The Minnesota Court of Appeals ruled in favor of the Yellow Medicine East School District reversing a decision by Yellow Medicine County District Court.
Kevin K. Stroup, Stoneberg, Giles & Stroup, P.A. Marshall, Minnesota represented respondents Scott Wintz and Patrick McCoy. Eric J. Quiring, Ratwik, Roszak & Maloney, P.A., Minneapolis, Minnesota represented YME (appellants).
Initially, Wintz and McCoy brought suit against YME claiming that YME’s attempt to use Alternative Facilities Program (AFP) funds was improper and unlawful and that the funding must be approved by the voters in the YME District. Eighth District Court Judge Slieter ruled that there was evidence to support YME’s claim that the ventilation improvements would meet state standards and state statute allows for Alternative Facilities Program funds to be used for ventilation equipment which meets the state standard, without a need to show specific current health or safety deficiencies. In his ruling Judge Slieter noted: “To this issue, the Court finds Defendants [YME] have a greater likelihood to succeed in demonstrating that the statue provides the authority to fund the ventilation system improvements.”
A second challenge was filed in 2010 by the law firm of Stoneberg, Giles, and Stroup, of Marshall. In that suit, Stroup, representing Scott Wintz and Patrick McCoy, challenged the scope of the project and claimed the project included improvements outside of what the state statue allows. The suit identified two portions of the school district’s construction project that did not qualify for funding under the AFP funds. The areas identified as being outside the scope of the ventilation system were the hot water piping and the fire suppression system.
In the decision of the three judge panel at the Minnesota Court of Appeals the opinion states: “Because we conclude that the district court’s finding that the hot-water piping portion of the project is not part of the ventilation system is clearly erroneous and because the sprinkler-installation portion is necessary to correct a fire or life-safety hazard, we reverse.”
The written decision cited that the Minn. Stat. 123B.59, subd 3a, governing the use of AFP, that fund one or more safety projects with an estimated cost over $500,000 or more per site will qualify for health and safety revenue. The decision states that the only question before the court was whether certain portions of the project “qualify for health and safety” revenue. The decision cited Minn. Stat 123B.57, subd. 6(a), that defines the approved uses of health and safety revenue as expenditures necessary to correct fire and life-safety hazards, as reason to include the fire suppression system in the AFP funding.
During the hearing, Perry Schmidt, the sales consultant from ESG who worked on the project evaluation and proposals, testified that it is the Minnesota Department of Education’s policy to consider hot water piping located outside the mechanical room as part of the ventilation system that is eligible for AFP funds. Schmidt testified that ESG’s evaluation of the existing piping indicated that it was too old and corroded to work with the new system. According to the written decision, respondents pointed to no contrary evidence.
Page 2 of 3 - In the matter of the fire-suppression system, the district court’s reasoning was that the installation of the sprinklers would qualify for funding under AFP if YME could provide evidence of an incident of a fire or life hazard indicating the need for sprinklers. The appellant court’s decision states that there was no legal requirement to provide evidence of an incident of fire or life hazard, rather that hazard is defined as a chance of being injured or harmed and it is not necessary that a harm or danger has already occurred. In addition, YME provided testimony that the State Fire Marshall had issued an opinion that the lack of sprinklers constituted a violation of Minnesota Fire Code. The appellant court decision state decision stated: “Further, common sense dictates that the chance of fire spreading is greater in the absence of fire-suppression equipment.” The court concluded that a near-complete lack of sprinkler protection and the state fire marshal order to correct this deficiency were sufficient evidence of a fire or life safety hazard and that the cost of installing such protection falls within the statue.
At the Monday night school board meeting, YME Superintendent Al Stoeckman said, “This suit has been going on for three years, we hope this will be the end of it.” He shared that since February 2010 the cost of the lawsuit has exceeded $80,000. Those dollars have been paid with general fund revenue. Board member Jane Hagert, questioned, “So this lawsuit has cost us the salaries of two first year teachers?” Stoeckman replied, “Basically, yes.”
Respondents Wintz and McCoy now have thirty days to appeal to the decision of the Minnesota Court of Appeals to the Minnesota Supreme Court.
Stoeckman indicated that the district will wait the thirty days and then contact Ehlers and Associates to sell the remaining $1.25 million in bonds. All of the work has been completed on the facilities project, however there are unpaid costs. Through an agreement with ESG, all of the contractors have been paid. Stoeckman explained that the unpaid costs actually will come in under a million dollars. “We got very favorable construction bids during the project.” The initial bonds were to be covered by Qualified Zone Academy Bonds (QZAB), very low interest funds. However, the lawsuit delayed the payment of the bonds and YME lost that funding. “There will be higher interest rates on the bonds that are left to sell. The market looks good, and we’re lucky the interest rates are still low,” shared Stoeckman. He did indicate that QZAB funds are still available and he will apply. “I’m going to apply for QZAB funds, we were lucky when we started this project and got over $10 million in those funds last time.”
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