Yellow Medicine County District Court File No. 87-CV-10-129
Kevin K. Stroup, Stoneberg, Giles & Stroup, P.A., Marshall, Minnesota (for respondents).
Eric J. Quiring, Ratwik, Roszak & Maloney, P.A., Minneapolis, Minnesota (for appellants).
Considered and decided by Halbrooks, Presiding Judge; Larkin, Judge; and Rodenberg, Judge.
In this declaratory-judgment action, appellants school district and school board challenge the district court's determination that two portions of the school district's construction project do not qualify for funding under the Alternative Facilities Bonding and Levy Program pursuant to Minn. Stat. § 123B.59 (2012). By notice of related appeal, respondent taxpayers challenge the district court's remedies order, arguing that it should be expanded. Because we conclude that the district court's finding that the hot-water-piping portion of the project is not part of the ventilation system is clearly erroneous and because the sprinkler-installation portion is necessary to correct a fire or life-safety hazard, we reverse.
Between 2003 and 2008, appellant Yellow Medicine East, IDS #2190 (YME) conducted three independent studies to assess the quality of the facilities at Yellow Medicine High School and Bert Raney Elementary School. The results indicated that the schools' facilities were inefficient, maintenance-intensive, and failed to meet current indoor air-quality standards. The Minnesota Department of Education (MDE) determined that it was "not educationally and economically advisable" to construct a new school and advised YME that "indoor air quality is an issue that the district needs to address throughout the facilities."
In July 2009, YME hired Energy Service Group (ESG) to assess the energy consumption and operational characteristics of YME's facilities. ESG recommended major upgrades to the facilities. Following this assessment, YME decided to replace the ventilation systems in both schools. The original estimated cost of the project was $14 million.
In October 2009, YME entered into two agreements with ESG: an energy-services agreement to complete the project and a professional-services agreement to assist YME in obtaining approval from MDE to fund the project, in part, through the Alternative Facilities Bonding and Levy Program (AFP). The AFP authorizes a school district to issue bonds to finance certain health and safety projects without submitting the proposal to a referendum election. Minn. Stat. § 123B.59, subd. 3. YME submitted an AFP application to MDE that resulted in a positive review and comment letter from MDE in December 2009.
In February 2010, YME's school board adopted a resolution, stating its intention to issue taxable general obligation alternative-facilities bonds. YME received alternative-facilities bond proceeds of $8.26 million. After receiving favorable bids on the ventilation project, YME expanded the alternative-facilities funded portion of the project to include the installation of sprinkler systems in both schools, based on two "inspection and compliance orders" from the state fire marshal.
Respondents Scott Wintz and Patrick McCoy commenced this taxpayer suit following the school-board resolution. They requested preliminary and permanent injunctive relief barring YME from beginning the project and sought an order declaring that YME was "attempting to improperly use the Alternative Facilities Program" and that the entire amount of project funding allocated to AFP bonds must be submitted to the voters for approval. The district court denied respondents' request for a temporary injunction and ordered a limited-fact trial on the issues of (1) whether YME possessed insufficient funds from capital-facilities revenue to pay for the project, as required by Minn. Stat. § 123B.59, subd. 1(b)(2), and (2) whether the funding "allocated for new hot water pipes[, ] sprinkler systems, and recommissioning or modifying the gym, locker rooms, and weight room, [was] properly funded by health and safety revenue."
Following a bench trial, the district court held that YME had insufficient funds to pay for the improvements. It determined that the ventilation portion of the project, totaling $7, 261, 856, qualified for health and safety revenue under the statutory language allowing funding for "upgrades or replacement of mechanical ventilation systems to meet American Society of Heating, Refrigerating and Air Conditioning Engineers standards." Minn. Stat. § 123B.57, subd. 6(a) (2008). But the district court excluded the cost of the ...