Approval of lease-purchase financing plan ends district’s wait
In a letter sent to District 831 on Friday, Oct. 25, the Minnesota Department of Education announced approval of the district’s plan to purchase the Forest Lake Area Athletic Association Sports Center using lease-purchase financing.
Superintendent Linda Madsen said district officials are happy with the outcome.
“We appreciate the work FLAAA has done, and we thank them for their work in the community,” she said. “I can also appreciate why they weren’t wanting to be in that business.
“It’s been a long haul — MDE approval doesn’t come quickly — and we had to be patient,” she added. “Over the long term, we had to make sure this was a positive for us. With the purchase price we landed on, that certainly is the case.”
Madsen said the district has staff in place to make the ice arena a successful addition to the school’s facilities. Business Services Director Larry Martini will work with Springsted on the financing details, including the date for transfer of ownership.
The district first tried to finance the purchase with abatement bonds, but the state did not approve that plan.
Friday’s letter from MDE Commissioner Brenda Cassellius says the state has issued a positive review and comment based on a financing source of lease purchase, as authorized under Minnesota Statute 465.71. No voter approval is required.
The letter says the estimated cost of buying the ice arena, including financing costs, is $3 million. Madsen explained that this is lower than the $3.3 million purchase price because the district will be paying some money down. The amount financed will be $3 million, she said.
The lease purchase payments will be funded by existing operating capital funds.
The district anticipates an annual operating revenue of $686,300, annual expenses of $367,300 and annual payment on debt of $200,000. This leaves an anticipated net income of $119,000.
By buying the ice arena, the district will eliminate the annual $75,000 levy to lease it, beginning on the payable 2014 levy.
State law requires the school district to have the right to terminate a lease-purchase agreement at the end of any fiscal year during its term.