ST. PAUL – After two days of testimony, a three-judge panel at the Office of Administrative Hearings will reconvene in January over a dispute on whether the St. Louis County School District improperly promoted a yes vote in a $78.8 million bond referendum and failed to report its campaign spending.

The case, known as Abrahamson and Kotzian vs. Independent School District 2142, traces its history to November 2010 when Tower Mayor Steve Abrahamson and Coalition for Community Schools president Tim Kotzian filed their complaint with the Office of Administrative Hearings.

The lawsuit has worked its way through the court system. After the complaint was initially dismissed by an administrative law judge, the Minnesota Court of Appeals reinstated the case. The district appealed to the state Supreme Court, which weighed in last August, essentially agreeing with most of the Court of Appeals’ ruling. That sent the case back to the OAH.

At the OAH hearing on Thursday and Friday, the panel heard from Abrahamson, Tom Watson and Marshall Helmberger, who testified for the complainants. The only witness to speak for the school district was Business Manager Kim Johnson, who was allowed to testify on Thursday out of sequence because she would be unable to attend the Friday session.

Testimony on both days was interrupted frequently by attorney Steve Knutson, who was representing the school district. Knutson objected to almost every question at times. He was overruled on the majority of his objections and his interruptions appeared to frustrate Chief Judge Ann O’Reilly, who had to rule on each one.

“I thought it went quite well, but it was difficult to conduct the hearing, because of Knutson’s constant objections,” said Helmberger. “It was a clear strategy of obstruction.”

Board member Gary Rantala, who had been scheduled to testify at the hearing, said he gained a new appreciation for the difficulties facing judges, but was disappointed that the hearing couldn’t be concluded in the two allotted days.

He’s also disappointed by the legal fees that are mounting for the district in the dispute.

But Helmberger said there is a simply remedy that would save taxpayers’ money and put the issue behind the district.

“If they had admitted that they crossed the line three years ago, they would have saved a huge amount of money,” said Helmberger. “This material is clearly promotional, not fact-based, and board members should be well aware of it.”

Helmberger said the board most likely faces nothing more than a slap on the wrist. “Any fine that would be levied would be inconsequential compared to the legal fees they’ve run up. The board is just being stubborn.”

Testimony

Abrahamson testified about the concerns he had as a local mayor and real estate broker about the social and economic impacts of school closures in the north.

He said he opposed the plan developed by Johnson Controls Inc. (JCI) and argued against it. He was upset when he saw the district’s newsletters and other materials distributed to voters. He said he viewed the materials as promotion because they only highlighted the benefits of a yes vote and the negatives of a no vote.

Watson, who testified as an expert witness in finance, discussed the process of developing financial projections and how frequently they should be updated.

Watson is the principal of the Watson Consulting Group, has served as chief financial officer and chief executive officer of major companies, served three terms as mayor of North Oaks and teaches college courses in business management and finance. He was also hired by the community joint powers group to try to develop alternatives to the JCI plan following approval of the bond proposal.

Watson observed that financial projections used in the district’s materials assumed the district would “do nothing” to manage its finances, which he said was unlikely.

Following the June 22, 2009, board action to cut staffing, including 16 full-time-equivalent teachers, Business Manager Johnson acknowledged that the district’s finances were “much better than previously projected.”

Watson said the district should have updated its financial projections based on those staffing reductions, since they would have been a material change in the variables affecting the projections.

Public officials have an obligation to the public to provide the most accurate information possible in such a circumstance, said Watson. He said he expected that had the district updated its information, it likely would have made it more difficult to pass the bond measure.

Watson did not dispute that the district might have had to take other steps, such as additional teacher reductions or school closings, had the referendum failed to pass.

As it was, the JCI plan called for closing four of the district’s seven schools and cutting 32 teachers along with other staff.

Johnson testified that she developed the financial projections cited by the district around March 2009. Those projections, which started from a $1.9 million base deficit in 2008-09, grew to $2.78 million in 2009-10, and $4.1 million by 2011-12. The projections assumed the district would “do nothing” to control expenses. She also acknowledged that the school board did take action by making staff cuts in June 2009. But Johnson said those cuts were “part of the plan.”

But under cross examination, Johnson could not point to any publications put out by the district prior to the Dec. 8, 2009, referendum, where the district explained that many of the cuts they were attributing to the facilities plan had already been implemented by the board and did not need voter approval. Johnson also conceded that the financial projections given out to voters had not been updated despite the impact of cuts approved in June.

Helmberger’s testimony consumed the entire second day. He presented the bulk of the complaintants’ case, under direct examination by Erick Kaardal’s law partner, Bill Mohrman. Mohrman, an experienced trial lawyer, was clearly irritated by Knutson’s frequent objections and he challenged Knutson on the rules of evidence on several occasions.

Helmberger testified extensively on the subject of promotion, and was accepted as a lay expert in media by the judges. Helmberger went through several of the school district’s newsletters, pointing out numerous ways in which the district only presented the benefits of approval of the referendum, or the potential downsides of a no vote. Helmberger said he believed much of the material was produced by a public relations firm working under contract with JCI.

Helmberger said a fair or impartial presentation of an issue involves the presentation of two or more perspectives, whereas the district only provided one perspective in the materials it presented to voters.

Among the most egregious examples cited by Helmberger was a section of the Dec. 8 newsletter in which the district outlined the tax implications of a yes vote. The section was headlined “Approval keeps your taxes lower than the regional average” and was accompanied by a bar graph that showed the St. Louis County School District having the lowest tax levy of 18 other school districts in the region. Helmberger noted that a voter reading the material had to see a small footnote to realize that the bar chart did not include the effect of the proposed bond measure.

Knutson, under cross examination, drew Helmberger’s attention to a box included with the bar chart. “Doesn’t that clearly indicate that residents would see a tax increase of $164 on a $100,000 home?” he asked.

Helmberger said the box said nothing of the sort. “All it says is ‘added tax impact equals $164 a year,’” said Helmberger. “It doesn’t say whether taxes would go up or down.”

At the same time that the school district was putting out such information, the school district’s teachers’ union was running advertisements in area newspapers urging voters to “Vote Yes for Lower Taxes.” Following the hearing, Helmberger said it appears that the school district and teachers were attempting to confuse voters on the tax implications of a yes vote.

At one point in his testimony, Helmberger was asked whether he would publish one-sided material such as the school district sent to voters in his paper?

“Not without clearly labeling it as advertising,” he said.

Helmberger also testified that he believed JCI had a multi-million dollar conflict of interest as the district’s strategic planning consultant and that this conflict helped drive the plan towards a massive facilities project.

The district paid JCI $300,000 for the strategic plan, but nearly $12 million to actually implement the facilities plan that was a partial result of it, added Helmberger. Getting that information into the record was difficult, however, as Knutson objected repeatedly. Mohrman asked if the district would simply stipulate the amounts paid to JCI, but Knutson refused.

Mohrman was incensed. “Is this really how the district, as a public body, wants to conduct itself?” he asked.

Helmberger also said he was flabbergasted by the district’s response. “This is a public body and it should be operating with some transparency.”

Because the hearing went beyond the two days scheduled, the two sides will reconvene for a third day of testimony, tentatively scheduled for late January.

Scheduled to testify are former St. Louis County Schools Superintendent Charles Rick, current school board members Gary Rantala and Bob Larson, and former board member Darrell Bjerklie.