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Frazee-Vergas school district tax draws some complaints

The Becker County Auditor-Treasurer's Office has been hearing some complaints from residents in the Frazee-Vergas School District about higher-than-expected property tax increases from the school operating referendum passed in November.

"Originally, when tax statements went out, people were upset," said Becker County Auditor-Treasurer Ryan Tangen. Some thought taxes on a $100,000 house were supposed to increase by $100.

But the district always said the increase on a $100,000 house would be $222, according the official ballot question.

The tax referendum ended up being "pretty close to what was estimated by the school district," Tangen said.

Some Frazee-Vergas residents saw big tax increases because of reductions in the "limited market value" program -- basically a property tax break for people whose land value (usually lakeshore) had increased rapidly.

"I've had one inquiry about the possibility of a reverse referendum, otherwise I haven't heard much," Tangen said.

Others were upset when the district's auditing firm announced a few weeks after the election that it had $885,000 in unreserved funds.

The news came as a surprise to the district's administration and school board members, who had been told there was between $50,000 and $90,000 in the general fund.

Since the district spends about $750,000 per month, that would have meant it was pretty much broke.

Even the $885,000 represented less than 10 percent of the district's annual operating budget, far below the 35-50 percent recommended by the Minnesota Auditor's Office.

"Because of that chunk of money," Tangen said, "some people thought they should delay it (higher taxes for the operating levy) for a year, or lower the tax burden."

Superintendent Deron Stender said three things contributed to the higher-than-expected general fund balance:

The Frazee-Vergas School District was hemorrhaging students last fiscal year, with 76 student leaving over the course of the school year.

With each of those students worth almost $5,000 in state aid, the district wrote off about $368,000 in anticipated state aid. That's standard school accounting, he said.

But the state pro-rates payment for students depending on how long they were with a district, so Frazee ended up getting a big chunk of money for those students, even though they left the district.

The district also implemented significant cost-cutting measures throughout the year, which resulted in extra dollars.

And it received $120,000 more than expected from the state for special education, thanks to legislation passed last year.

The district had been sitting on about $800,000 on July 1, 2006, but it spent $300,000 to avoid deeper cuts in staff and programs.

Combined with the $368,000 in lost tuition, the district figured it would have about $120,000 left in its general fund -- and it had a new program, all-day Kindergarten, to pay for.

"We never lied, we gave them exactly what we knew, based on the data available to us," Stender said. School district finance is complex, with state funding systems that are complicated and changeable.

"That's why superintendents are reluctant to give numbers at any given point, because we know they're going to change a month later," he said.

School Board Member Rich Ziegler said the school board has not been approached by any groups or individuals with concerns about the new operating levy.

Mary Lepisto of rural Frazee, who was active in the group opposed to the referendum, said opponents were unhappy with how the pro-referendum group ran its campaign, and don't like how the district is spending the referendum money now.

But there are no plans that she knows of to try to overturn the referendum.

"I'm not happy with them hiring teachers that they won't be able to pay in five years when the referendum runs out," she said, adding that she would prefer to see the money used to fix buildings, repair roofs, replace boilers and make other one-time improvements.

"Regardless of what people think," Stender said, the district was in a fiscal "tourniquet" and the referendum was, and is, desperately needed.

"We've deferred many, many, many of our expenditures -- facilities, curriculum, educational needs for our students," he said. "We still need to be fiscally responsible, but we'll be able to address some of the needs we've been neglecting."