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Several major promises made during the selling of the Red Plan have been broken. One promise was that the public school district would sell a passel of “excess” property for a whopping $26 million, to help pay for the plan. From the beginning, I saw this claim exactly as it was: over-the-top nonsense.
For years the mainstream media has given the school district a pass on the failed property scheme, blaming the entire fiasco on the real estate crash of ‘08. Two other reasons are more pertinent in assessing why these properties never generated top dollar. The first is that schools are expensive to retrofit for other uses. They’re generally made of brick and steel and concrete. Secondly, the school district dumped several multi-million dollar, hard-to-sell properties on the market at the same time. This brilliant idea would only be included in a How-to-Market-for-Profit textbook as a prime example of what NOT to do.
If the $10 million sale of Central had gone through, the district would have grossed somewhere in the neighborhood of $14 million for all the properties and netted about $7 or $8 million. We’ve been taking a big percentage loss on each sale. The asking price for Central was $13.7 million. I laid out the numbers on Central deal four or five months back. If the $10 million purchase price had gone through, the district stood to net about $4.7 million profit, after subtracting expenses. Now that the $10 million offer on the crown jewel of our city’s property–the Central campus–has flown out the window, Duluthians are really in a pickle.
The package price on the Central campus (including the two Secondary Tech buildings--20 and 21 years old) is likely going to tumble into the bargain basement, now. On the upside, there’s never been a better time to make a great deal on three buildings and 77 acres of prime Duluth property! As an added sweetener, the district has offered to toss in some old collectible Central paraphernalia and bronze busts of Keith Dixon and Tim Grover, the two men most responsible for closing the school down.
Some self-described optimists on the school board still believe the property sales were a great financing concept. Board Chairwoman Judy Seliga-Punkyo is an actual, card-carrying member of the Optimists’ Club. In a News Tribune article about the collapsed sale, our chief resident optimist said: “It is disappointing, BUT it (was really smart and) good we didn’t include (the money) in our budget. And selling it in parcels might end up being BETTER!”
Free ice cream will be offered with every parcel.
According to the News Tribune article, one of the primary reasons the sale fell through was that “development costs for the site, including utilities, demolition and new roads are ‘extraordinary.’” That word–extraordinary–was used by the owners of Harbor Bay, the company that had signed a purchase agreement and put down $200,000 earnest money on the deal. The company had until the end of June to cancel the agreement without penalty, which it did. The company could have, but chose not to ask for an extension--a pretty clear indication they’ve permanently dumped all their grand ideas for the site.
In order to sell the property in parcels, the district will now have to pick up all the costs for utilities, roads and the extremely expensive (and sickening) demolition of three practically brand new, multi-million dollar buildings. When the dust settles on this fiasco, we’ll be lucky to net a nickel.
 
Something for nothing.

From the onset of the Red Plan, it astonished me that a claim of something-for-nothing could lower the collective IQ of otherwise intelligent people. The claim of big palaces with huge swimming pools being “already half paid for” seemed to perform an instant lobotomy on many of our leaders. Keith Dixon, snake-conjurer and verbal contortionist, simply mesmerized them. It was stunning to watch them bob their heads and let him babble on the way he did. I don’t think many understood a word he was saying, except that he was going to conjure up shiny new schools, somehow magically already half paid for.
It’s probably safe to assume I’m the only person in Duluth who still goes back and listens to some of Dixon’s long, rambling speeches. (If anyone else does, we should get together and aid each other in seeking a more fruitful existence.) Even when I transcribe the speeches into written form, the man’s opaque word labyrinths are almost impossible to decipher. He piled phrase upon unrelated phrase. Seldom was there any linear sense. Often, after parsing through all the phrases and distilling them down to the essence of what was being alluded to, I’ve found either vaporous hot air or some small, arcane point. To state my point more succinctly: what came out of his mouth was almost pure bs.
Dixon was in fine form during the infamous June 27th, 2011 Special Board meeting, called just three days before he slipped out the back door. Probably the most important meeting held in this city in the 23 years I’ve lived here, the goings-on in the boardroom that evening erased any doubt in my mind that the Red Plan was the biggest corporate scam I’d ever witnessed first hand. The minority members of the Board had been kept completely out of the loop about the meeting’s agenda. After listening to the cotton-topped hustler lather the place up with the thickest, most incomprehensible layer of pure verbal bull_ _it for about an hour, Art Johnston finally asked: “I assume you’ve set the agenda here. What resolutions are there going to be?” Judy Seliga-Punkyo was Chair of the Board, as she is currently. She answered: “I did not set the agenda.”
The Chair of the Board admitted she didn’t have anything to do with setting up the agenda of a Board meeting. Who did set it all up? The whole sham circus was being run by Dixon and his administration, and, ultimately, by their corporate masters–Johnson Controls. About midway through a meeting that lasted nearly three hours, two resolutions popped out of thin air. The resolutions were clearly on the agenda prior to the meeting, without the knowledge of the full Board. Together they totaled $34 million more dollars added to the cost of the Red Plan. Seliga-Punkyo voted to approve both of them, after asking just one substantive question: “By going for option two, we extend this (bond payment) out two more years, correct?”
Dixon, the great obfuscator, answered: “Well, that’s one possibility. There are multiple possibilities out there. You know, one avenue is ‘Yes.’ What we just said is one example is if you extend it one year, then this is how much that generates. (Every “is” is his.) If you extend it two years, then you’ve got more than you need in that, in that area. Could you, could you, not do the taxes and extend the operational savings out? That’s a possibility. Could you continue to tax and move the operational savings? There’s possibilities (incorrect subject/verb agreement his) here for multiple years. The shortest term is to do option one and option two in two years. But, but, there isn’t anything about how you could do that. You could do it over three or four years. But that’s why it’s hard to for us to give you an exact strategy.”
The Chair’s incisive response: “Right. I just wanted to make sure we CLARIFIED that for everyone before we voted.”
A clarification of the clarification is obviously required. Here is the concise translation of Dixon’s jumbled, distorted language: “It depends how you want to play this scam. Do you want to rob more from the taxpayers first, or from the classrooms?”
 
The property sale myth.

Besides using the June 27th meeting as a demonstration of how our leaders let a forked-tongued hustler run rampant with a half billion dollars, I also want to use it to respond to a myth that has been perpetrated by the mainstream media for years. This is the way the myth was stated in the Duluth News Tribune article: “Sale of the site had long ago been figured into the debt repayment plan for the district’s $315 million long-range facilities plan, which included selling (Central.) Because it didn’t sell when expected, school property taxes were raised significantly.”
District officials have continued to explain away most of their broken promises (including a much-larger-than-claimed Red Plan tax burden) on the bungled property sales. The truth: whether property sales had gone through as projected or not, we were going to get hammered. Mr. Dixon put it this way, on June 27th, 2011: “The idea, really, that the department (MDE) authorized you tax capacity above the blue line, to move those dollars into--that whole discussion about how much is going into that–you know, to pay that five million, every year it’s how much is the payment this year, is transferred--to say we don’t have to transfer all that.”
Translation: “You don’t have to transfer all this money out of the General Fund, to pay for the palaces we built. You can slam the taxpayers!”
What the obfuscator was referring to was the 2009a lease/levy bond. The district had been making payments on that bond through an annual Board resolution authorizing a transfer from the General Fund. That five million withdrawal from the Fund (actually, $4.9 million), combined with the 2010d and 2009b lease/purchase annual appropriations were absolutely killing our public education system. Stan Mack, by far the most qualified candidate to replace Dixon, called the combined $7.8 million annual withdrawal from the Fund: “a serious problem, major leakage from the General Fund, caused by school board action. Unprecedented in the State of Minnesota.”
It may very well be unprecedented in the country. District 709 simply could not continue pulling all the money from the Fund and return to anything remotely resembling fiscal stability. The full debt on the 2009a bond was $96 million. $10 million from the sale of Central represented only two payments, and that money (if realized) was unlikely to ever be used for those payments. The school board is saddled with a depleted reserve ($28 million blown in ten years) and classrooms are desperately clamoring for more money, especially on the western end of town. The appropriated bond payments had to come from the General Fund, but the 2009a bond had a levy transferable to the tax base.
Most of that bond obligation was going to end up on the shoulders of the people of Duluth, regardless of property sales. All of it has now been moved to the tax base. On June 27th, 2011, the cotton-topped dandy declared: “I don’t see how this is going to get any better in the next few years.” From the beginning, his primary mission was to keep his magic numbers act up in air until he could slip out the back door.
 
Baked numbers.

In another recent Duluth News Tribune article, Mayor Ness said he never believed the numbers “baked” into the Red Plan’s population projections. The claim that the city’s central corridor was going to soon be almost bereft of school-aged children seemed especially dubious. I wanted the latest demographic study to verify that claim, but of course the district has no interest in proving itself wrong. A lot of the newcomers to our city are settling into the central hillside, where housing is affordable. There are a lot of kids in the central neighborhoods. Just walking around that part of Duluth belies the Red Plan’s half-baked predictions.
I’ll never find myself at an Optimists’ Club picnic with Judy Seliga-Punkyo, but let me offer up a little Pollyannaish hope of my own. The failure to close a deal on Central could be a blessing in disguise, if other voices are finally allowed into the discussion. I’ve always believed dumping all the Central schools in a town more than thirty miles long was an act of lunacy. I’m convinced it won’t be that long before we’re foolishly looking around for prime central property to rebuild them, or some inferior imitations of them (it is going to be nearly impossible to ever replace a wonderful school like Nettleton.)
When the real estate market collapsed in 2008, I tried to get people to consider a leasing option for some of the properties. I especially wanted the option explored for the Central property, because I feared we were going to end up netting pennies on the dollar, while hauling brand-new buildings off to a landfill. As a candidate, I ran into a representative from Lake Superior College who told me the organization was interested in leasing the property for a new aviation program they were putting together. Maybe that plane has left the terminal, but we should now at least look around for a viable tenant for ten or twenty years.
The Central campus is the most valuable resource in the city. The property is actually a good investment. Ten or twenty years down the road, in a better market, it would likely be worth much more than we can sell it for today. The option would give us flexibility, something that has been missing from the Red Plan–the ability to adjust to changing circumstance. Maybe the mayor’s very worthy idea of a “vocational-focused” central school could yet materialize.
There is another aspect about the leasing idea that warrants some thought. The Red Plan was implemented through brute political force, with almost no sensitivity to the feelings of the city’s citizens. Central high school has the longest, most cherished tradition in Duluth. Just the possibility that the school may one day rise again from the tattered debris of the Red Mess would give some long-due respect and hope to the people who were betrayed and run over. I believe it would put some salve on the still-festering wounds of Duluth. It would be wisdom.
Of course advice from anyone outside the district’s inner power circle will, as usual, be completely ignored. If the pattern from the past ten years holds true, the blind mice controlling the school board and their administrative directors will instead just stubbornly do the dumbest thing they can possibly do.