost roughly $8 million and $12 million, respectively. Design changes and additions, along with rising construction costs and unforeseen expenses, have raised project totals, district officials have said.