Lawmakers hope to fix debt-limit cap for schools

/ 22 March 2012 / jennifer

Heather J. Carlson, Rochester Post-Bulletin, March 22, 2012 –

ST. PAUL — Area lawmakers are working to abolish a state law that would severely limit the ability of three local school districts to borrow money in the future.

Rep. Duane Quam, R-Byron, found out last week about a provision in state law that sets a much lower debt limit for cities of the first class. Thanks to population growth, Rochester became a city of the first class last year, a designation that carries with it a number of statutory regulations. Cities are classified by population. School districts that include portions of Rochester are included in this designation.

Quam discovered that Rochester, Byron and Stewartville public schools would see their debt limit drop from 15 percent of market value of all taxable property to 0.7 percent. And while Minneapolis, St. Paul and Duluth, all cities of the first class, already have been exempted from this law.

“My feeling was if everybody is going to get exempted anyway, why not get rid of an arcane subdivision of law,” Quam said.

The bill had its first hearing Tuesday before the House Education Finance Committee, and members agreed to consider including the proposal as part of a larger education bill. A similar bill sponsored by Senate Majority Leader Dave Senjem, R-Rochester, is scheduled for Senate Education Committee hearing today.

School debt

Larry Smith, finance director for the Rochester school district, answered lawmaker questions about the bill at the Capitol. During the brief hearing, no committee members voiced concerns or asked questions. After the hearing, Smith said the debt limit is $1.6 billion for the school district. The new restrictions would reduce that to $72 million. The district’s debt now is $66 million.

Smith said the district has demonstrated it’s fiscally responsible and hasn’t come close to the previous debt limit.

“We’ve shown we’re not just there trying to spend as much as we can,” Smith said. “We’ve always been prudent and fiscally responsible.”

Jennifer Walsh, business manager for the Byron school district, said the district’s debt limit is 3.64 percent of market value taxable property — already above the 0.7 percent limit.

“It would make it impossible for us to issue any further debt,” she said.

Stewartville schools Superintendent Dave Thompson said he believes the district’s debt level is likely above the lower rate and that the district has contacted lawmakers about getting the language changed.

City of the first class

Quam’s bill draws attention to lawmakers’ efforts to set up different rules for cities of the first class. Last session, House Republicans proposed phasing out local government aid for cities of the first class but exempted Rochester. Rep. Jim Davnie, DFL-Minneapolis, said he agrees with the need to get rid of the debt limit law but criticized Quam for backing other proposals to exempt Rochester from laws that apply to other first-class cities.

“Rochester is a city of the first class except when (Quam) doesn’t want it to be a city of the first class,” he said.

Rep. Mindy Greiling, DFL-Roseville, challenged Quam to look at getting rid of some of long-standing differences that make no sense.

“Rochester has given us the perfect opportunity. They are going to be looking at fresh eyes with everything,” she said.