News & Articles

Two school board committee meetings--HR and Business--were held on 2/15/17. They are on youtube now, if anyone is interested enough to watch. Other than a handful of administrators and the guy filming our seven elected stars for youtube, the boardroom was completely empty. No media people--not even the usually dependable beat reporter from the Duluth News Tribune--were on hand. Just me, sitting in a corner, watching and listening to our government. 
As always, there are a number of things that were discussed during these meetings that are worthy of further discussion, but I just want to take a closer look at one. 
 
It was called long-range

Even the Reader’s staff carped a bit when the Red Plan was again voted the Worst Government Boondoggle, but the instincts of the general public have been right from the beginning. One of my principal objections about a plan that promised to make all our facilities “new or like-new” centered around maintenance. “If you make all the buildings new or like-new within a span of five years,” I may as well have argued to myself, “how are you going to stagger out a viable maintenance schedule into the future? It seems to me that you are setting yourselves up for a huge wave of maintenance expense in about twenty or thirty years.” 

“The reason we need our plan in the first place,” the Red Planners scoffed and countered, “is because this cheap town neglected maintenance all these years and let the school buildings deteriorate.” 
Granted, running up a half billion dollar bill and making all the buildings new or like-new would theoretically solve this problem, at least for a while. The Red Planners in fact felt so confident this concern was eradicated, they essentially wiped the whole subject of maintenance off the table. They argued that all their new or like-new buildings wouldn’t require any maintenance, for at least five years. Only the “most urgent repair and maintenance items were to be included in the plan during that roughly five year time period.” Former CFO Bill Hanson informed me in response to an information request. 

The Minnesota Department of Education approved a multi-million dollar ten-year facilities maintenance plan for district 709 about the time Keith Dixon came to town. Because much of the Red Plan work was technically facility upgrade and renovation, Mr. D. realized he could move this money into the Red Plan’s funding scheme. Essentially, maintenance funds became another source of nonvoter-approved tax money used to pay for the plan. 

  Like new

Johnson Controls is an extremely slippery corporate operator, and the Red Plan is a case study in why it is a bad idea to get involved on a grand scale with a slippery corporate operator. Who was verifying “like-new?” (Definitely not Duluth’s mainstream media watchdog.) The taxpayers have already picked up a three-quarters of a million dollar bill for a new roof on Congdon Elementary and the district’s current ten-year plan includes a new roof ($850,000) slated for Lakewood Elementary next year. We did get some needed upgrades in our school buildings (some of the boilers were ancient,) but part of the “like-new” pitch always felt to me like a used car salesman sanding out some rust, shoving in some putty, spray-painting over the patch and declaring, “This car is just like new!” Obviously a roof that already needs replacing wasn’t like new. 

Another part of the scheme that I found so disturbing at the time, and still do, is that Johnson Controls was also allowed to just toss some of the original work scope of the Red Plan over the side of the boat. The News Tribune reported on 6/25/10 that “an estimated $11.6 million of unexpected additional (Red Plan) costs started popping up 11 months ago.” One of the projects tossed overboard as Johnson Controls scrambled to meet budget and protect its profit by “shifting money around,” as the paper described it, was renovation work scheduled for historic Old Central. 

Here’s the thing about maintenance: it doesn’t go away. Maintenance work deferred still has to be addressed down the road, and the longer it is deferred, almost invariably, the more expensive it gets. 
Last year it was revealed that the lion’s share of the district’s current ten-year facilities maintenance plan was going to be dedicated to renovation work in Old Central. The work scope for the old landmark building is broader than the work originally slated to be done with the Red Plan, but an examination of the numbers raises some questions. All the roof work from the original plan, for example, adds up to $486,756. The roof work included in the current ten-year facilities plan adds up to $2,271,894. Much of the work description overlaps, but there are some exceptions, which probably explains part of the higher cost. However, it seems evident, examining the figures, that at least some of the additional expense is due to a roof decaying in Duluth’s rough elements for another decade or more before being fixed. 

The larger point is: while we spend so much money on Old Central over the next ten years, much of the maintenance in our new or like-new buildings, already deferred five years, is also going to be deferred further down the road. (Some of the earliest “like-new” Red Plan buildings, such as Stowe Elementary, are already nearly ten years old.) During this February’s Business Committee meeting, our school board, ever desperate for funds in the wake of the failed Red Plan, advocated deferring even more maintenance. 

We just blew half a billion on a problem blamed on poor maintenance and maintenance is again being shoved onto the back burner. 
The repairs and renovations of Old Central ($17,899,595) are scheduled to consume 71% of the money district 709 intends to spend for facilities maintenance in its current ten-year plan. All the other facilities combined are only scheduled for $7,364,508 of repair and maintenance. Subtracting $850,000 just for the new roof on Lakewood Elementary leaves about $6.5 million (or $650,000 a year) to maintain all the other buildings, every one not really made “like-new.” 

Obviously the district is already stretched thin to properly maintain and protect the obscenely expensive investment we just made in our school buildings. The ten-year maintenance plan is funded with non-voter-approved tax money, which means, as the cost of deferred maintenance goes up, the long-term effect of the Red Plan will be to burden the citizens of Duluth for at least a generation or two into the future. To make matters worse, our Board is looking to knock even more maintenance projects off the list, so it can raid money to renovate a building that was supposed to be sold to pay off the Red Plan debt. 

  Rob from this, to pay that 

Before the public HR and Business Committee meeting, the Board met in closed session to discuss the fate of two “excess” properties vacated during the Red Plan: Nettleton and Rockridge. 
The status of Nettleton was not revealed publicly, but it’s already been reported in the media that a Minneapolis-based developer, United Properties, is interested in acquiring the property to create senior housing. Many Rivers Montessori has made several offers on the property, but the majority members of the school board refused to deal with any other educational organization. The property was supposed to bring $480,000, to help pay for the Red Plan. Many Rivers exceeded that asking price, with an offer of $500,000. The price United Properties has offered has not yet been revealed, and nothing else was revealed during this meeting about what the Board discussed behind closed doors. 

The Board, however, did discuss the Rockridge school during the Business Committee meeting. From all appearances, Rockridge has been taken off the auction block and district 709 is going to get into the leasing business. 
The 31,000 square foot Rockridge building stands on 13 acres of land in a nice part of town. In the Red Plan’s Review & Comment document it was valued at $1,780,000 if used as a school. The land and building was valued at $1.2 million if used for an alternative purpose. Of course, if we don’t sell it, over a million dollars once counted in the Red Plan’s financing scheme is automatically lost. 

On top of that loss, we now have to do some renovation work before we can lease it to the prospective leasers: Woodland Hills Academy. The preliminary estimate for this work given to the Board during the Business meeting by the Doug Hasler, the district’s still relatively new CFO, was $2.5 million. The Board is planning to pull as much of this money as it can from the ten-year facilities maintenance plan, which, again, will knock even more scheduled work out of the plan and defer it down the road. 

The Red Plan was a poorly conceived plan, the antithesis of good, long-term planning. 
 
Noble sentiments 

Woodland Hills is a facility for troubled kids, who’ve been sent to the facility by various state and county agencies, in an effort to rehabilitate them and get them back on the straight-and-narrow. While they are within the continuous geographical perimeter of ISD 709, our public school district is responsible for their education. 

ISD 709 has actually been paying Woodland Hills lease money of $156,075 a year, to use part of the organization’s current facility for educational purposes, but W. Hills wanted to more than double that amount--to $340,000. This is the reason ISD 709 started looking around for other options. The Board has been hounded about vacant properties as of late, so figured it could take some heat off itself and put the Rockridge property to use. The plan is to turn the lease arrangement around and now rent the part of Rockridge not used for educational purposes to Woodland Hills. This arrangement, however, will not likely be a net gain, because ISD 709 will also now have to cover all the school’s operational expenses, which Mr. Hasler estimated at approximately $253,000 annually.

If district 709 can get a decent lease agreement out of Woodland Hills, this arrangement wouldn’t be the world’s worst bargain, if it wasn’t for the larger picture: the million dollars lost for Red Plan bond payment from not selling the building as originally projected, and the $2.5 million of renovation work that has to be done. 

These details are not minor, but no Board member raised the issue about the promise of Red Plan tax relief from property sales, and there weren’t enough hard questions about raiding the maintenance fund. 
The biggest head-nod of agreement from the Board during the meeting came from member Johnston’s comments about equity: “As much as I don’t like to spend money, I do think that the Woodland Hills kids deserve to have a quality facility, just like all our other facilities.” Who can argue? It was a noble sentiment. Just because these kids have some social issues doesn’t mean they should be treated as though they have lesser worth. But this argument is also indicative of the underlying problem with school districts, why they are so hard to hold fiscally accountable. In a recent City Pages report, about a Red Plan-like hustle currently being played on the Prior Lake-Savage school district, the reporter pointed out how public school discussions get warped by fact that children are involved. “When it’s turned into an emotional argument,” one citizen was quoted as saying, “what gets neglected is the fiscal stewardship part.” 

The primary lesson we should have learned from the Red Plan is that fancy facilities do no favors for children if they break the bank.
Robbing more money from the ten-year plan will (in the short term) save this Board from a few aspects of its fiscal headache. It erases the need to use more General Fund money from a district already in deficit, and allows the Board to use taxpayer money without going to the taxpayers and immediately raising the levy. But, in effect, it just defers financial issues. Everything bumped off the maintenance list will have to be dealt with later, at a likely higher price. 

During the Business meeting, the Board also complained that the Minnesota Department of Education refuses to let them tap into the ten-year maintenance plan to deal with the vexing playground rubber mulch issue, despite desperate pleas from administration and board members to every Duluth representative. The State so far has refused to let them raid $600,000 of maintenance funds to rip out and replace parts of brand new playgrounds. The justification the Board is using-- “We’re broke, in the RED! We can’t use General Fund money!” -— is certainly true, but robbing more maintenance money will just kick other expenses down the road. 
*Update: the State has recently indicated it may now be willing to bend another rule and let the Board use maintenance funds to replace the rubber mulch, which requires more playground destruction and reconstruction than one would expect.
   
Worse Government Boondoggle 

In the preface of the current ten-year facilities maintenance plan, former district Facilities Manager, Kerry Lieder, wrote: “The current replacement value of the district’s capital facilities infrastructure is estimated at over 300 million dollars. The district maintains approximately 1.86 million square feet of building floor area. Recent construction experience indicates our school facilities would cost approximately $150-200 per square foot to replace…Generally accepted guidelines indicate the average maintenance and repair budget for a typical school in Minnesota should be approximately $3 per square foot or approximately 2% of the replacement value each year. With this basis applied to all of our facilities, the district should be spending around $5.6 million per year on maintenance and repair, factoring a 50 year life service life.” 

District 709 is not remotely on track to reach this goal. The Board member who asked the toughest questions on the subject--member Oswald--elicited this response from the district’s Finance Manager on what the district is currently spending: “This year our revenue for Long-Term Facilities Maintenance…was $1.386 million. For (next year,) fiscal year ‘18, we have $2.57 million for LTFM projects. Beyond that is yet to be determined because that (the levy) is set every year.” 

“It’s my understanding,” member Oswald responded, “that we already have projects budgeted in the long-term plan to use that money, so what will not get done in order to pay for some of this funding for Rockridge?”
“At this point, member Oswald,” the district’s current Facilities Manager answered, “it’s difficult to know what will get pushed back…”
Current maintenance expenditures aren’t anywhere near what is required to properly maintain the half billion investment we just made in our public school facilities, and now even more work will be deferred off the list. 
During the last election, my friends at the Duluth News Tribune wrote: “The fiscally conservative Martell said resource allocation has long from missing from classrooms in favor of macro-thought such as the long-range facilities (RED) plan he still loathes.” Far be it for me to argue with this characterization, especially the word choice. Not only did I worry education would be short-changed by a highly disruptive and overly expensive focus on facilities; I believed the shaky financial scheme would not solve our fiscal problems, but rather exasperate them into the future.

Every indication is pointing to a major maintenance problem (and a lot of money needed) for our no longer “new and like-new” buildings a few decades down the road.