ELY— School officials here will have to wait a bit longer for a solution to their approximately $4 million cost overrun on their ongoing school construction project. They had hoped that Tuesday’s meeting of the Iron Range Resources and Rehabilitation Board (IRRR) would have provided a solution, by tapping the agency’s Consolidation and Cooperatively-Operated School Account to help cover the COVID-related cost increases, which has sharply escalated construction costs across the board.
That didn’t happen, in part because of uncertainty around the future of taconite mining production, which provides funding for the account through a nickel-per-ton tax. Mining production dipped this year and IRRR Commissioner Mark Phillips noted that there is additional uncertainty going forward, centered on the futures of both the Northshore Mine, related to a dispute over mining royalties, as well as Hibbing Taconite, which is currently slated to run out of ore by 2024. IRRR officials are concerned that reductions in taconite production could result in negative cash flow for the school account by 2028.
At the same time, under current law, the nickel-per-ton tax is set to blinker off in 2024. That’s a problem that was supposed to be solved by this year’s omnibus tax bill, which makes that nickel-per-ton tax permanent. That would guarantee a funding stream of about $1.5-$1.7 million annually, according to Sen. Tom Bakk, the Independent from Cook.
Bakk said both the DFL-led House and GOP-led Senate agree on the specifics in the tax bill, but the measure is tied to a number of other spending measures on which the two sides don’t agree, and it’s unlikely a special session will be held until the two sides work out their differences. If that doesn’t happen, said Bakk, it’s going to force major changes in ongoing construction projects at both Ely and Rock Ridge. “The Ely voters voted for a project,” said Bakk. “They’re not going to get the project they voted for if they have to cut $4 million.”
The school account fix wasn’t the only measure in the tax bill that would have offered Ely a lifeline. The bill, if approved, would allow the Ely school district to sell up to $9 million in additional bonds, repayment of which would not be on the backs of Ely taxpayers.
Further, the tax bill would exempt the school district from having to pay sales taxes on its building supplies, which would help reduce the size of the budget shortfall.
It’s all being held up by continuing disagreements over education and transportation funding issues, as well as whether additional health and human services funding should be directed toward long-term care or childcare.
“We’re close, but we’re not that close,” said Bakk.
The longer the two sides remain at loggerheads, the tougher it becomes for Ely school officials, who will need to decide soon whether to approve significant cutbacks in their project or put work on hold in hopes of a funding solution.