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School board OKs sale of OPEB bonds

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Farmington, 55024
Farmington Independent
651-463-7730 customer support
Farmington Minnesota P.O. Box 192 / 312 Oak St. 55024

There was dissent, debate and even a little drama, but the District 192 School Board on Tuesday but board members ultimately voted to approve the sale of $6 million in bonds to pay for retirement benefits owed to current and former district employees.

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The bonds, which the district will sell sometime in the coming week with the help of financial advisor Ehlers and Associates, will help the district pay for health benefits that were written into district contracts years ago when such benefits were cheap. Those benefits have since been written out of contracts, but finance director Jeff Priess said the annual bill for the benefits could grow to as much as $1 million down the line as more employees retire.

Funding for the bonds was included in the property tax statement sent to residents. The bonds will cost the owner of a $250,000 home about $31 per year.

The board voted 4-2 in favor of selling the bonds. Board members Tim Burke and Julie Singewald cast the dissenting votes.

Tuesday's animated discussion was hardly a surprise. The bonds, commonly referred to as other post-employment benefit bonds, have been a hot topic for some current school board members even before they took office.

Most at issue, it seemed, were questions of whether the district needed the bonds and whether the board could support asking residents to pay a bigger tax bill at a time when many are struggling to make ends meet. For some it was a question of balancing the long-term needs of the district with the present-day pocketbooks of residents.

The district currently pays for retirement benefits out of its general fund, but Priess has said that will become increasingly difficult as the cost grows.

"This is an item that really helps the district with that liability," Priess said. "It certainly helps with the general fund."

Using bond money to pay for the retirement benefits, Priess pointed out, frees up general fund money to pay for other things.

But board member Tim Burke has long argued that there are too many uncertainties with future finances to commit the board now. He objected to the idea of burdening taxpayers with a problem for which better solutions might arise.

Burke also objected to a proposed payment plan that has the district making payments on the bonds for a few years after the money raised by the bonds has run out.

"That's just fiscal irresponsibility in my mind," Burke said.

The $6 million bond is not expected to cover all expenses related to retirement benefits but Priess expects it to help the district for a dozen or so years.

Burke made an alternate motion Tuesday that would have led to the district putting a levy vote to residents, possibly by mail. But Priess said there would be no way to restrict the use of that money to retirement benefits. Board member John Kampf had other objections, raising concerns about the reliability of mail ballots in light of the current U.S. Senate recount.

"As far as I'm concerned any road that leads to a mail ballot should have a barrier 10 feet wide and 50 feet high saying, 'Don't go up here,'" Kampf said.

Burke's alternate motion failed, 4-2.

For Singewald, the objection was more emotional and more personal. She teared up as she talked about other district residents who have lost their homes. And while she liked the idea that freeing up general fund money could mean smaller class sizes she worried about the burden the bond would put on taxpayers.

"In five years my taxes have gone up $1,000 for the school district," Singewald said. "Sometimes $30 more is $30 too much."

Kampf, though, worried that not selling bonds now would hurt the district down the line, forcing some future school board to make drastic cuts in order to pay the OPEB bill..

"I'll be damned if I'm going to allow harm to (students)," he said.

District 192 is not alone in its decision to sell OPEB bonds. Since the Minnesota Legislature made the sales possible last year at least 36 districts have authorized sales in amounts ranging from $725,000 in Kingsland to $40 million in White Bear Lake.

Details scarce

It's impossible to put an exact cost on the bond sale just yet because the sale has not been made. Tuesday's vote superintendent Brad Meeks and board chair Bob Heman to work with Ehlers and Associates to sell the bonds, but there are no solid numbers just yet.

Ehlers representative Joel Sutter said Tuesday he expects the sale to take place in the next week. The board capped the interest rate for the bonds at 6 percent.

The district currently has a preliminary offer at a 5.65 percent interest rate.

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