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Helmut Schmidt, Published May 08 2012

Bluestem wants nearly $5 million in debt forgiven

FARGO – The chairman of the fundraising group for the Trollwood Performing Arts School and the Bluestem Center for the Arts has told the Fargo School Board in a letter that his group wants nearly $5 million in debt written off and forgiven by the school district.

In response, the school board voted 8-1 Tuesday to have a letter drafted that says the district is ready to exercise its lease rights and pay off part of that debt – $2.1 million in bonds – and take over sole control over the use of the Bluestem Center in south Moorhead.

That letter could beconsidered for action at the school board’s next meeting, board President Jim Johnson said.

In Dave Olig’s letter, dated Tuesday, Olig said the Bluestem board of directors saw no way the group could successfully raise funds if they had to pay $2.1 million in debt for bonds, and a $2.74 million interest-free loan from the school district that helped build the $15 million facility.

Referring to a memorandum drafted by school board representatives, Olig said requiring repayment of the $2.7 million, and leaving it up in the air whether the district would still seek repayment for the $2.1 million in bonds, “is unacceptable.”

“This is an impediment that will effectively block our ability to do business. For example, our partner for concert promotions would not enter into contracts with Bluestem when (Fargo Public Schools) could effectively force us out of business at any time,” he said.

The Bluestem Center is home to the Trollwood Performing Arts School, a Fargo School District program that’s also been supported by Bluestem group fundraising.

The school district has been paying the operational costs of the Bluestem Center since shortly after the Bluestem group defaulted on a $286,000 bond payment in December.

On March 1, the board took over operational decisions at the arts center, and recently put scheduling of it in the hands of district staff.

Olig in his letter blames the school district for erring in lending money to Bluestem (at that time called FutureBuilders in support of Trollwood) to build the Bluestem Center.

“The Fargo Public School District provided millions of dollars in loans to a volunteer-only organization, with no assets, at a zero percent interest rate and no repayment schedule,” Olig wrote. “While we accept our accountability, we believe that the Fargo Public Schools should also acknowledge its role in putting taxpayer dollars at risk.”

Rick Steen moved that the letter be drafted to prepare the way for the district to exercise its rights under its Bluestem Center lease agreement.

By paying off the bonds, the district would be the sole decision-maker over use of the facility. However, the district would not obtain title to the facility.

“We just want to move forward. We don’t want to jeopardize the Trollwood Performing Arts School or any use of the facility out there. The longer you have a dysfunctional partnership, the worse it’s going to get,” Steen said. “Let’s create an operating model that’s going to work. And maybe re-create that partnership (with Bluestem or a similar group),” he said.

“We can’t sit as a district, with an obligation of almost $5 million of debt and no control. We just can’t do that,” Steen said.

Johnson said the letter “would be a serious statement by the board that all of the parties involved, in particular the Bluestem board, needs to look for a solution besides forgiveness of the debt.”

He said the school board can’t bring the city of Moorhead into discussions until the Fargo School District exercises its lease rights.

“I don’t view this motion as a threat to the Bluestem organization as much as a bell that we’re in the fourth quarter,” Johnson said. “It is time to do serious work by serious people.

“I have been frustrated, perhaps you’ve heard it, that this problem showed itself in earnest in December (and) it took about seven weeks, from the first time we communicated a possible strategy for a solution, to hear back from their board,” Johnson said.

Johnson said Bluestem has the energy to help make the arts center succeed, but “communicating to us that they have no desire, and quite frankly, as I read the letter, no intention (to worry) about paying off their obligations to the district, does concern me. I would hope that they find a different solution.”

John Strand was the board’s lone dissenter on the vote to have the lease notice letter drafted.

“I’m absolutely opposed to this,” Strand said, urging that Moorhead city officials be brought into discussions.

“We’re going to shoot ourselves in the foot. … We’re pushing people in a corner. We’re giving people ultimatums,” Strand said.

Paul Meyers backed the move to write the letter, noting that it should not hurt talks with Bluestem.

“I think it’s crucial that the board needs to move with economy in mind, in a positive way,” Meyers said. “We need to move decisively to make the program and the facility work positively for the community.”

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