9-1300-11658-2

 

STATE OF MINNESOTA

OFFICE OF ADMINISTRATIVE HEARINGS

FOR THE MINNESOTA DEPARTMENT OF

CHILDREN, FAMILIES AND LEARNING

 

In the Matter of the Petition to Consolidate Independent School Districts No. 24, Lake Park and Independent School District No. 21, Audubon, Under Minn. Stat. § 122.23

FINDINGS OF FACT, CONCLUSIONS OF LAW AND RECOMMENDATION

            The above-entitled matter came on for public hearing before Administrative Law Judge Phyllis A. Reha on May 6, 1998 commencing at 6:30 p.m. in the Detroit Lakes Pavilion, Detroit Lakes, Minnesota.  The record in this matter closed on May 23, 1998 at the conclusion of the public comment period.

Brad Sinclair, Attorney at Law, 10 Robert Street, Fargo, ND  58102, appeared on behalf of Independent School District No. 24 (hereinafter "Lake Park School District"). Independent School District No. 21 (hereinafter “Audubon School District”) was not represented by legal counsel. The following school officials all testified in support of the proposed consolidation:  Stephen Twitchell, Lake Park and Audubon Superintendent of Schools, Route 1, Box 434, Audubon, MN 56511; Jeff Sanborn, Chairman of the Lake Park School Board, Box 467, Lake Park, MN 56554; Libby Storm, Member of the Audubon School Board and Joint Chairperson of the Audubon/ Lake Park School Boards, Route 1, Box 67, Audubon, MN  56511; Dale Twedt, Chair of the Audubon School Board, Route 1, Box 203, Audubon, MN  56511; Marlene Hansen, President of the Lake Park/Audubon Education Association, Route 3, Box 264F, Detroit Lakes, MN.  Doug Sledmoen, Member of the Audubon School Board, Route 1, Box 653, Audubon, MN  56511, testified in opposition to consolidation.

NOTICE

            This Report is a recommendation, not a final decision.  The Commissioner will make the final decision after a review of the record.  The Commissioner may adopt, reject or modify the Findings of Fact, Conclusions, and Recommendations.  The Commissioner is Mr. Robert Wedl, Commissioner, Minnesota Department of Children, Families and Learning, Capitol Square, 550 Cedar Street, St. Paul,  MN  55101.

The following residents of the Audubon School District requesting a public hearing on the consolidation plan and plat testified in opposition to the proposed consolidation: Cameron Haukedahl, Box 158, Audubon, MN  56511; Paul Schmidt, Route 1, Box 110, Detroit Lakes, MN  56501; George W. Kohn, Route 1, Box 579, Audubon, MN  56511. Ron Haukedahl, 401 Seventh Street, Audubon, MN  56511, also testified in opposition to the consolidation.

The following residents of the Audubon and Lake Park School Districts testified in support of the proposed consolidation: Denise Helland, Laureen Svobodny, John Hansen, Connie Jahnke, Valerie Knudsvig, Aaron Wittnebell, Deborah Brakefield, Mary Hanson, Tom Anderson, Richard Ellsworth, Erling Kolke, Ruth Westlund, Duane Myhre.  Sheila Mollstre also testified.  Evan Ronken, President of the Lake Park/Audubon Student Body and Sean Twedt, student, Lake Park/Audubon High School testified in support of consolidation.  Aaron Wittnebellek, student, Lake Park/Audubon High School testified in opposition to consolidation.

Robert Buresh, Staff Member of the Minnesota Department of Children, Families and Learning (hereinafter, "Department of CFL"), appeared on behalf of the Department of CFL and provided information with respect to the consolidation process.

STATEMENT OF ISSUE

The issue in this case is whether the Commissioner of Children, Families and Learning (hereinafter “Commissioner”), should approve, modify or reject the proposed plat and also whether the Commissioner shall approve or reject any proposal contained in the petition regarding the disposition of the bonded debt of the component districts pursuant to Minn. Stat. § 122.23, subd. 6.

Based upon all of the files, records and proceedings herein, the Administrative Law Judge makes the following:

FINDINGS OF FACT

1.            The Lake Park and Audubon School Districts are located in the west central part of Becker County.  Lake Park has property in Clay County.  Hawley borders to the west; Detroit Lakes to the east; Pelican Rapids to the south, and Ulen-Hitterdal to the north.  The two school districts are approximately the same geographic size.  The town of Lake Park is in the middle of the Lake Park School District and the town of Audubon is located in the middle of the Audubon School District.  They are bisected by highway 10.  Audubon is approximately six miles from Detroit Lakes.  Lake Park is approximately 11 miles from Hawley.  Audubon and Lake Park are six miles apart. The two school districts together from a rectangular configuration, which is approximately 12 miles by 17 miles, bisected by highway 10.  Ex. 6.

2.            Prior to the beginning of the 1989-1990 school year, with the assistance of the then Minnesota Department of Education, Lake Park School District and Audubon School District entered into an Inter-District Cooperation Agreement and Joint Powers Agreement pursuant to and in accordance with Minn. Stat. § 122.541 and 471.59.  (T. p. 27; Ex. 19).  This Inter-District Cooperation Agreement (hereinafter referred to as the "Pairing and Sharing Arrangement") provided for Audubon to continue to operate kindergarten and grades 1 through 6, and Lake Park to continue to operate grades 7 through 12.  Each school district was required to continue to educate all of its resident pupils in the grades it maintained; each school district agreed that it would educate the pupils of the other district in the grades the other district had discontinued.  Each school district was required to continue to provide its own health services, food services, vocational educational programs and special education programs.  The Superintendent of School’s contract was to be held jointly and the Superintendent was to serve as superintendent for both school districts.  (Ex. 19).

3.            The Pairing and Sharing Arrangement also provided for each district to continue to provide its own transportation and collect transportation aids for its resident pupils as provided in Minn. Stat. § 122.85, subd. 6 except to the extent that each district was to provide one-half of the transportation necessary in the operation of a shuttle bus service between the schools and the two school districts.

4.            Each school district was to continue to own its own separate property except to the extent that funds directly related to instructional programs were to be shared as provided in the Pairing and Sharing Arrangement.  (Ex. 19).

5.            Pursuant to Minn. Stat. § 471.59, subd. 11, the parties agreed to establish a joint school board to govern both school districts regarding matters that arose as a result of the Pairing and Sharing Arrangement.  The joint school board was to be composed of the full membership of each school board and approval of any action by the joint school board required a majority vote of each school board delegation in attendance at the meeting.  The Pairing and Sharing Arrangement could be changed from year to year after July 1 of each year by action of its separate school board by providing notice to the other school district of its intention to change the agreement.  Such notice was to be given on or before January 1 in advance of the forthcoming school year.  If no such notice was given, the agreement was to continue and be reviewed on a yearly basis.  (Ex. 19).

6.            In December of 1997, Lake Park School Board voted to withdraw from the Pairing and Sharing Arrangement with Audubon effective June 30, 1999.  (T. p. 37; Ex. 23).

7.            Since it was put in place for the school year 1989-1990, the Pairing and Sharing Arrangement has worked well for Lake Park and Audubon.  It has provided significant enhancement in curriculum and course offerings, computer technology, library collection, and extracurricular activities.  Enhancements to curricula include the offering of Spanish in grades 1 through 6 and high school, computer lab in grades 2 through 6, computer courses in the high school, including computer 1 and 2, windows, and networking 1 and 2.  English department offerings have added courses in Shakespeare, media technology, creative writing, Pullitzer people, applied communications, composition 1, speech 1, poetry, authors, oral interpretation, multi-media, media arts, play production, Russian literature, composition 2, mythology, journalism, sports literature, standard English, public speaking, creative writing and composition 2.  With respect to science, 7^th grade life science is now offered for a full year, 8^th grade earth science is offered for a full year and chemistry and physics are now offered every year instead of every other year.  Meteorology and astronomy are now available as electives.  In the elementary school library the collection of books has increased from approximately 7,000 to 8,000 to over 15,000.  The reference collection has been updated and computer technology is now available with Internet access.  (T. pp. 29-30, 47; Ex. 17).

8.            The extra-curricular activities have also been increased and enhanced.  Following the Pairing and Sharing Arrangement, there are better music facilities, larger groups for band and choir, more music sections, more class choices and better equipment.  Extra-curricular athletics has added boys and girls cross-country, track and golf.  In the area of health and physical education, more sections have been offered thus providing manageable class sizes and additional opportunities for students.  (T. pp. 29-30, 32; Ex. 17).

9.            While the Pairing and Sharing Arrangement provides many enhancements and increased opportunities in curricula and extra-curricular activities, there are a number of disadvantages in maintaining this arrangement as opposed to consolidation.  Lake Park and Audubon are still two separate school district entities, which must maintain their own buildings and facilities.  There are separate financial books, accounting records and auditors.  Transportation is separate, as is food service.  It is difficult to do any long-term planning because of the requirement that the Pairing and Sharing Arrangement be renewed on a year-to-year basis.  (T. p. 30; Ex. 19).

10.            The issue of consolidation of the Lake Park and Audubon School Districts first came before the Lake Park School Board in 1995.  The Lake Park School Board voted overwhelmingly in favor of consolidation.  In 1995, the Audubon School Board also voted to approve consolidation.  In November of 1995 the matter came before the voters of the Audubon and Lake Park School Districts.  Because the Pairing and Sharing Arrangement was still in effect, the ballot provided the voters with a choice of continuing the Pairing and Sharing Arrangement, or voting in favor of consolidation.  Three hundred and sixty (360) votes were cast in favor for continuing the Pairing and Sharing Arrangement and two hundred and one votes (201) were cast for consolidation.  Thus, consolidation failed.  Of the 1,194 registered voters in Audubon, 262 voted.  Of the 1,403 registered voters in Lake Park, 139 voted.  (T. pp. 35-36, 67-72; Ex. 28).

11.            A number of supporters of consolidation including board members believed that some of the residents of Audubon and Lake Park School Districts cast their votes based on misinformation.  Other supporters of consolidation believed that a “yes” vote for the continuation of the Pairing and Sharing Arrangement was not necessarily a “no” vote for consolidation.  (T. p. 36, 76; Ex. 28).Thus, on March 21, 1996, the school boards of both Lake Park and Audubon passed a resolution to have another consolidation vote.  The date of the vote was set for May 21, 1996.  School board elections in both school districts were held at the same time.  Again, the ballot provided a choice for the voters to vote in favor or against continuing the Pairing and Sharing Arrangement, or voting in favor or against consolidation.  There were 346 votes in favor of continuing the Pairing and Sharing Arrangement and 320 votes in favor of consolidation.  Consolidation was again defeated, but by only 26 votes.  Over 90% of the Lake Park voters voted in favor of consolidation and approximately 48% of the Audubon voters voted in favor of consolidation.  (T. p. 36, 68-69; Ex. 28).

12.            By a narrow margin, members of a citizen group opposed to consolidation defeated two of the six incumbent board members on the Audubon School Board.  (T. p. 69-70; Ex. 28).

13.            In November of 1997, two additional board seats on the Audubon School Board were up for election.  Board members favoring consolidation held both of these seats.  No other candidates were registered to run against the incumbents.  However, a last minute write-in campaign on behalf of two Audubon citizens opposing consolidation resulted in the defeat of one of the candidates favoring consolidation.  As a result of the defeat of one of the board seats, as of January 1998, the Audubon School Board would have three seats favoring consolidation and three seats opposed.  (T. 69-70; Ex. 28).

14.            Following the November 1997 school board election, a citizen group in Audubon favoring school consolidation circulated a petition and gathered 355 signatures favoring consolidation.  (Ex. 15, 28).  On December 18, 1997 at a scheduled board meeting, the citizen group favoring consolidation presented its petition to the Audubon School Board at a joint meeting of the two school boards.  At that time, the Audubon School Board voted in favor of consolidating the school districts with a vote to be held on September 15, 1998 at the school district primary election.  The Audubon School Board thereafter drafted a formal resolution resolving to consolidate the Audubon and Lake Park School Districts for the following reasons:

a.      to improve curriculum and services;

b.      to receive greater education services for the tax dollar expended;

c.      to allow for more cost efficient staffing and use of facilities.

The Audubon School Board further acted to request the Becker County Auditor to prepare a consolidation plat pursuant to provisions of Minn. Stat. § 122.23, together with supporting statement and submit the plat to the Commissioner for approval. The School Board further directed that the bonded debt of the Audubon School District be paid pursuant to the provisions of Minn. Stat. § 122.23, subd. 16(a) whereby the obligations of the taxable property of the component district with reference to the payment of such bonded debt is not affected by the consolidation.  Lastly, the Audubon School Board acted to provide a school board attrition plan for governance of the newly created district reducing the number of board members from 13 to7 over a period of six years.  The effective date of the consolidation was specified to be July 1, 1999.  This resolution was passed unanimously by the Audubon School Board. (Ex. 2).

15.             In response to an inquiry by Superintendent Twitchell to the Office of the Secretary of State, the senior election advisor in the Secretary of State's Office on January 23, 1998 provided information on the steps that needed to be completed before a school board could call a consolidation election.  The letter stated that the school district “could not commit to setting a date for a vote on consolidation until the county auditor draws up a consolidation plat defining the boundaries of the consolidated district which must then be submitted to the Commissioner for approval; and an election plan for the composition of the consolidated school board and an orderly reduction to a final board size of 6 or 7 are approved and returned to the school boards for acceptance by the Secretary of State's Office pursuant to Minn. Stat. § 122.23.”  (Ex. 2, 29; T. pp. 70-71).

16.             A special February 9, 1998 joint board meeting of the Audubon and Lake Park School Districts met.  The composition of the Audubon School Board had changed due to the November, 1997 election.  The Lake Park School Board unanimously passed the following resolution and moved its adoption:

Resolution calling for the approval of a consolidation plat and plan by the Commissioner of Children, Families and Learning and the Secretary of State proposing to consolidate Independent School District #24 (Lake Park) and Independent School District #21 (Audubon).  (Ex. 2). 

The same resolution was introduced and moved for adoption by a member of the Audubon School Board.  The Audubon resolution failed due to a tie vote.  (Ex. 2)

17.             The formal resolution of the Lake Park School Board dated February 9, 1998 was submitted to Keith G. Brekken, Becker County Auditor pursuant to Minn. Stat. § 122.23 requesting that he submit a plat and supporting statement to the Commissioner for approval.  The resolution of Lake Park School Board provided as follows:

Resolution proposing to consolidate Independent School District #24 (Lake Park) and Independent School District #21 (Audubon).  (Ex. 2).

18.             The Lake Park School Board thereafter drafted a formal resolution resolving to consolidate the Audubon and Lake Park School Districts for the following reasons:

a.                  to improve curriculum and services;

b.                  to receive greater education services for the tax dollars expended;

c.                  to allow for more cost efficient staffing and use of facilities.

The Lake Park School Board further acted to request the Becker County Auditor to prepare a consolidation plat pursuant to provisions of Minn. Stat. § 122.23, together with supporting statement and submit the plat to the Commissioner for approval. The School Board further directed that the bonded debt of the Lake Park School District be paid pursuant to the provisions of Minn. Stat. § 122.23, subd. 16(a) whereby the obligations of the taxable property of the component district with reference to the payment of such bonded debt is not affected by the consolidation.  Lastly, the Lake Park School Board acted to provide a school board attrition plan for governance of the newly created district reducing the number of board members from 13 to7 over a period of six years.  The effective date of the consolidation was specified to be July 1, 1999.  This resolution was passed unanimously by the Lake Park School Board.  (Ex. 2).

19.             As a result of the tie vote of the Audubon School Board, the same petition presented to the Audubon School Board in December of 1997 by 355 Audubon citizens supporting school consolidation was presented to the Becker County Auditor requesting that he submit to the Commissioner a consolidation plat and supporting statement; and to the Secretary of State an orderly reduction plan of the membership of the newly consolidated school district consistent with Minn. Stat. § 122.23 and the resolution of the Lake Park School District dated February 9, 1998.  (T. p. 71; Ex. 35).

20.             On February 27, 1998, Keith G. Brekken, Becker County Auditor, submitted to the Commissioner a plat showing the boundaries of the proposed consolidated school district, as well as the present school district boundaries.  The plat also shows the location of school buildings in the area proposed as a new district and the location of school buildings in the adjoining districts.  With the plat, Auditor Brekken provided the following supporting statement:

1)                 The adjusted net tax capacity of all the property in the proposed district would be 2,973,903.  Pupil breakdown is as follows: District 21 = 351; and District 34 = 453.

2)                 The reasons for the proposed consolidation are as follows:

a)                 To improve curriculum and services.

b)                 To receive greater educational services for the tax dollars expended.

c)                  To allow for more cost efficient staffing and use of facilities.

3)                 There are no proceedings pending to dissolve either district involved in the plat.

4)                 The two school districts to be combined are independent districts and the proposed new district will contain at least 18 sections of land.

5)                 The bonded debt of Independent School District 24 will be paid pursuant to the provisions of Minn. Stat. § 122.23, subd. 16, paragraph a, whereby the obligations of the taxable property in the component district with reference to the payment of such bonded debt will stay with District 24.

6)                 The referendum levy authorization of the newly created district shall be the maximum rate calculated pursuant to the provisions of Minn. Stat. § 122.531, subd. 2(a) and said levy authorization shall continue indefinitely.  Said referendum levy authorization for the newly created district shall be the taxable property in the newly created district.  That would raise an amount equal to the combined dollar amount of the referendum levies authorized by Independent School District 24 for the year preceding consolidation.

7)                 The governance of the newly created district is as follows: the board of the newly created district will have 7 members.  The number of board members will be reduced from thirteen (13) to seven (7) over a period of six (6) years. . . .

8)                 The school buildings in each current district are to be brought to Americans with Disabilities Act standards, and each district must comply with the Health and Safety Standards established by OSHA.  If either district incurs debt, the district incurring the debt will handle the debt.

9)                 The other financial obligations of the component districts are as follows: Independent School District 24 and Independent School District 21 together with twelve (12) other districts, entered into a lease agreement with Valley and Lakes Education District, which has since disbanded, and with West Central Educational Cooperative Unit (ECSU) for the purpose of leasing interactive instructional transmission facilities. . . .The effective date of the consolidation of Independent School District 24 and Independent School District 21 should be July 1, 1999, due to the Pairing and Sharing Agreement ceasing as of July 1, 1999.  (Ex. 11).

21.             The Department of CFL received the plat and supporting statement of the county auditor on March 5, 1998.  (Ex. 11).

22.             In the February 27, 1998 letter to the Commissioner from Auditor Brekken, he seemed to indicate that the submission was based upon the request of both the Lake Park and Audubon School Boards, when in fact, only the Lake Park School Board had adopted the resolution on February 9, 1998.  In response to a request for clarification by a resident of the Audubon School District, Auditor Brekken clarified that the consolidation plan and plat were submitted based on the resolution that was submitted by the Lake Park Board only, not the Audubon School Board.  A copy of this clarification letter was submitted to the Commissioner and to the Secretary of State.  (Exs. 11, 29).  This error does not invalidate the plat and plan submitted by the County Auditor as Minn. Stat. § 122.23, subd. 2 (a) only requires “a resolution of a school board in the area proposed for consolidation or upon receipt of a petition executed by 25% of the voters resident in the area proposed for consolidation or by 50 such voters, whichever is lesser.”  As long as there is a resolution of one of the school boards of the proposed consolidated district, the county auditor may submit the plat and plan to the Commissioner.  Minn. Stat. § 122.23, subd. 2).

23.             On May 5, 1998, Jeff Sigurdson, Senior Election Advisor, Office of the Secretary of State, approved the proposed transition schedule dated February 9, 1998 for the consolidated school board of the Lake Park and Audubon School Districts.  He concluded that the reduction of the combined board from 13 to 7 members elected at large by January 1, 2004 meets the requirements of Minnesota Election Law.  (Ex. 1).

24.             On March 9, 1998, the Commissioner received a petition from 20 resident voters of the Audubon School District requesting a public hearing on the consolidation plat and plan submitted by the Becker County Auditor pursuant to Minn. Stat. § 122.23, subd. 6.  (Ex. 12).

25.             On April 13, 1998, the Commissioner notified the Superintendent of the Audubon and Lake Park School Districts that a hearing would be held on May 6, 1998 regarding the proposed consolidation between the Audubon and Lake Park School Districts.  The notice provided that the hearing would be held at 6:30 p.m. at the Detroit Lakes Pavilion, located on South Washington Avenue on the Lake in Detroit Lakes, Minnesota.  It further directed the school districts to publish a notice of the hearing in their official newspapers.  (Ex. 13).

26.             On April 29, 1998, a Delegation of Authority to Phyllis Reha, Administrative Law Judge by Robert J. Wedl, Commissioner of Children, Families and Learning was submitted to the Secretary of State's Office delegating authority to ALJ Reha to conduct a hearing pursuant to Minn. Stat. § 122.23, subd. 6 regarding the plat and plan for consolidation of Independent School District 21 (Audubon) and Independent School District 24 (Lake Park).  The delegation of authority provided further that findings resulting from the hearing shall be provided to the Commissioner of Children, Families and Learning.  (Ex. 10).

27.             Notices of the public hearing were published in the Becker County Record on April 15 and 22, 1998 and in the Lake Park Journal section of the Hawley Herald on April 20 and 27, 1998.  (Exs. 3, 4 and 5).

28.             In July of 1997, the school boards of Lake Park and Audubon retained The ADM Group, LLP to review “what is” in the two districts, and determine whether or not another consolidation vote in the near future would be a wise choice or not for the two districts.  (Ex. 6, p. 1).  The request by the two districts did not include a study of other options such as consolidation with other districts by either district, dissolution of the districts, pairing with other districts by either district, or repeal of the Pairing and Sharing Arrangement and going it alone.   The ADM Group investigated and evaluated information related to enrollment, finances, programs, facilities, organization, geographic setting, demographics, and a final recommendation.  (Ex. 6, p. 1).  A July 1997 organizational report was presented to the Lake Park and Audubon school boards in December 1997.  (Ex. 7).

29.             In February of 1998, the two school boards decided additional data and information would be helpful in terms of deciding the future of the Lake Park and Audubon school districts.  The two school boards again retained The ADM Group, LLP to conduct a second study.  The purpose of the second organizational report was “to generate more detailed information that would assist the school boards to better inform the citizens of the districts as they decide the organizational future of educational delivery.”  The second organizational report addressed issues related to organizational options, enrollment projections, facilities and finance.  (Ex. 7, p. 1).

30.             Enrollment is the single most important factor affecting a school or schools.  Enrollment drives finance, programs, facilities and organization.  It is the controlling factor when assessing efficiency and effectiveness.  (Ex. 7, p. 3).

31.             The enrollment of the Lake Park and Audubon school districts has stabilized at approximately 700 students in grades K through 12.  Combined, the Lake Park and Audubon school is projected to have graduating classes of 50 students.  Separate, the two schools are projected to have graduating classes of only 25 students, excluding open enrollment.  Combined, enrollments are currently sufficient to provide an acceptable education program now and projected ahead to 2008 through 2009. (Ex 7, pp. 3 and 31 )

32.             The census and enrollment data indicates a manageable decline in enrollment in both school districts.  The data projects less of a decline in Audubon than in Lake Park.  (Ex. 7, p. 3, Tables 1-8).

33.             Open enrollment is a negative factor.  Open enrollment in the combined Lake Park and Audubon school districts accounts for a considerable monetary loss (35.52 WADM’s {weighted average daily membership} for a total of $135,433 for 1996-97) for the combined districts.  Audubon’s share of the loss was $95,859, and Lake Park’s loss was $39,574.  Audubon had a net WADM loss of 25.25, and Lake Park 10.28.  Audubon has more of a problem with open enrollment due to its geography, which places it very close to Detroit Lakes.  Detroit Lakes is experiencing enrollment loss.  Detroit Lakes welcomes additional students through open enrollment.  Both Pelican Rapids and Ulin-Hitterdal also welcome additional students.  (Ex. 7, p. 3-5, 31).

34.             Audubon is showing stability and strength in terms of enrollment at the elementary level.  Audubon’s resident elementary enrollment is now larger than Lake Park’s.  The two districts will be similar in size in terms of K-12 enrollment in the not-too-distant future.  (Ex. 7, p. 31).  Even though there is enrollment decline across the combined districts, it is manageable.  (Ex. 7, p. 31).

35.             Combined, the two school districts show an estimated loss of about 10 to 15 WADM’s per year over the next five years.  Converted to dollar loss in today’s dollars using the current state-local formula figure of $3,505, this comes to a total of $35,245 for the combined districts.  This is a manageable figure in terms of budget adjustments.  (Ex. 7, p. 3, 14).

36.             Audubon’s fund balance, all funds, was $564,620 at the end of 1996.  At the end of 1997, the fund balance, all funds, was $469,342.  The fund balance, all funds, at the end of 1998 is projected to be $245,229.  (Ex. 7, p. 14).  Audubon does not have any outstanding building debt.  The school district is in good financial health.  (Ex. 7, p. 14-15).

37.             Lake Park had a substantial fund balance of $1,361,312, all funds, at the end of 1997.  The balance, all funds, is projected to be $980,000 at the end of 1998.  Part of the reduction is due to excess debt service and a reduction in the operating funds.  The Lake Park district is in good financial health.  (Ex. 7, p. 15).

38.             School districts that consolidate receive additional revenue from the state of Minnesota to help defray the cost of the consolidation.  This funding amounts to $300 ppu (per pupil unit), which would generate approximately $240,000 in the case of Lake Park and Audubon.  These dollars can be used for many discretionary items, including general operating expenses.  One-time spending is recommended because the dollars are finite.  (Ex. 7, p. 15).

39.             School taxes across the state of Minnesota are going to be similar due to tax limitations and the funding formulas.  Factors that cause taxes to vary by district include voter-approved referendums and bond issues, and board-approved accessibility and health and safety levys.  Equalization is the main factor in taxing fairness across the district boundaries.  Bonding capacity in each district and the two combined is more than adequate to support operations.  (Ex. 7, p. 14).

40.             The school tax capacity rate for Lake Park for pay 1997, excluding RMV (referendum on market value) was 53.477.  The rate for pay 1998 is 44.156.  The referendum is in addition to the tax capacity rate, and was at a rate of .11218 for pay 1997.  This would mean about $65 on a $60,000 home.  A similar figure should be true for pay 1998 for the RMV.  A debt service adjustment plus a reduction in the accessibility levy contributed to the lower-than-usual pay 1998 tax capacity rate for Lake Park.  Lake Park has about five years remaining on its bonded debts, which will stay with the Lake Park district regardless of organizational changes.  The Lake Park school rate has generally been higher than the Audubon school rate primarily because of levys per debt, referendum, and accessibility needs.  (Ex. 7, p. 16).

41.             The school tax capacity rate for Audubon for pay 1997 was 44.142.  Audubon does not have a referendum.  The rate for pay 1998 is 42.021.  Audubon has no outstanding debt service.  The property tax evaluations of the two school districts are similar.  Data taken from the Department of CFL levy limitation sheet for taxes payable 1998 reveal the following valuations:

 

Item	Audubon	Lake Park
Adj net tax capacity 1996	$1,626,670	$1,667,553
Market value 1996	$104,514,927	$112,973,425
REF Market value 1996	$98,147,652	$105,372,375

(Ex. 7, p. 16).

42.             Lake Park has a market value referendum that raises $252,000 in revenue for 1998-99.  The pay 1998-levy share is $154,000, not including some minor adjustments.  The market value rate for pay 1998 is .138.  This means that a $60,000 home in Lake Park will pay $82 per year for referendum purposes.  Audubon does not have a referendum.  The budget deficit in Audubon for 1996-97 was $100,000.  The projected budget deficit for 1997-98 is $200,000.  A fully equalized referendum (350 ppu) would raise approximately $140,000 in Audubon.  The estimated Audubon rate for an equalizer referendum would be .05 on market value or approximately $30 on a $60,000 home.  The rate goes up after the equalizing factor because the mix is dollar for dollar after 350 ppu.  There will be a one-time property tax rebate on homestead property for 1998.  (Ex. 7, p. 17).

43.             If the districts were to separate with tuition agreements or dissolve, a severance obligation for employees is required.  A levy may be enacted to cover the obligation.  The most significant expenditure is a yearlong severance for unemployed teaching staff.  (Ex. 7, p. 15).

44.             Some Audubon residents criticized the Lake Park School District for overspending in past years.  (T. p. 58; Ex. 14, 29, 36, 39).  While expenditures did exceed revenue, a referendum was passed to continue programs and make up the deficit.  Although no in-depth study has been conducted, it appears that the sizes of classes in Lake Park had more to do with the difference in spending than other factors.  (Ex. 7, p. 15).  For example, classes of 35 to 45, which are generally cumbersome, need to be split, thus causing higher costs.  Audubon generally ran classes in the mid-20s, which required only one section.  (Ex. 6, p. 12).  Spending patterns are under control in both school districts.  (Ex. 6, p. 12).  The differences in spending patterns between the two districts are not large.  Historical differences between the two districts are more likely to be due to size of classes than other factors.  Each school district has healthy fund balances and enrollments are stabile.

45.             At the time the Pairing and Sharing Arrangement was considered, a study was commissioned to advise the districts regarding the best location for the grade levels.  As a result of this study, the K-6 elementary school was sited in Audubon, and 7-12 high school was sited in Lake Park.  Lake Park had the larger enrollment in past years, and as a result, had need for more teaching stations in various departments and classrooms in the high school in general.  (Ex. 6, p. 16).

46.             A technical condition assessment report on the Lake Park site prepared by Yeater, Hennings, Ruff, Shultz, Rokke, & Welch, architects and planners from Moorhead, Minnesota, was conducted in June of 1997, for the school building in Lake Park and in January 1998, for the elementary school in Audubon .  The assessments provided a description and evaluation of the buildings in both school districts.  It evaluated the technical conditions of the buildings to aid in prioritizing maintenance needs, determining appropriate allocation of resources for building improvements, and understanding issues which could be addressed in the event of expansion plans.  (Exs. 8 and 9).

47.             The consolidation plat submitted by the county auditor to the Commissioner requires that the school buildings in each of the two school districts must be brought into compliance with Americans With Disability Act (ADA) standards.  The technical condition assessment reports provide a priority corrective action summary, which essentially outlines the top priority deficiencies found in each of the schools buildings.  The deficiencies were ranked according to physical service ability and code compliance scales.  Also provided in each report is the estimated cost of correcting the deficiencies.  The report authors point out that efficiencies may be gained by combining corrective actions into a more comprehensive project.  By far the most costly items indicated are costs for handicapped accessibility.  (Exs. 8 and 9). 

48.             The Lake Park facility consists of more than six different building episodes.  The earliest section of the school was built in 1890.  This is a three-story structure that presently houses the high school/jr. high offices, the principal’s office, a staff room, a community room, the library, a weight room in the basement together with an art room and some storage for science and art.  The 1922 building section presently has classrooms in the upper two levels and the cafeteria in its lowest level.  The 1956 episode is a connection built to provide a direct link to the 1922 section.  It houses the district offices, several classrooms directly above and the series of connection stairways to the many adjacent floor levels below.  Another major project in 1971 added four sections to the building.  These sections house storage, kitchen, classroom space, a shop classroom, and a music suite and corridor.  Lastly, in 1989 and 1991, the gymnasium, lobby, concessions, handicapped toilets and theater were constructed.  (Ex. 9, p. 3).

49.             Due to the multitude of levels and the age of the construction, the 1890, 1954 and 1922 sections of the school are not handicapped accessible.  The lower level Cafeteria and classroom spaces are also not accessible.  The lack of accessibility requires the installation of a 5-stop elevator[1] and platform lifts with total costs of approximately  $250,000.  Other deficiencies given high priority ranking would add at least another $25,000 in costs.  (Ex. 8, p. 5).

50.             The priority corrective action summary for the Audubon building also indicates the need for significant corrective action and expenditures.  The Audubon school building consists of four major building episodes, starting with the original structure dating back to April of 1922.  The 1922 structure houses the central heating plant, the gym, bathrooms, library and classrooms.  A second major addition in 1954 and 1955 houses locker rooms, a gym with a stage, classrooms, bathrooms, kitchen and central commons dining area and shop with agriculture classroom and lab.  In 1969 and 1970, the third addition added space for offices, classroom and music education.  The office spaces are now used for the district offices.  In 1977, a new double gymnasium was added with space for adjacent boys and girls locker rooms, athletic staff and support spaces, a new library, science lab, mechanical spaces supporting the additions, bathrooms and classrooms.  (Ex. 9, pp. 3-5).

51.             A priority corrective action summary was prepared for the Audubon school building, which indicated significant deficiencies in handicapped accessibility, building integrity and safety.  Due to the age of the original 1922 structure, the building is not accessible to the second floor.  A three-stop elevator with lobby additions to tie the three levels together for handicapped accessibility is required at an estimated cost of between $125,000 and $190,000.[2]  Additional high priority deficiencies would add at least an additional $70,000 expenditure. (Ex. 9, p. 6).

52.             It is clear from the technical assessment reports conducted for Lake Park and Audubon that accessibility issues must be addressed.  The 1890 and 1922 section of the Lake Park building will need to be eventually considered for replacement within the next ten years.  Similarly, the 1922 Audubon section must also be considered for replacement within the next ten years.  These upgrades, could be part of a comprehensive bond issue to be considered in the next ten years provided the districts consolidate.  The organizational report II prepared by the ADM Group provided an analysis of the costs of 4, 5, and 6 million-dollar bond issues for a combined district.  Various properties and values were used.  Figures were generated by the Department of CFL based on consultant assumptions and a July, 1997-combined district (See, Ex. 7 at pp. 24 through 25).

53.             Lake Park has a building bond referendum for the gymnasium and the theater at the high school.  Concern has been expressed by Audubon taxpayers that they will become responsible to share in this levy if the school districts are consolidated.  The consolidation plan adopted by Lake Park states clearly that the Lake Park building bond levy would remain an expense for residents of the former Lake Park district only if consolidation is approved.  (Ex. 11). 

54.             K through 12 education is financed through a combination of revenue sources, such as state aid, local levy, and the levy referendum.  The majority of school district revenue is determined annually by statutory funding formulas.  The total revenue allowed by these formulas is then allocated between taxes and state aids.  Any shift in the tax allocation percent is offset by a corresponding change in state aids.  (Ex. 6, pp. 12-13).

55.             The State of Minnesota's funding formula takes into account enrollment in the district, which is weighted to produce total pupil units (WADM – Weighted Average Daily Membership).  The WADM's are multiplied by the foundation aid allocated for each WADM by the State Legislature to produce the maximum amount of general fund expenditures allowed.  If a district’s voters have passed a levy referendum, additional funds may be collected and spent in the district.  (Ex. 6, p. 12; Ex. 7, p. 3, 6-8).

56.             Lake Park has a general operating fund excess levy.  The general operating excess levy for Lake Park in 1996 was $132,000.00. It is now approximately $100,000. If the school districts consolidate, both Lake Park and Audubon residents will share responsibility for the excess levy.  This will increase Audubon taxes over what they are now.  However, the revenue will go directly to the education of Audubon as well as Lake Park students in a consolidated district.  The total amount of the levy shared by both districts would be reduced due to a change in formula.  The amount of revenue generated will remain the same but the state-funded portion will increase to make up the difference.  (Ex. 7, p. 15).

57.             If the two districts are consolidated, it is the intent of the Lake Park School Board not to close any buildings.  Both communities would maintain their existing school buildings.  All students in the combined school district in grades K through 6 would attend the elementary school in Audubon and all students in grades 7 through 12 would attend the high school in Lake Park.  (T. p. 37).

58.             Consolidating the two districts will offer students improved curriculum and services.  There will be a greater variety of classes, more sections, and the availability of more enrichment classes.  The enhancements of a consolidated school district will be similar to those that exist currently for the Pairing and Sharing Arrangement.  (See, Findings 7-9 above).

59.              By consolidating the two existing districts, more effectiveness and efficiency would be possible in regard to the Superintendent's office if there was one district instead of the present arrangement.  The Superintendent's office must devote time and energy to serving two boards.  That time and energy could be used for school improvement.  (See, Findings 9).  (Ex. 7, p. 9-10).

60.             An approximately $250,000 one-time incentive would be available if the districts consolidated.  (Ex. 7, p. 15).

61.             Opportunities to participate in extra-curricular activities will be enhanced if the two districts consolidated.  These extra-curricula opportunities and enhancements are similar to those that exist currently as a result of the Pairing and Sharing Arrangement. (See,  Findings 7-9 above). 

62.             Most of the residents from Audubon who testified at the public hearing favor consolidation. Most of the letters received during the comment period favor consolidation.   (Ex. 32-39).  Parents with students in the school system generally like what the Audubon /Lake Park School District is doing in regard to curricula and programs for their children.  (Ex. 18 which contains 44 separate letters).  Several parents stated that a small school gives the students a sense of belonging and provides parents with the opportunity to participate in school decisions.  (Ex. 18).  Parents commented that it was their feeling that students loved their school.  There was a feeling there needed to be stability and a sense of oneness, and the perception of instability was bad for growth in the community.  (T. p. 53-55, Ex. 18).  Everyone who testified in support of consolidation indicated that the Pairing and Sharing Arrangement was a positive arrangement, but felt that consolidation was the best route for purposes of long-term planning and stability.

63.             Many who spoke in favor of consolidation at the hearing see consolidation as an opportunity to get a better educational program for the students with more activities and minimize the impact of declining enrollments in the rural area.  (T. p. 17, 19, 22, 47, 56, 62, 73, 80; Ex. 18).

64.             Several parents said that they voted no in the last vote on consolidation because they were happy with the Pairing and Sharing Arrangement and saw no tangible reason to vote yes for consolidation.  Those same parents now see and understand the instability of a Pairing and Sharing Arrangement especially in light of the fact that the Lake Park School Board has now voted to withdraw from the Pairing and Sharing Arrangement effective June 30, 1999.  (Ex. 18).

65.             Four residents of the Audubon School District testified in opposition to the proposed consolidation of Lake Park and Audubon School Districts.  Doug Sletmoen, Member of the Audubon School Board did not oppose consolidation per se, but indicated that a number of concerns and questions about the finances and costs to meet handicapped accessibility codes in both buildings have not been carefully considered.  In addition, he is concerned that the citizens of Audubon might not be appropriately represented on an area basis if the proposed consolidation plan is approved.  He believes that these issues should be addressed prior to consolidation.  (T. pp. 51-52).  George Kohn, a resident of Audubon testified that he believed that the Lake Park District was not fiscally responsible in that prior to the last general fund referendum, Lake Park had been in deficit spending eight of the past eighteen years with only the last five years showing a positive general fund balance.  He also believed that it has been more costly to combine accounting systems under one program than it was to have a separate program in Audubon.  He points out that no one has provided a comprehensive analysis of district wide census and enrollment projections to provide a basis for a conclusion that consolidation is in the best interests of the taxpayers of Audubon.  (T. p. 57, Ex. 29).

66.             Approximately 300 people attended the public hearing on May 6.  28 people presented testimony at the public hearing.  The Administrative Law Judge received into evidence at the hearing 24 hearing exhibits.  The record was left open for the receipt of additional written comments from interested members of the public for two weeks following the hearing.  By May 22, 1998, the Administrative Law Judge received eight written comments from interested members of the public.  Everyone who attended the public hearing was given an opportunity to testify at the hearing.  The hearing was adjourned only after no one else wished to testify.

67.             The proposed district to be consolidated contains at least 18 sections of land as required by Minn. Stat. § 122.23, subd. 1.

Based upon the foregoing Findings of Fact, the Administrative Law Judge makes the following:

CONCLUSIONS

1.            The Commissioner of the Minnesota Department of Children, Families and Learning and the Administrative Law Judge have jurisdiction in this matter pursuant to Minn. Stat. § 122.23, subd. 6 and 15.06, subd. 6 and the delegation of authority issued by the Commissioner of the Department of Children, Families and Learning dated April 4, 1998.  (Ex. 10).

2.            The procedural requirements of Minn. Stat. § 122.23 have been met, and the Commissioner has authority to approve, modify or reject the proposed plat and also approve or reject any proposal contained in the petition regarding the disposition of the bonded debt of the component districts.

3.            A public hearing was properly requested within 20 days after submission of the plat to the Commissioner by at least 20 residents living within the area proposed for consolidation.  (Ex. 13).

4.            Notice of the public hearing was in proper form and content and the Commissioner has complied with all relevant substantive and procedural requirements of statute and rule.

5.            Consolidating the Lake Park and Audubon School Districts will offer a long-term solution to the financial problems which both districts will face due to actual and projected declining student enrollments and projected decreases in state funding.

6.            Consolidating the Lake Park and Audubon School Districts will improve curriculum and educational opportunities in both districts by offering students more choices and sections of academic classes, increased opportunities to choose instructors, more access to extra-curricular activities, and greater access to and use of technology such as computers and the Internet.

7.            Consolidating the Lake Park and Audubon School Districts will provide greater service for the money spent by operating with full class sections; eliminating duplication of services such as two school boards, and operating two accounting systems.  The Superintendent's office could operate more efficiently and effectively under consolidation.  In addition, the consolidated school board will qualify for consolidation incentive funding from the State of Minnesota during the first two years of consolidation, thereby getting the most for each educational dollar spent.

8.            Consolidating the Lake Park and Audubon School Districts will provide more efficient staffing and use of school facilities by eliminating the need for any new building construction; utilizing the existing buildings in a manner which will allow both communities to maintain their elementary school, and their high school; and utilizing the entire staff in such a manner as to avoid duplication or excess instructors.

9.            The attached Memorandum is hereby made a part of the Conclusions as if fully set forth herein.

            Based upon the foregoing Conclusions, the Administrative Law Judge makes the following:

RECOMMENDATION

IT IS HEREBY RECOMMENDED: That the Commissioner of the Minnesota Department of Children, Families and Learning approve the proposed plat and the proposal contained in the petition regarding the disposition of the bonded debt of the component districts.

 

Dated this

day of

June,

1998.

 

 

                                                                             

PHYLLIS A. REHA

Administrative Law Judge

 

Reported: Court Reporter:  Carolyn's Reporting Service

                                                 RR 2, Box 253Z

                                                 515 Tenth Street

                                                 Hawley,  MN  56549

            1 Transcript Volume

 

MEMORANDUM

Minnesota Statute § 122.23 sets forth the procedures whereby the two school districts can be consolidated into a single independent district in Minnesota.  The statute provides two distinct mechanisms to initiate this process:  by resolution of a school board in the area proposed for consolidation, or by a petition therefor executed by 25% of the voters resident in the area proposed for consolidation or by 50 such voters, whichever is lesser.

The opponents to the proposed consolidation argue that the Commissioner should reject the proposed plat and plan, since the voters of the Lake Park and Audubon School Districts have already voted on the proposed consolidation on two previous occasions and have been rejected each time.  However, this argument is not persuasive.  Under the statute as it currently exists, the Commissioner does not substitute his will for the voters.  His sole obligation is to review the proposed plat and plan for consolidation and to approve, modify or reject it.  Minn. Stat. § 122.23, subd. 6.

It is clear from the evidence that the plat and plan for consolidation in this case is well thought out and if adopted by the voters in the two school districts will assure long-term quality educational opportunities for the students of both districts, will alleviate the impact of declining enrollment on both districts, will provide improved curriculum and educational services in both districts, will provide more opportunities for extra-curricular activities, and will provide greater educational services for the dollars expended.  It will provide more cost efficient staffing and use of school facilities.  There is nothing in the proposed plat and proposal which warrants rejection or modification by the Commissioner.  Although the voters in Audubon have previously rejected consolidation in two previous elections, the testimony and evidence at the hearing supports the view that many voters were not voting against consolidation but were voting in favor of continuing the Pairing and Sharing Arrangement.  Many of the curricula and extra-curricular advantages which have been noted in the Findings of this Report are available in a Pairing and Sharing Arrangement.  However, it appears as if the Pairing and Sharing Arrangement option is no longer available after June 30, 1999 as Lake Park has voted to withdraw from that arrangement.  Thus, many of those same voters who supported continuing the Pairing and Sharing Arrangement now see that consolidation is the only way to maintain the high quality educational opportunities that now exist for the students.

As the organizational studies conducted by the ADM Group have indicated, it would be difficult for each of the school districts to go it alone taking into consideration the impact of declining enrollments, open enrollment and class size.  The State of Minnesota says that a secondary school has to have at least 66 in a graduating class to qualify for debt service equalization for a secondary facility.  Furthermore, it is clear that enrollment drives finances.  Finances drive effective programming.  It is questionable at best that a school district with only 25 graduates could maintain an independent school system.  Together, Lake Park and Audubon would have approximately 50 graduates.  A district with 50 graduates can provide an effective and reasonably efficient educational program.

It is clear from the testimony presented at this hearing that students and parents like the combined school arrangement.  Communities and staff want what is best for students and their communities.  People are weary, defensive, and mistrusting of their neighbors as a result of the continuing unresolved issue of consolidation.  Relatively minor issues have been blown out of proportion.  There are misconceptions regarding spending, property wealth, taxation, and how the funding formula works.  Opponents fear that their taxes will be impacted by a consolidation because of the referendum, debt service and capital activity in Lake Park.  The study conducted by the ADM Group indicates that tax rates would be similar if these three factors were eliminated.  Base tax rates in Minnesota schools are similar across district boundaries when these factors are removed.  Lake Park has gone on record and the County Auditor's proposed plat and plan clearly indicate that the bonded debt of Lake Park will be paid pursuant to the provisions of Minn. Stat. § 122.23, subd. 16, (a), whereby the obligations of the taxable property in the component district with reference to the payment of such bonded debt will stay within Lake Park.  The language in the consolidation plan, adopted by the Lake Park School Board clearly states that the Lake Park building bond levy will remain an expense for residents of the former Lake Park District if consolidation is approved.  However, to the extent that Lake Park has a general operating fund excess levy, Audubon taxpayers will share responsibility for a portion of this levy.  While Audubon residents may see an increase in taxes over what they are paying now, the revenue goes directly to the education of Audubon as well as Lake Park kids.  In addition, the total amount of the levy shared by both districts will be reduced due to a change in formula and an increase in state funds.  Certainly, if Audubon did not consolidate with Lake Park and wished to continue their own school system, a referendum would be necessary in Audubon to manage the financial responsibilities of the existing school district.

It is clearly up to the voters in Lake Park and Audubon to ultimately decide upon whether the proposed consolidation will occur.  The approval of the plat and plan by the Commissioner is merely one step in that direction.

If the Commissioner approves the plat and plan, then the matter goes back to the school boards and they have 45 days to act.  At that time there are two issues.  One is that they have to vote to continue the process, and that does require a positive vote.  A tie vote, of course, is not a positive vote, and there would be no election if that is the case.  If there are positive votes in both districts, then there are two ways in which there might be an election.  First, both school boards can call for an election.  Then there would be an election in both districts.  One district cannot call for an election.  It has to be both.  If they both don't call for an election, then the citizens have 30 days to petition for an election in either or both districts.  Thus, in the event of a citizen petition, there could be a vote in one or both of the school districts.  Lastly, there is the possibility of legal action where concerned citizens could request a court of competent jurisdiction to require either school district to approve a resolution, and if they do not, the court can issue an order saying the resolution is passed.  Granada Independent School District v. Mattheis, 170 N.W.2d at p. 88 (Minn. 1969).  In addition, other case law indicates that even if a plat or plan has some technical irregularities or it might not technically meet all statutory requirements, that the Commissioner has a right to modify the plat, and approve the plat if it substantially meets the statutory requirements for approval.  Common School District v. Barstead, 42 N.W.2d 393 (Minn. 1950); See, also Independent School District No. 561, Pennington and Marshall Counties v. Independent School District No. 35 and 438 Beltrami and Marshall Counties,.170 N.W.2d 433 (Minn. 1969).

If the Commissioner approves the plat and plan submitted, it is clear that the majority of those who spoke at this public hearing and submitted written comments favor the matter being placed before the voters of the two school districts to decide for or against consolidation.

P.A.R.