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Judgment in taxpayer suit spares YME School Dist. from worst

GRANITE FALLS -- A judgment in a taxpayers' lawsuit against the Yellow Medicine East School District spares it the costly and complicated task of unraveling more than $2.8 million worth of facilities improvements found to have been improperly funded.

But the judgment issued June 14 by District Judge Randall Slieter still leaves the district with difficult financial decisions.

The judgment prohibits the district from issuing the remaining $1.25 million in alternative facilities bonds.

The district has more than $800,000 in unpaid expenses associated with the improvement project.

The greatest share of the unpaid work, $710,246, is owed to the Energy Services Group of Wayzata for engineering, consulting and other professional services.

The judgment also prohibits the district from tapping any unspent portions of the alternatives facilities bond to pay for work ruled not eligible.

The district has contacted the Minnesota Department of Education and will be looking at its options to raise the funds needed, according to Superintendent of Schools Al Stoeckman.

The district is currently in the process of making $488,000 in possible cuts to next year's budget.

The judgment comes in the wake of a Jan. 23 ruling in a civil lawsuit brought by two district taxpayers, Patrick McCoy and Scott Wintz. They charged that the district should have sought voter approval before it issued more than $10 million in bonds to finance improvements to the elementary and high school buildings in Granite Falls.

The court ruled that $7,261,856 in work financed by alternative facilities bonding was authorized by laws allowing health and safety improvements without a referendum.

The court found that $2,807,121 of the work was not authorized by law. Essentially, the judge ruled that the portion of work focused on improving ventilation in the school buildings met the health and safety requirements of the law. Work outside the ventilation improvements -- mainly adding new hot water piping and fire sprinkler systems -- did not qualify.

The attorney representing the school district, Eric Quiring of Ratwik, Roszak and Maloney, said the district is analyzing the judgment and considering its options, including that of appeal. The district considers the initial ruling "confusing'' in that it determined that hot water piping directly tied to the ventilation systems in classrooms was ineligible.

The school had relied on its consultants and approval by the Minnesota Department of Education before it proceeded with the project using alternative facilities bonds that did not require a referendum.

The district taxpayers who filed the lawsuit had warned the school district it could be violating the law and had asked the court to prevent the issuance of the bonds before the work was undertaken, noted their attorney, Kevin Stroup of Marshall. The court supported the claim of McCoy and Wintz that a portion of the bonds should only have been issued with approval of the voters in a referendum.

"He ruled it illegal, but what has been done is done and he is not going to make them reverse that,'' Stroup said.

The judgment allows the district to make up the remaining shortage from whatever funding sources "they can glob on to, including real estate taxes,'' he said.

In a memorandum accompanying the ruling, the judge stated that the court approved a limited remedy for a number of reasons. The first cited was law that states third-party contractors who performed the work have a right to be paid and "ought not be adversely affected.''

Both sides have the option of appealing within 60 days of the judgment's filing.

Tom Cherveny

Tom Cherveny is a regional and outdoor reporter with the West Central Tribune in Willmar, MN.

(320) 214-4335