Staff photo by Fritz Busch Gibbon City Administrator Dana Lietzau speaks at a GFW (Gibbon Fairfax Winthrop) school board public hearing for abatement bond issuance in Gibbon Monday. The board unanimously approved a $1.95 million 10-year abatement bond.

GIBBON — After detailed discussion and a public hearing Monday, the GFW (Gibbon Fairfax Winthrop) School Board unanimously approved a property tax abatement bond not to exceed $2.9 million.

Superintendent Kelly Smith recommended a 10-year, $1.95 million abatement bond. The State of Minnesota Ag2School credit would pay $1,033,500 of the abatement bonds.

At a school board committee meeting two weeks ago, Smith said the property tax abatement allows the school district to move money dedicated for parking lot improvements to pay the City of Gibbon about $132,000 a year for 20 years for bringing sewer and water service to the new school.

He said paying back $1.95 million in new debt service over 10 years will save the school district much more money than paying it back over 15 or 20 years.

At a public hearing prior to bond approval, Gibbon City Administrator Dana Lietzau said the school bonding decision was made without consulting the City of Gibbon which is providing sewer and water services to the new school project on the east edge of town.

She said school project sewer and water infrastructure meetings a couple years ago included herself, GFW Superintendent Jeff Horton, the city council, public works and school board members.

“Bond counsel advised us (City of Gibbon) to not bond for the school district to put in this infrastructure. Reason number one was if the school district decides to kick us off, we have no repercussion on that. All the expenses would come back to the city,” said Lietzau.

After learning the school district decided to do an abatement bond two weeks ago, she said she’s been trying to decide what to do.

“City of Gibbon taxpayers can’t be held accountable for the expenses we’re losing on this. My options are asking you (school board) not to do it (bonding), which isn’t going to happen because if you can save money, you definitely want to for the whole school district. It only makes sense,” said Lietzau.

She said her second option is a reassessment.

“We’re currently bonding at 3.75%. Our assessment policy is for all bonds allow us to assess up to 2% above the bond. We were loud and clear in the beginning that we can’t pay off our bond until 2034, so we’re stuck with a 10-year bond and not gaining anything off it,” said Lietzau.

“Our third option is a rumor I heard that we can take the money and invest it. That’s not true. We’d have to hire our financial advisors to invest it. Ehlers, our financial advisors say losing percentage rates would cost the City $156,000. We could also do a defeasance (when a borrower sets aside sufficient funds to cover associated debts) with a trust costing the city $42,500. Right now, that is the city’s best option,” she said.

Lietzau said another option is putting a capital charge on the school utility bill.

“I respect your decision. You want to get rid of debt and do what’s best for the school district. I just think the bond decision was made without us, the stakeholders. It throws us in a bind. We need to make decisions on this together with comments from both parties. I hope going forward, we can collaborate and set goals together,” said Lietzau.

Smith said he talked about the bonding with Lietzau April 29.

“I apologize if you think it was off the table. It was never my intent or the school board to dump on the City of Gibbon. This is a huge financial decision for us. We want what is best for the school district. To me, it’s a no-brainer, the right decision for us,” he said.

Smith said he felt there are ways to move forward with investments without paying arbitrage (buying something where it’s cheaper and selling it where it’s more costly).

“I think there things to look at to mitigate concerns from the City of Gibbon,” he said.

Resolution approval came on a motion by Ken Briese, seconded by Amy Acree.