Panel backs seeking bonds for retirees

The Brainerd School Board Finance Committee recommended board approval Thursday to call for the sale of $23 million in bonds to fund Other Post-Employment Benefits, or OPEB.

The move garnered support from members of the community budget committee who attended the meeting.

The district has a window of opportunity, open until Aug. 1, to levy up to $23 million of its OPEB liabilities, or its projected retiree costs, onto the local levy for the next 13 years without voter approval.

New accounting standards require a change for all Minnesota school districts, cities and counties in OPEB liabilities. Before this year, most districts paid these costs out of operating funds when they came due. State lawmakers last year authorized districts to levy the amount. This levy, as opposed to an operating levy, does not need voter approval and is shared by all property owners, including seasonal recreational property owners. Proposed legislation has been introduced in the Legislature to revoke or change this levy authority.

If the district levies that amount, it could free up to $1.5 million annually from its general fund. Steve Lund, director of business services, told board members that he recommends subsidizing OPEB liabilities annually from the general fund, possibly for $1 million, which could extend the trust up to 2065. Otherwise, if the trust fully funds the OPEB liabilities, then the levy would end in 2022 and the trust would be depleted by 2025.

The district is mandated by the state to provide access to its health insurance plans to retirees through age 65. The district has contractual obligations with its unions to pay portions of some retirees' health insurance premiums, depending on the length of employment and terms of the contracts negotiated at that time.

For the past 16 months budget committee members, with backgrounds in business, banking and finance, have studied the district's financial records.

Mark Ronnei, a community budget committee member and general manager of Grand View Lodge, said he initially was opposed to the concept of levying the district's OPEB liabilities but the more he learned, the more he supported it.

"It's not the most red hot idea I've ever seen but look at the alternatives," Ronnei said. "I now feel it would be irresponsible not to do it. It's a window here ... I guess the enemy of this idea is ignorance and the less you understand the more you'd be opposed to it. Unfortunately it probably makes for really nice sound bites and Vox Pop quips but you know, we can't be ruled by those because it's a complex issue. ... In my opinion, this is one of those difficult, potentially unpopular, but necessary decisions."

Ronnei said he's employed by the fourth largest taxpayer in Crow Wing County and he's not saying there won't be an impact on his business when this levy is authorized. He said he's been recruiting employees lately and the school district is a major factor "for us to take our business to the next level" during this hiring process since people want to know about the school district.

Dale Benson, a community budget committee member and vice president of Brainerd Lakes Health, said the business sector already had to go through some of these accounting changes, particularly after the fall of Enron. He said he believed one of the factors in why the district's operating levy referendum failed two years ago is because Crow Wing County decided to build its new buildings before that and didn't need a public vote.

"I think you have to look at all the realities and play the hand you're dealt and the hand we're dealt in education in this state is bleak," said Tim Edinger, president of Education Minnesota Brainerd and a community budget committee member. "We know what this vehicle can do on OPEB liabilities and the side benefit is that it frees up money in the general fund that can impact kids."

Edinger said, speaking on behalf of the teachers' union, the union will use bargaining during upcoming negotiations to lessen the district's future OPEB liability.

"I just don't really enjoy pushing this through without the community having to vote on it but with the timing issue we have to let everyone know why it will work well for us," said board member Reed Campbell.

"This is a liability on the books," said board member Bob Nystrom. "It would be unpopular to add a tax on but with the current state of our economy I think it's something we really have to consider. This is really going to impact the kids in our community and I don't want to shortchange the kids coming into our district in the future."

Board member Ruth Nelson said state lawmakers put school districts in a difficult situation since schools don't yet know how much, if any, increases in state funding they'll receive for the next two years. She said the sale of OPEB bonds seems fair since it will spread the costs evenly across all property owners, unlike an operating levy.

"I think we would all agree now, we asked for too much," Nelson said of the 2007 operating levy referendum which was defeated.

Board members Lew Hudson, Kent Montgomery and Molly Kurtzman also said they supported the plan to start the process of selling bonds to fund OPEB.

"We will get hit on Vox Pop (in the Dispatch) and others ... but I think it's the only responsible tool we have right now," said Montgomery.

The board will vote on the sale of OPEB bonds at the regular May 11 board meeting.

JODIE TWEED may be reached at jodie.tweed@brainerddispatch.com or 855-5858.