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Lawsuit against YME on its way to trial

OLIVIA -- A lawsuit by two taxpayers against the Yellow Medicine East School District is headed to trial, with the potential for what their attorney termed a "train wreck'' should they prevail.

The two parties did not reach a settlement Thursday during a conference in District Court in Olivia, but instead set the framework for a trial on the issues in March.

At issue is the district's prior action to award nearly $11 million worth of financing for health and safety and other work in the district's school buildings without taxpayer approval.

Patrick McCoy and Scott Wintz, both of Clarkfield, are challenging the school district's ability to issue financing for the health and safety portion of the work -- estimated at $8.7 million -- without bringing it to voters for their approval. They charge in their lawsuit the district disguised much of the work as health and safety work to obtain the financing without a vote by taxpayers.

The plaintiffs' challenge -- if successful -- could invalidate some or all of the bonds awarded to finance much of the work, according to their attorney, Kevin Stroup, with Stoneberg, Giles and Stroup, of Marshall.

It would leave the district, bond holders and the government entities involved looking to "unravel" the financing. It's estimated that more than one-half of the construction work has already been completed, and the remainder is under contract and scheduled to be completed this coming summer.

Stroup, reached Thursday after the conference, said it was not clear during the discussions how the financing could be unraveled if the plaintiffs prevail.

Plaintiffs McCoy and Wintz filed the civil lawsuit in March to challenge the district's authority to award financing.

They had also filed a motion for a temporary injunction to halt the project while they challenged it. The court ruled against them in May on that point, and the construction work proceeded last summer.

The school district's attorney, Eric Quiring with Ratwik, Roszak, and Maloney, Minneapolis, could not be reached following the conference. Prior to the conference he pointed to the district court's ruling in May that had denied the temporary injunction. The court had found that the district had "the greater likelihood of success on the merits'' if the case was heard.

The court had also denied the injunction because the school district had demonstrated that it would suffer great harm by a delay in the project.

The school district was able to obtain federal stimulus funds to reduce interest costs on the financing by an estimated $4 million. The district issued Qualified Zone Academy Bonds -- a low-cost financing tool for school building renovation -- for $10.7 million worth of work at an interest rate of 0002 percent. Interest costs were calculated to total $144,000 over the 15-year term.

The work undertaken includes replacing the heating, cooling and ventilation systems to improve air flow and control humidity in the elementary and high school buildings in Granite Falls, as well as improve energy efficiency.

Tom Cherveny

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

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