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Helmut Schmidt, Published February 29 2012

Bluestem debt could force tough choices for Fargo School District

FARGO – Paying to run the Bluestem Center for the Arts and the long-term debt tied to the south Moorhead facility could force some tough choices in the Fargo School District’s budget, at least for the coming year.

On Wednesday, district officials were digging into operational, financial and legal issues following the school board’s decision on Tuesday to take over operating the home of the district’s Trollwood Performing Arts School. The center had been run by a nonprofit also called Bluestem, which has been struggling to raise enough private donations to make its bond payments on the $15 million facility.

Dave Olig, president of Bluestem’s board of directors, also confirmed Wednesday that two positions were cut at the center, as the nonprofit turns from running the facility to fundraising to pay off nearly $5 million in debt for which the district ultimately is responsible.

Business Manager Broc Lietz said the district must budget for the possibility of making up to $573,000 in payments for two bond installments in June and December, as well as pay $200,000 to $300,000 a year in operating expenses and special assessments. Fargo schools already had to step in to pay a bond payment for Bluestem late last year.

Board President Jim Johnson said the board told staff to include those figures in the budget.

“Whether Bluestem will be 100 percent successful” in raising those funds, “I’m in no position to know that for a certainty,” Johnson said. “It will be really in their court as far as how successful they are.”

Lietz said the district can:

<•> Offset some of the operating and bond costs through rental income from the facility, and fundraising by the nonprofit Bluestem group, as well as examining operations for cost-cutting.

<•> Absorb remaining costs through savings found in the School District’s budget or by making program cuts.

<•> Use part of the district’s ending fund balance – expected to be $32 million to $34 million by the end of fiscal year on June 30 – to make bond payments. It could also, for that matter, use those reserves to pay off the bond completely.

The board paid more than $4 million in one-time capital project costs from that fund last year, Superintendent Rick Buresh said.

Buresh said the district could refinance Bluestem’s bonded debt, if favorable interest rates saved money.

The Bluestem nonprofit owes the School District about $2.7 million for an interest-free loan, and $2.1 million on bonds guaranteed by the district.

When the nonprofit failed to make a $286,000 bond payment in December, the district was legally bound to pay the installment. That put the Bluestem group into default on an agreement with the district.

The handoff of operations began Wednesday, Buresh said, as Jim Frueh, the district’s director of maintenance and operations, began determining what manpower was needed.

Buresh said he didn’t expect to hire extra staff to take over the site.

Meanwhile, Olig said the Bluestem board has laid off their facility manager and a database specialist. “I’m sorry that happened. But that’s part of the process.”

Olig said Bluestem Executive Director Sue Wiger will stay to help lead fund-raising to pay off the facility. “We’ve raised hundreds of thousands of dollars each year” with her guidance, Olig said.

Olig remains optimistic about their fundraising prospects, especially now that the group no longer needs to focus on covering its day-to-day expenses.


Readers can reach Forum reporter Helmut Schmidt at (701) 241-5583