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Debt, building a concern for Morris-Cyrus consolidation plans

MORRIS - On Thursday, Oct. 4, the Morris Area and Cyrus school boards met for the first time in a joint work session to discuss a potential plan to consolidate the two school districts.

Declining enrollment and increased costs have left the Cyrus School District in debt and struggling to provide services to students.

At the joint work session, the two school boards met to review their plat - consolidation plan - and agree on a timeline for moving forward.

In this second of three stories on the potential consolidation, we'll look at two of the major discussion points for the two school boards - district debt and Cyrus school building - that will need to be agreed upon before the consolidation is potentially approved.

District debts and obligations

Going into the consolidation, each district has some debt. The plat will include an agreement for how that debt will be repaid.

Currently, the Cyrus School District is operating in the red, which is called Statutory Operating Debt. After the consolidation, all of the district's debt is renamed "reorganization debt." The most recent plat estimates the reorganization debt to be around $300,000.

At the joint school board meeting, the Cyrus board indicated they will be asking the Minnesota Legislature for special legislation that would allow them to sell a bond for the amount of their reorganization debt, then levy Cyrus school district residents to repay the loan.

Mike Hoheisel of Northland Securities, a consulting firm working with both districts on the consolidation, told the two boards there is precedence for this type of legislation from a previous consolidation that Northland Securities worked with. If the special legislation is approved, Cyrus taxpayers will be responsible for the district's existing debt, rather than taxpayers of the newly combined district.

The Morris Area School District also has some debt to consider from the existing building referendum for the new elementary school. The question in this case is what percentage of that debt should the taxpayers of Cyrus be asked to carry when their students become part of the district.

Hoheisel presented two possible options, one based on the percentage of students from Cyrus that will be part of the new district and one based on the percentage of state aid the newly combined district will lose due to how education aid formulas are calculated.

Both calculations result in Cyrus taxpayers initially taking on between three and four percent of Morris' existing building referendum and increasing the amount over the next 10 years.

Cyrus school building

If the two districts consolidate, the Cyrus school building will become part of the new district.

The Cyrus School Board has indicated that their first goal is to try and sell the Cyrus school building. If they are not able to sell the property, they will seek a second piece of special legislation to help finance demolishing the building - a cost of about $800,000 that will remain with Cyrus district taxpayers.

The special legislation, explained Hoheisel, would allow the district to both ask for a grant to help offset the abatement costs and ask for a bond for the amount it would cost to demolish the building.

At the joint work session, Kurt Gartland, chair of the Morris Area School Board, said that the Morris Area School District is not interested in using the building for educational purposes and encouraged the Cyrus board to try and sell the building.

Any proceeds from selling items in the school building, or the building and land itself, would be used to decrease Cyrus' reorganization or building demolition debt.

If either piece of special legislation is not approved, "it would be difficult for the Morris district to absorb this $1.1 million in costs, nor would it really be fair to the Morris district," said Morris Area School District Superintendent Scott Monson.

"That would be a discussion and a determination that would need to be held, and I think we need to have a contingency plan in place," Monson added.

In our final story, we'll look at two other negotiation points - district staff and school board reorganization - as well as the consolidation timeline going forward.