By John Diers Oct 28, 2017
Prior Lake and Savage voters turned down a $150 million school referendum in May 2016. The rejection should have been a signal to the school board majority and the administration that it had a credibility problem with voters. Unfortunately, rather than starting fresh and dealing with the issues, it wrapped the old referendum in a doubtful financing scheme to make it more attractive and, worse, reaffirmed its questionable business relationship with the consultant, Nexus. It also mobilized a “vote yes” group of parents and teachers to drum up support for some seriously flawed decisions by the board majority and the administration.
Let’s be clear. Prior Lake and Savage are growing communities and more classrooms and building improvements are required to meet the academic needs of current and future students. That’s a given, and, although I understand and support the need, I cannot vote for this referendum. My critique is not directed at the parents, teachers, and students who need and use the system. It is directed at a board majority and administration that have made some poor decisions in placing this referendum on the Nov. 7 ballot.
This is a bad proposal, and, as a bad proposal, it did not earn unanimous support from this school board — which says something in itself. Two board members dissented. One, Melissa Enger, was an unequivocal “no.” The other, Mary Frantz, abstained and offered a fact-based explanation of her abstention and a critique of the majority’s decisions in an Aug. 26 column in this newspaper. If you haven’t read it, go back and do so. Similarly, read Bryan Fleming’s commentary in the Oct. 21 Prior Lake American. As for the consultant, Nexus, and its relationship with the district, see the letter from Duluth School Board member, Art Johnston, in the Oct. 21 edition. And for more background, go to a series of articles in City Pages and the Duluth Reader about the Nexus principals and their activities in the Duluth school system.
School board chair, Richard Wolf and some “Vote Yes” folks argue that all of this is a “distraction.” But is it a distraction to question how and why a public policy board would execute a no-bid contract worth millions of dollars with a consultant that had no previous track record or experience? For me it is an inexcusable failure of public accountability that raises issues about insider influence and possible conflicts of interest in the consultant selection. Why did the board blithely accept the staff’s recommendation and not demand and direct a public proposal process? Who is in charge and accountable, the board or the staff? Was there no concern by the chair and the board majority that this would raise questions that it now dismisses as a distraction?
Keep in mind the district will pay approximately $13 million to Nexus, 12 percent of the referendum amount, and portions of that money will go to subcontractors, but how much? This is in addition to what I estimate is $10 million already paid ($8.7 by mid-2016 plus payment for an additional contract Nexus received some time ago). Why didn’t the district hire a professional architect-engineer and necessary support staff to manage the project and then incorporate these positions in a newly reorganized engineering and facility maintenance department? Who in the school district organization will manage and audit the work of the consultant? What controls will be in place? Who follows the money? Where is the value in all of this for taxpayers, students and teachers?
Last year the district asked for approximately $150 million in the failed referendum. This year it’s back with a $109 million request — ostensibly a lesser amount, but is it? Or, is the $109 million the result of a shell game that transferred approximately $12 million to long-term facilities maintenance, another $10 million to “lease levy,” and a penalty of $9.3 million in financing costs to lower initial bond payments to hide long-term costs.
You may ask and wonder about the running track and the additional non-academic gymnasium space and all the rest. They’re not in the referendum, but they didn’t go away, and eventually you will pay for them.
Which brings me to the question of financing. The board is proposing capital appreciation bond financing. Think of it as buying an expensive home with a low monthly payment but with a huge balloon penalty at the end. As Bryan Fleming points out in his column, such financing is extremely risky and will cost Prior Lake taxpayers an additional $9.3 million. However, if there are interest fluctuations the amount could reach as much as $15 million — or more. Which is why the Minnesota Department of Education reports that only five percent of districts nationwide use CAB financing and why it’s illegal in Michigan, and discouraged in California and elsewhere.
So why did the board approve CAB financing? How many models did it consider and who proposed them, or did it simply take the staff recommendation as it did with the Nexus selection?
If this referendum is rejected and the board comes back with a request that addresses these “distractions,” I will be there and knock on doors to support it, but not this time.
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John Diers is a Prior Lake resident who spent 40 years working in the transit industry and is the author of “Twin Cities by Trolley: The Streetcar Era in Minneapolis and St Paul” and “St. Paul Union Depot.” To submit questions or topics for community columnists, email firstname.lastname@example.org. (Editor’s note: Diers is a community columnist and not employed by, or paid by, the newspaper.)