GRANITE FALLS -- A district judge's order gives a partial victory to two taxpayers challenging how the Yellow Medicine East School District financed more than $10 million worth of improvements to its high school and elementary school buildings in Granite Falls.
It creates a dilemma for the district, which will have to re-examine a portion of the financing and completed work that was ruled as not authorized by law.
In the order filed Monday, District Judge Randall Slieter determined that $7,261,856 financed by alternative facilities bonding was authorized by law. The work met the standard for health and safety improvements and thus no referendum was required to issue the bonds.
However, the judge found that $2,807,121 of the project using alternative facilities bonding was not authorized by law. The work did not directly address health and safety. State statute specifies criteria for the use of alternative facilities bonding which does not require seeking the approval of voters in an election.
Plaintiffs Scott Wintz and Patrick McCoy, as taxpayers in the district, had challenged the financing for the improvement projects because no election was conducted.
The district took advantage of federal Qualified Zone Academy Bonds for the work and estimates that it saved $4.7 million in interest costs by doing so.
The Qualified Zone Academy Bonds used by YME are a financial instrument created by Congress in 1997. According to the U.S. Department of Education, the funds are available for renovation and repair of buildings, equipment and technology updates, among other things.
The plaintiffs charged that the availability of low-interest money without a referendum led the district to undertake work in excess of what was needed.
In his ruling, the judge ruled that the portion of the work that focused on improving ventilation in the school buildings met the standard of representing health and safety work. Consequently, that work could be undertaken without a bond referendum.
Work outside of the ventilation improvements -- mainly adding new hot water piping and fire sprinkler systems -- did not qualify.
The district at the same time also undertook other improvements, but those were not financed through the health and safety bonds. The total of the work completed was $11,571,307.
The judge ruled as moot the plaintiffs' request for a permanent injunction because the work is completed.
In his order, the judge noted that all but $1.24 million in bonds have been issued. The district also has unpaid invoices of $4.1 million for the project.
Also to be considered when the parties meet next month to determine a remedy is the plaintiffs' request for their costs.
The school has been represented by Ratwik, Roszak and Maloney of Minneapolis.