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Duluth School Board approves debt refinancing and restructuring

The Duluth School Board Tuesday night approved the refinancing and restructuring of debt services related to the Red Plan

The board voted unanimously to approve the refinancing of two bonds, which were sold last week, and voted 5-1 to restructure a third, with board member Nora Sandstad voting no. Board member Sally Trnka was absent.

The refinancing of the two bonds, which is paid through levy money, will save taxpayers more than $2.27 million over the next eight years. The third bond, which is paid from the district's general fund, could cost the district about $1.56 million more in interest in the long run and extend the life of the bond by four years through 2034, but will free up about $700,000 a year in the general fund initially, which will grow to more than $800,000 a year toward the end of the bond life.

In March, when the district was given estimates in savings and costs, the refinanced bonds were only estimated to save taxpayers about $1.7 million and the restructured bond was going to cost the district about $4.3 million extra in interest and the life would have been extended to 2036. But due to market conditions, the final savings are more favorable.

Sanstad said she voted against restructuring the bonds because she is thinking of future School Board members who would have to deal with decisions made now.

"We should not be extending out our payments, particularly from the general fund," she said. "It's a problem that we were saddled with a decade ago and I choose not to saddle the board of 2031 with this continued obligation of several million dollars of the general fund."

The school district will have the option to pay off some of the debt on the restructured bonds from 2023-2027 is the district were to sell a property currently in its possession, such as Central High School which is listed for sale at $7.9 million. This option is only triggered by the sale of a property. According to CFO Cathy Erickson, if the district were to sell property before 2023, it could choose to retain the money from the sale until 2023 to pay off the debt.

Board member Josh Gorham, who had voted against the restructuring in March, said he changed his mind because the numbers came back more favorable and liked the idea of being able to pay the bonds off early with money made from the sale of property, which would save the district interest payments in the long run.

Boundaries

The board also unanimously approved hiring Cooperative Strategies, a nationwide education financial and demographic planning company, to provide boundary planning services. Cooperative Strategies' bid was $58,900 plus estimated expenses of $14,855.

"I believe for the health of the district, both financially and space wise in our buildings, that we should look at a boundaries study so we can even out those enrollment numbers in our schools," superintendent Bill Gronseth said. "This would give us an opportunity to enter in to a community discussion and staff discussion about what we would like our enrollment numbers to look like and what our priorities should be."

Northspan, a Duluth-based business and community development consulting company, was the only other bid, which came in at $19,000 to $24,000. Though their bid was lower, it was recommended to the board to approve Cooperative Strategies' bid because school boundary changes is what they do. Board member Alanna Oswald said she agreed with the recommendation to go with a national firm because it will be better for the community.

"I know that there has been a lot of conversation about wanting to spend the least amount of money possible and that we should go with a local company because they know what we have. But I have to argue that the national company has a much better product for us to take advantage of and to engage community members with," Oswald said. "There are many complexities when discussing boundaries and it's really hard to encompass all of them with a couple of local people who haven't done it before. The national firm is somebody who works solely on doing this and knows the pitfalls. I think it's well worth the expense and I've been assured that we can afford it."

The board also voted Tuesday to definitely postpone approving a new background check policy until May.

Adelle Whitefoot

Adelle Whitefoot is a Michigan native who moved to Minnesota in Sept. 2014 when she started as a reporter for the Lake County News-Chronicle. She graduated from Northern Michigan University in Marquette, Mich., in 2012 with a bachelor's in English writing and has been a professional photographer since 2011. Whitefoot is the night general assignments reporter for the Duluth News Tribune. 

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