Inconvenient truth

by Loren Martell

Old Duluth Central High School. Photo credit: Ted Heinonen
Old Duluth Central High School. Photo credit: Ted Heinonen

The investment ISD 709 made in facilities was sold as a wonderful deal for the taxpayers.  One key to saving taxpayer money hinged on selling “excess” district property and transitioning public land back to the tax rolls.  The numbers around this pot of gold were skewed from the onset.  

Despite collecting only 45% of the asking price ($3 million of the $6.7 million it was marketed for,) the Red Plan’s backers regularly bring up the Woodland deal as a great success story.  The property, minus the demolished school, is now a private development called BlueStone, but any benefit to the taxpayers has been put on hold for 26 years because of TIF--tax increment financing.  Not only did taxpayers lose $3.7 million from the upfront price, but for more than two and a half decades from the date of the sale (2011-2037,) all tax revenue generated from the property will be used to offset the developer’s costs for the project.  

On 5/23/12, the Duluth News Tribune reported that, when fully developed, the property was “expected to have a market value of about $74.1 million (and) annually generate $943,610 in taxes…When the tax increment agreement expires in 26 years, that full sum will flow to the public tax rolls.”  It will take four more years, at that rate of return, for taxpayers to make up all the money lost from discounting the sale price.  Calculating the full amount of money lost over the 26 years of TIF is difficult, because the development will happen in phases.  $943,610 cannot be simply multiplied by 26, but a figure somewhere in the ten-twelve million dollar range would be a fair estimate.  

My understanding of the TIF agreement is that it also includes a surcharge of 6% interest until the developer is paid in full.  On top of that, the developer (who paid $3 million for the entire piece of property, 18 acres) turned around and sold a parcel (20%, 3.6 acres) to another nonprofit entity--the College of St. Scholastica--for $2.58 million, a clear indication that taxpayers did not realize the full, potential value from the initial sale. 

The only property the district actually sold for its marketed ($500,000) price is also hardly a boon for taxpayers.  An old fire hall on East Third Street, vacated by Facilities Management during the Red Plan’s facilities reshuffle, the building became a stuffed grab-bag of tax subsidies:  

(1) $745,000 in Minnesota Housing Finance Agency Low Income Housing Tax Credits,

(2) $540,000 in Federal Historic Tax Credits,

(3) $540,000 in State Historic Tax Credits,

(4) a $1.4 million 30-year deferred loan from the Minnesota Housing Finance Agency,

(5) a $220,000 30-year deferred loan from the Greater Minnesota Housing Fund.  

No tax revenue will be collected from the property until 2040, thirty years from date of sale, which amounts to a $1.97 million subsidy, plus interest, under Tax Increment Financing.  In a 1/21/18 article, the News Tribune reported that local government entities were losing about $149 million in tax collections from all the properties currently locked up in TIF, but that is probably Too Incidental For concern.

At least the old fire hall did bring in the asking price.  None of the other district “excess” property garnered anywhere near what they were marketed for.  The MDE Red Plan Review & Comment document states: “the disposition proceeds from selling the Morgan Park and Lincoln Park properties are estimated to be $500,000 and $610,000 respectively.  These proceeds, along with the disposition proceeds from the sale of all Red Plan surplus properties, will be used in the funding mechanism of the plan.”  500,000 + 610,000 = $1,110,000.  The two properties were actually sold for only 9% of what the taxpayers were promised: $100,001. 

Board members cheered and high-fived each other in the boardroom when they sold Nettleton Elementary for less than a third of its asking price.  Rockridge Elementary was put on the market for $1,780,000, but the school board again refused to sell to a “competitor.”  Rather than saving taxpayers money, district 709 spent millions for a remodel and will pay more yet for a new roof and other needed facility upgrades. 

The granddaddy of all these property boondoggles, however, sits on a promontory in the center of our city.    

People wept over this

One reason I got into the school board contest again was because of my concern over the Central High School property.  That property, abandoned for going on nine years now, embodies how poorly we’ve been led.  

I attended the rezoning meeting for the Central property held in City Hall after the campus was closed.  No Board members were there.  Some of the citizens in attendance were crying.  One woman kept breaking down, weeping so hard the meeting had to be paused a few times.  Her husband could not console her.  I have never seen anyone cry harder at a funeral.  To trample so callously on such a deep love for a school was the very antipathy of wisdom for a public school district. 

Memories run long in Duluth.  Many people still complain to me about the way Old Central was shut down, and that happened nearly half a century ago.  If our school board doesn’t find some wisdom, the anger and resentment about what happened over New Central will still linger in this town a century from now.    

On page 6 of the original Review & Comment document, Johnson Controls declared it would “dissect the grade populations and identify what schools are located in population centers.”  We’re just 11 years out from the first renovated school and those words have been proven false beyond any dispute.  Still $200 million in debt, our school district has been forced to hire a firm to look for some way to make the configuration we were left with work.  

To do a boundary study at this point of the ball game, and not bring the Central property back into the discussion, is the culmination of many years of poor leadership--nothing but more denial and shortsightedness.   

The Red Plan’s school configuration was a bad fit for a town with a 30 mile long geographical footprint and a deep, historical east/west divide.  From the beginning it was inevitable that a long-range plan would backfire.  A few decades down the road, when every penny of the obscene price tag is finally paid off and prime central property has been tossed away for 2 cents on the dollar, Duluth will have to purchase more central property and start rebuilding schools it should never have shut down to begin with.  

Grover’s words

Former Board Chair, Tim Grover, seemed like a brave soul at first--one of the few school board members questioning the likely result of what our town was getting into.  After he sold out on his stated beliefs and promises, Grover started turning the microphone off on citizens in the boardroom, so he wouldn’t have to listen to truth of his own words.    

The former school board representative from district 3 stated on the record that Duluth’s geography “virtually requires” it to have three high schools.  He also said the Red Plan would produce an “educational void in the center of the city.”  More of his words are available for view in the paper of record, 10/28/07.  

Mr. Grover was the only Board member who initially voted against the Red Plan, in June of ‘07.  According to an article in the Duluth News Tribune, he requested his fellow Board members “give more consideration to a three-high school plan, particularly considering the impact the Red Plan (would have) on the Duluth Central high school community.”  

In the Zenith City Weekly, Grover bluntly admitted misinformation was being circulated about whether or not the public should be given the right to vote: “In general, projects of larger scale…have gone before the voters…I’ve been concerned about it…People were misled.” 

I’ve heard many theories about why this individual did his turnabout.  Some people are convinced he was double-dealing from the onset, but I don’t believe he would have gone so far as to vote against the plan out of some kind of ruse.  I believe he was simply reborn under the snake conjurer’s spell.  Either way, the truth he once spoke will inevitably come full circle.  In fact, his predicted “educational void” already exists.  District 709 has begun leasing space in the old Washington school for early childhood education ($14,366.40 a year, with a 3% annual increase) because, as the CFO told the Board: “There aren’t any other spaces in the center of the city.”

If we dump the Central property, it’s just a matter of time before foolish Duluth will have to start all over and rebuild some central schools. 
 

Look before taking the final leap

Duluth citizens were promised “educational equity” from making all our public schools “new or like new,” but that promise has predictably failed.  A few high-achievers are doing amazing things at Denfeld, but overall comparisons between East and West are disheartening.  There is a direct correlation between good educational outcomes and the environment under which classroom instruction is being delivered.  

The difference in this city’s East/West public educational environments was elucidated by the Disproportionate Suspension/Expulsion Report ISD 709 filed 2/15/19 with the Minnesota Dept of Human Rights.  Lincoln Park Middle School had a total of 267 total suspensions/expulsions in the first semester of the 2018-19 school year, while Ordean Middle School had 59.  Denfeld High had a total of 256 suspensions/expulsions, while East High had 72.

How long will it be before our town’s movers and shakers admit reality?  Ignoring the Central campus while redrawing our school district’s school boundaries is like Duluth’s municipal government painting a circle around the center of the city and excluding the whole area from any of its long-range planning.  The last demographic study done for the school district showed the town’s highest school-aged population densities are east and west of Mesaba, right where the Central campus is located.

Even now, the high school is only 48 years old; the two Secondary Tech Center buildings are only 23 and 25 years old.  To NOT reconsider the utilization value that property and those buildings still hold for our public education system at this juncture is off-the-charts foolish.    

If and when the district sells the Central property, more cheering and high-fiving will likely occur in the boardroom, as though a great success has been accomplished.  The mainstream media will facilitate all the spin.  Don’t believe a word of it.  The asking price has already been slashed from $13.7 to $7.9 million.  We’ve lost buckets of taxpayer money invested in the property less than a decade before shutting it down, as well as hundreds of thousands of dollars maintaining it all these years.  

The financing will be laced with subsidies and the tax revenue from any development will be locked up in TIF for so many years, Millennials will be looking at retirement before any theoretical benefit comes back to the town.  The sale of Central is already baked-in as another LOSER.  

It’s not too late to stop and truly think, take another look, before following this deeply-flawed, errant trajectory right over the cliff. 
 

They saved the Seaway!

I was in the city council chamber when the DFL-endorsed councilors made their arguments about saving the old Seaway Hotel.  One of their talking points was about resource value and the unacceptable waste of tearing the building down and hauling it off to a landfill.  

Where is this group of avid environmentalists now?  Our school district spent about nine million dollars to purchase 63 properties for the Red Plan.  Most of the properties had buildings on them that were torn down and hauled off to landfills (and, incidentally, removed from the tax rolls.)  Five school buildings--Woodland, Piedmont, Laura MacArthur, Lester Park, Morgan Park--as well as the pool annex for Lincoln Park Elementary are also in landfills.  

Adding three more multi-million dollar buildings to our landfill tonnage record would probably accumulate enough bad stewardship karma to condemn us to one of the inner circles of hell.  For the town’s right wing, that would equate to being subjected to “Inconvenient Truth” lectures from Al Gore, Bernie Sanders, Nancy Pelosi, AOC, Greta Thunberg and Jill Stein forever and ever and ever.  

John Ramos once quoted the left’s local golden boy, former mayor Ness, in this paper.  Mr. Ness described Duluth as being “about outdoor recreation, access to natural beauty, enjoying four full seasons, an authentic arts scene, and bluegrass music played as fast as humanly possible.  It’s about impressive beards, wind-burned cheeks, and a Wellstone sticker on an old pickup truck.”  All of these things, plus mountain bike trails, declared the mayor, gave Duluth an “authentic quality of being.”  In the same article, Mr. Ramos pointed out that the mayor was pushing to tear down the public library, which was only thirty-five years old and designed by a renowned architect.  

This wasteful discarding of our resources is inarguably antithetical to the very ethos the mayor was espousing.