In March 2012, voters in the Scribner-Snyder Community Schools district turned down a $7.5 million bond issue that would have paid for an addition and renovations to its junior-senior high school building.
So the school district, faced with a 2014 deadline to address a fire marshal's order, came up with Plan B. That, in turn, prompted a lawsuit that could reach far beyond Scribner, Neb.
The case is scheduled to go to trial today in Dodge County District Court. And it's one that school districts and others will probably be watching.
“We think it could have a big impact on all the school districts in Nebraska. I wanted every district in Nebraska to know this could happen to them, too,” said Carol Vacha, one of the district residents who filed the lawsuit.
The issue is this: Over the summer the district helped design and put up a $720,000 metal building with six classrooms. Construction was paid for by Scribner Bank, and the school district, located about 55 miles northwest of Omaha, will take ownership once seven years of lease payments are made.
A group of area residents objected and filed the suit, citing a state statute that says school districts can't directly or indirectly issue bonds for construction projects costing more than $25,000 without a vote of the people.
Superintendent Ginger Meyer, however, said the district, which consulted with attorneys and public finance experts, acted legally. It did not sell bonds but instead acted under another section of the same statute that allows districts to enter lease agreements for buildings or equipment, she said. It's a mechanism that other districts in the state have used to finance construction.
Jovan Lausterer, the attorney representing Vacha and other opponents, said he believes that the lease-purchase option is limited to personal property, such as buses or computers, by a later piece of legislation — Legislative Bill 633 — added in 1985. Several legislators at the time said they wanted to make sure districts couldn't get around a public vote to finance construction.
“We believe that the intention of the Legislature was to prevent school districts from proceeding with building projects such as this without a vote of the taxpayer,” said Lausterer, a Wahoo attorney.
But Derek Aldridge, the Lincoln attorney representing the school district, said it issued no bonds, directly or indirectly.
“The statute says what it says,” he said. “The schools can lease or lease-purchase buildings or equipment for a term not to exceed seven years.”
Cody Wickham, vice president of public finance for D.A. Davidson in Omaha, said other districts have used the same lease-purchase mechanism to finance construction in recent years. The firm was the underwriter for the Scribner-Snyder project.
Axtell Community School in Axtell, Neb., used a $115,000 lease-purchase arrangement in 2011 to build and equip a building to house concessions, equipment and restrooms.
In O'Neill, the school district used a similar arrangement in 2010 to build an 11,000-square-foot addition to an elementary school and renovate two classrooms. That project cost $1.9 million. The school district leased the addition through a separate nonprofit organization.
Meyer, who stepped into her post in July 2011, said the fire marshal cited a number of code and safety issues that the district needed to address, including plumbing, wiring and a lack of a second exit for classrooms at the top of the three-story, 1923 building. The year before her arrival, residents opposed a proposed merger with the West Point Public Schools.
So the district went ahead with the bond issue vote. “It was a lot of money, and it failed, but it didn't address our fire code issues,” she said.
Junior and senior high school students now attend classes in the new building and in another building that the district renovated with the help of volunteers and staff. Meyer said the district will pay off the lease before the seven years specified in statute. It is making the $113,000 annual lease payments from its special building fund, as allowed by statute.
But Vacha, who served on the school board from 1995 to 2011, said the residents who filed the suit weren't happy that the district went ahead with the project after the bond issue failed, particularly given its enrollment trends and earlier merger talks. The district had 239 students in pre-kindergarten through 12th grade last year. A decade ago, it enrolled 301.
“All we wanted was a say-so,” she said. “If you're going to use our money, we want a say-so.”
Lausterer said the residents want the school board to put purchase of the building to a vote. It would be up to the bank to decide whether to continue with the lease until a vote to buy the property.
“It will matter in that taxpayers will have a voice in the process,” he said.