Pillager School District heads toward May election for revised referendum

PILLAGER-May 14 will be a significant day in the Pillager School District.

On that day, residents will cast their votes for a roughly $14.39 million referendum that would fund additional learning spaces, solve several maintenance issues and build a 350-seat auditorium.

This plan comes after a $13.2 million referendum asking for many of the same enhancements failed in 2017.

Lack of support

The 2017 referendum consisted of just one question asking for support to build more early childhood and elementary classrooms, tend to facility maintenance needs and build a 500-seat auditorium. About 61 percent of voters opposed the plan.

This past fall, the district sent out a survey asking voters how they voted, why they made that decision and if they might support a future referendum.

Of the more than 400 district residents who answered the survey, 76 percent said the referendum cost was too high, and 72 percent did not support the auditorium.

Survey results also showed a lack of support for additional early childhood spaces, which is not planned to be part of the upcoming referendum. Respondents did, however, show support for funding maintenance projects-like a new roof and updates to several exterior doors and windows-and additional elementary and vocational class spaces. Vocational programs include hands-on learning classes like culinary arts, welding and woodworking.

Lastly, Superintendent Mike Malmberg said the survey showed support of separating the issues into two referendum questions-one to deal with additions and maintenance and one to deal with the auditorium-and having another vote as soon as possible.

Back to the drawing board

In November, school board members and district officials met for a workshop to discuss the survey results and how to move forward. The ultimate result was a new two-question, $14.39 million referendum.

Officials recently presented the revised plan to a 30-person task force made up of residents, business owners, parents, grandparents, farmers and city and county officials. All task force members but one suggested the district take the new plan before voters May 14. A spring election, Malmberg said during a Tuesday, Jan. 29, interview, is the soonest the district could put a new plan together. If the questions pass during a spring election, the district can then go out for project bids in the fall and begin construction the following spring.

Question 1

The first of two referendum questions-estimated at $8.4 million-will focus on fixing maintenance issues and adding classroom and vocational learning spaces.

A new roof for the elementary and middle school wings of the K-12 building is among the building's most pressing needs. The high school wing was built via referendum in 2011, but the school's current performance stage dates back to 1940, and other sections of the middle and elementary areas were either built or updated in the '90s.

Because of the building's age, sections of the roof previously patched now need to be replaced altogether, Malmberg said. Some exterior windows and doors also need replacing, and some brick and mortar work needs to be done on the outside of the building.

In the elementary area, four additional classrooms are included in the first question, along with a music room, technology room, special education rooms, one flex classroom to be used as needed, a new health clerk office by the front entrance and an expanded entrance hallway. Bathrooms and two classrooms would also see updates and additions.

The middle school would regain two classrooms now being used at the elementary level. It would also see its special education areas updated and remodeled and an added teacher work area to free up classrooms to use during prep hours.

Question 1 would include several additions and updates for the district's vocational services programs as well.

The current bus garage-which Malmberg said has been used as a storage space for years-would be transformed into a woodworking classroom, giving the metal and auto area more space and room for updates. The ProStart culinary program would see three new commercial kitchens, and a makerspace flexible classroom would be created in the media center to be used for additional programming. An online learning lab would also be created.

Question 2

The second question, which is contingent on Question 1 and cannot be passed on its own, deals with the creation of a 350-seat performing arts auditorium in the high school wing for $5.9 million. Pillager currently has a cafetorium-that is, a stage built in to the elementary school cafeteria. During a previous interview, Malmberg said the area doesn't provide adequate lighting and seating for shows or storage space for performing arts programs.

"Auditoriums are sometimes thought of wants versus needs, but I don't know if that's so much the case anymore," Malmberg said. "There's several districts in our area that have either asked for one or just passed one or are asking for one, and we don't have one."

Last April, the voters in the Brainerd School District approved a referendum question asking for a 1,200-seat auditorium. Pequot Lakes, Aitkin, Crosby-Ironton and Staples-Motley also have auditoriums.

"It's going to be used every day," Malmberg said of the proposed auditorium. "I don't think people understand ... the use that you'd have with it throughout the day, not just for plays and musicals and concerts."

The school has a summer theater program and a fiddlers contest Malmberg said could make use of the auditorium, and it could invite touring groups to play shows in Pillager, as well or provide space for political caucuses.

"There's lot of different things," he said.

Tax impact

Though the revised referendum costs more than the failed 2017 plan estimated at $13.2 million, the tax impact to voters this time around is lower, Malmberg explained, as the district's net tax capacity has increased by 11 percent since the last vote.

If voters approve both questions, property owners will see the following tax increases:

• $100,000 home-about $3.40 a month, or $41 a year.

• $150,000 home-about $6 a month, or $72 a year.

• $300,000 home-about $13.80 a month, or $166 a year.

• $100,000 commercial property-about $7 a month, or $86 a year.

• $500,000 commercial property-about $44 a month, or $530 a year.

• $1,000,000 commercial property-about $92 a month, or $1,103 a year.

• $100,000 seasonal recreation property-about $4.75 a month, or $57 a year.

• $250,000 seasonal recreation property-about $12 a month, or $144 a year.

• $500,000 seasonal recreation property-about $24 a month, or $287 a year.

In contrast, the 2017 plan would have seen homeowners with a $150,000 property paying about $8 more a month, or roughly $102 a year. The cost for Question 1 would be spread out over 20 years, and the price of the auditorium over 22 years.

If voters approve just Question 1, property taxes will increase as follows:

• $100,000 home-about $2 a month, or $24 a year.

• $150,000 home-about $3.50 a month, or $42 a year.

• $300,000 home-about $8 a month, or $97 a year.

• $100,000 commercial property-about $4 a month, or $50 a year.

• $500,000 commercial property-about $25.75 a month, or $309 a year.

• $1,000,000 commercial property-about $53.50 a month, or $643 a year.

• $100,000 seasonal recreation property-about $2.75 a month, or $33 a year.

• $250,000 seasonal recreation property-about $7 a month, or $84 a year.

• $500,000 seasonal recreation property-about $14 a month, or $167 a year.

The district will provide a tax simulator in the coming months for residents to enter the value of their property and see the tax impact.

If the first question were to fail, Malmberg explained the district would be forced to levy more long-term facilities maintenance dollars to pay for a new roof, which is among the building's most pressing concerns. So pass or fail, property taxes are likely to increase.

The Minnesota Department of Education's long-term facilities maintenance revenue program offers non-voter approved funds to pay for a district's 10-year facility plan. Money from the program can only be used for the following purposes:

• Deferred capital expenditures and maintenance projects necessary to prevent further erosion of facilities,

• Increased accessibility of school facilities,

• Health, safety and environmental management costs associated with implementing a district's health and safety program,

• Transferring money from a district's general fund reserve for long-term facilities maintenance to the debt redemption fund to pay amounts needed to meet principal and interest on general obligation bonds. Long-term facilities maintenance revenue program funds can only be used in this way after school board resolution.

Since these funds have been available to Pillager since 2017, the district has not always levied as much as it could have, as Malmberg said district officials wanted to keep taxes as low as possible. In 2017, the district levied $87,244 out of a possible $150,588, while in 2018 the district did levy the full $350,443 worth of maintenance program funds. This year, the district levied $117,600 out of a possible $382,171, which will result in property taxes being virtually unchanged or slightly reduced, depending on property values.

But if Question 1 on the new referendum fails, Malmberg said, the district will be forced to levy all $382,171 maintenance program dollars available in 2020 to pay for a new roof.

In that case, overall property taxes would still rise. Taxes on a home valued at $150,000 would increase about $2.30 per month, or $28 per year.

"You're really voting for $14, and residents get so much more for additional dollars," Malmberg said of Question 1.

And the tax increase from levying more state maintenance funds would pay only for a new roof, Malmberg noted, whereas funds approved in a referendum would result in more classroom space, additional vocational areas and more maintenance fixes.

"It's kind of a no-brainer, in my opinion," he said.

Because of Minnesota's Ag2School tax credit, farmers with homestead and non-homestead agricultural property would actually see a greater tax increase if Question 1 of the referendum fails and the district has to levy maintenance program funds. The Ag2School credit provides tax relief to farmers in agriculture-rich school districts. As a result, owners of a $3,000 non-homestead agricultural property would see an increase of $0.60 per acre a year with the passage of Question 1, versus a $0.66 per acre yearly increase with program funds. Similarly, farmers with homestead agricultural property at the same value would see a tax increase of $0.30 per acre a year if Question 1 passes, versus a yearly increase of $0.33 per acre if it fails. A farmer with non-homestead agricultural property valued at $6,000 would see a yearly increase of $1.20 per acre with the passage of Question 1, versus $1.32 per acre with maintenance program funds. An agricultural homestead property valued at the same amount would see an increase of about $0.60 per acre a year if Question 1 passes, versus a yearly increase of $0.66 per acre if it fails.

2011 referendum

A question Malmberg said he has heard several times from voters is why the district needs another referendum so soon after the 2011 vote that funded the high school wing of the building.

Since that time, he said enrollment has grown faster than anticipated, and the 2011 project did not address the elementary school, middle school, vocational programming or maintenance needs.

The 2011 addition will be paid for by 2031, the 20-year timeline residents approved with their vote. The district has paid interest on the project up until this year as other existing debt came off the books, and it will now begin paying more money toward the principal of the 2011 addition. Malmberg said the district kept taxes at a relatively consistent rate when the last referendum was passed, which helped spread the cost to more residents over time who will benefit from the building in the future.

Open enrollment

With about 42.5 percent of students in the district open-enrolled, another question Malmberg said he hears from residents is why the district doesn't close its open enrollment so Pillager taxpayers aren't paying for buildings to house students that don't even live in the district.

Open enrollment means students who do not live within the Pillage School District can still attend school there.

The simple answer is that open-enrolled students generate much-needed revenue for the district.

"Those open-enrollment kids bring with them revenue," Malmberg said. "Yes, you would have to build buildings for them, but without those students, you can't collect that $7.18, so I wouldn't be able to offer some of the programs I offer without those kids."

Not having the extra funds generated from open enrollment, Malmberg said, would result in: larger class sizes; limited College in Schools courses; fewer counseling and social services; and fewer technology, fine arts, vocational and high school elective courses.

At the beginning of the 2018-19 school year, Pillager saw a student body of 1,160. Of those students, 493 were open-enrolled. The district also had 213 students who lived within the district but chose to open-enroll elsewhere. Closing open enrollment, therefore, would result in fewer students in the district overall and less revenue. And while those 213 students do not directly generate revenue for the district right now, those residents still contribute to the district's tax base.

However, the district recently approved a policy to cap open enrollment at 105 students per grade, enabling the district to operate within a recommended class section size and facility guidelines for the 2011 high school addition.

The Pillager School District receives about $10,300 per student in state revenue each year, while the average Minnesota school district receives roughly $12,300 per student. That discrepancy is explained by excess operating levy referendums many districts have in place. Each school district in the state can levy $724 per student each year of non-voter-approved local optional revenue. Districts can also earn an extra $100 per student of voter-approved funds through an excess operating levy referendum. The average district with an excess operating levy in place receives $1,370 per student, which would garner an extra $750,000 of revenue per year for Pillager if it were at the state average.

About 70 percent of Minnesota school districts approve such a levy each year. Pillager, however, does not, as only year-round residents pay for those funds, but about 50 percent of the property in the Pillager School District is owned by seasonal residents. The likelihood, then, of Pillager voters approving an excess operating referendum is low, as they would have to pay much more per taxpayer than districts completely made up of full-time residents.

"Excess operating referendums have created an unequitable system in our state based off your net tax capacity and your ZIP code," Malmberg said, noting Pillager would have a difficult time passing an excess operating levy. "It would cost too much money."

That's where open enrollment comes in. Pillager is still able to levy $724 per open-enrolled student. And every dollar the school board levies on residents' school district taxes garners $7.18 from the state in additional revenue for students.

Moving forward

Right now, the district is working to get approval for the referendum from the Minnesota Department of Education. Malmberg does not expect that to be an issue after the MDE approved the 2017 referendum. After obtaining approval, the district will send more information out to voters and schedule public meetings.

Malmberg wants to ensure voters district officials have done their homework and worked diligently to develop a much-needed referendum plan. But he wants voters to do their homework as well.

"I want people to really make sure that they ask questions and get the facts," he said. "I value everybody's vote, whether it's a yes or a no. I just ask people to make sure you know what you're voting on and for because some people may not understand that their taxes are going to go up one way or another. ... Either way you're going to be voting for a tax increase, so make sure you know that you're voting for the right increase."