District levy lowered; building issues loom

The Carlton school board approved a levy for 2025 that reduces school taxes by about 4 percent.

In the same meeting, there was troubling news about facilities, and mixed news about finances.

Before the regular meeting Monday, Carlton schools held this year’s Truth in Taxation hearing, which presents a detailed picture of next year’s taxation and allows for public comment. Jennifer Smith from Arrowhead Regional Computing Consortium told the board and the public that the district would see a reduction in the levy totalling $1,135,540.76.

“That is the total dollar amount that will be collected from all of the property owners within the district … a decrease of 3.9 percent,” Smith said.

Local school district property taxes are a combination of debt service, voter-approved levies, and some nonvoter-approved levies. Debt service, which is 30 percent of the levy, covers the interest and principal on bonds that were issued in 2018 and run till 2036. Carlton has among the lowest debt in the region because Carlton voters have consistently voted down building referendums. The rest of the levy is based on market value and enrollment. If market value holds steady, a declining enrollment can mean a decrease in taxes.

Smith said local taxes are only a fraction of a district’s total revenue. Pointing to a pie chart, she said, “The levy of $1.1 million … is just 18 percent of the total revenues of the district … [which is] $6.2 million.

The vast majority of the rest of the money comes from the state, which makes up 64 percent of the budget. Eight percent comes from federal sources. In the budget approved in June of this year for fiscal year 2025, Carlton’s total revenue was projected at $6.2 million, with expenses of about $6.3 million, and a deficit of $102,380.

There were no public comments, and the board approved the proposed levy during the regular meeting.

Audit findings

The evening was full of presentations. The first at the regular meeting was the annual audit report for fiscal year 2024 presented by Janel Bitzan of auditing firm BerganKDV of St. Cloud. The written report is 95 pages long, but Bitzan, speaking via video remote, boiled it down to three findings and some comments on the school district’s financial state.

The first finding was “a lack of segregation of accounting duties,” which simply means any one person could have access to too many accounts. This is a finding for most, if not all, school districts in the region because there is not enough money to hire enough people to satisfy the requirement.

In another finding, “We noted payments were made that were not consistent with contracts,” the report said. It went on to explain that some payments to employees were not properly authorized.

“Based on our conversations with different board members, we do believe these payments were approved but not officially approved or documented within the minutes,” Bitzan said.

Lastly, the report noted, “The district did not have formal written internal control procedures in place as required by applicable standards.”

It’s a good idea to have written accounting practices in place, especially when there is turnover of personnel.

“If you had someone new coming in, it’s … harder for them to learn,” Bitzan said.

The district had projected a deficit in the general fund of over $300,000, but in the final analysis the general fund actually grew by $172,389, which was due to higher-than-projected revenue.

This has resulted in a fairly healthy fund balance for a district of its size. Auditors monitor the unrestricted fund balance in the general fund and compare it to total expenditures. They like to see a figure of over 16 percent (unrestricted fund balance divided by total expenditures). For the year 2024, Carlton’s was 19.7 percent.

Superintendent Donita Stepan warned that the result should not be viewed as light at the end of the tunnel.

“Our fund balance looks really good right now … but we had a lot of ESSER (Elementary and Secondary School Emergency Relief) funds left over,” she said, referring to federal aid that the district can no longer count on going forward. “It’s something to celebrate, but it’s going to be a short-lived celebration,” she said.

Building issues

The board heard from a team from the Duluth office of Integrated Construction Services, a construction management company headquartered in Minneapolis. Jeff Schultz, Kevin Wormuth, and Nathan Norton ran through a series of slides showing the condition of Carlton’s buildings and other properties. The presentation showed there is a lot of work that needs to be done. Presenters emphasized the age of the secondary school buildings (67 years on average) and the large number of would-be improvements that were deferred over the years. Health and safety items were a concern. Wiring and ventilation are obsolete, with some ventilation dating back to original construction.

“There’s a fire alarm system that needs updates, and you still have some asbestos flooring in the gym,” said Kevin Wormuth.

South Terrace Elementary was constructed in 1962, but also has needs, some more critical than others. Wormuth listed concerns including older flooring and doors, a roof built in 2007 that is nearing the end of its useful life, and single-pane windows. Bathrooms are not in compliance with ADA rules. One slide has a picture of the accessible signage outside a bathroom, but “when you actually go in there, it’s not a handicap accessible toilet,” he said.

Board member Sue Karp wondered if ICS was aware of the new solar array that is scheduled to be built on the roof of South Terrace this spring. Wormuth replied that ICS was aware, and since the solar panels are anchored with weights and not drilled into the roof, they would not interfere with any improvements.

For $2,500, ICS offered to list construction needs for Carlton and prioritize them, while also helping to decide on what is an immediate need and what can be deferred. In addition, the contract also promises to help with budgeting and identifying funding sources. Actual construction would come at additional cost.

“I was hesitant, I’m not gonna lie … about voting yes and choosing to approve this,” said board member Laura Nilsen. “But I think after talking with them and coming up with a good plan of action, I think it’s a really good investment of $2,500.”

Board member Sam Ojibway was most concerned about the health and safety items.

“We’re going to have a pretty difficult January figuring out how to spend some money, because we need to get this place safe. A lot of things keep me up at night, but that for sure, is one of them,” he said.

The board OK’d the contract with ICS.