This past Thursday, District judge Randall Slieter issued a remedy order on approximately $2.44 million worth of health and safety improvements undertaken by the Yellow Medicine East School District that the judge had determined to be outside of the state’s Alternative Facilities Bonding and Levy Program (AFP) parameters in a ruling in January.
Most concerning to the district is an order prohibiting YME from issuing the lone remaining bond funded by the AFP?in the amount of 1.25 million, however, the ruling also binds the district from paying any unpaid portion of the project which is not eligible to receive AFP funding from existing AFP bond dollars and also awards plaintiff’s costs and distributions that do not exceed $10,000 at this point in time, according to plaintiff Kevin Stroup, of Marshall law firm Stoneberg, Giles & Stroup,
YME?appeared to be spared from a harsher ruling that might have required the district to refund the $2.44 million worth of health and safety improvements deemed to be outside the jurisdiction of the AFP.
Both the district, represented by Eric Quiring of Minneapolis law firm Ratwick, Roszak and Maloney. and plaintiffs Scott Wintz and Patrick McCoy will have 60 days to appeal the order.
“At this point we’re talking with our engineering firm, [Energy Systems Group, of Wayzata] ESG? and the Minnesota Department of Education, who again approved the project and project financing, to see what our next steps could be,” said Superintendent Al Stoeckman.
Stoeckman said a recommendation based on those discussions would be made to the school board during its July 16 meeting, and it is the board that will ultimately determine the district’s course of action. In turn, Stroup said the plaintiffs would wait to hear what was decided at the meeting before deciding whether or not they would appeal.
“I thought the court would grant a broader remedy,” Stroup said.
Over the course of the summers 2010 and 2011, the YME District went forward with $11.57 million in largely health and safety based construction improvements at the elementary and high schools.
Under the state’s Alternative Facilities Bonding and Levy Program, if school projects meet certain health and safety improvement criteria, the district is permitted to levy the cost of the improvements without having to hold a public referendum.
Utilizing findings from three independent facility studies performed between 2003 and 2008, the district successfully pursued state authorization of $10 million of the project’s total sum.
With questions as to how such expense could befall property owners without voter input, district taxpayers, Wintz and McCoy, first filed a lawsuit in May of 2010. Their first action, an attempt to place an injunction progress was denied, but a lawsuit alleging that YME’s project went beyond AFP parameters continued to make its way through the courts.
Page 2 of 2 - The school could have held up on the project, but in doing so would have lost out on federal Qualified Zone Academy Bonds (QZAB)?that, with their accompanying near-zero interest rate, were to save the district approximately $4.7 million in interest payments over the life of the 15-year term.
Weighing their options, the district took into account that the AFP health and safety project had been reviewed and approved by ESG; bond consultant, Ehlers and Associates of Minneapolis and the Minnesota Department of Education before deciding to proceed.
With BRE improvements already complete, work was just getting underway at the high school in June of last year when a ruling by Slieter surprised the district, confirming that $7.2 million of primarily heating, cooling and ventilation system equipment was compatible with the AFP framework but that a $2.44 million portion of the project warranted another look.
Not contained within the district’s original AFP plan, the work in questioned mostly involved hot water pipes, sprinkler systems and mold abatement.
The plaintiffs charged that the availability of low-interest loans led the district to undertake work in excess of what was needed while the district maintained that the project additions, only considered when original construction bids fell well under projections, were approved by the state under the AFP parameters.
Slieter’s ruling stated that the earlier studies had proven the need for the school’s ventilation equipment, but there was no such relative, documented, proof for the other additions and, therefore, they did not meet state guidelines.
In one instance Slieter noted that a recommendation by the Fire Marshall to get sprinklers is not the same as a mandate or study proving that they were necessary.
A narrow remedy
Stoeckman said that all of the parties are hoping for a quick end to the ordeal. To date, $57,212 in legal fees have been spent on the facilities lawsuit, he said.
According to a memorandum within the remedy order, all but approximately $900,000 of the AFP funded work has been allocated, of which $710,000 is owed to district’s engineering firm, ESG. Beyond the use of AFP funds, YME would not be restricted in how it covers this sum, including levying taxes.
In Slieter’s remedy order, the judge explained that he did not pursue broader remedies because the district’s actions did not involve intended wrongdoing and therefore the order’s purpose was to deter others from performing actions akin to those of the district’s in the future.