The Economics of the 1990 Duluth School Bond Issue

Abstract

Over the last two years the Duluth public school bond issue has captured the attention of the general public. The Duluth school board and Duluth school system has proposed that Duluth embark on an ambitious plan to begin to rebuild Duluth's aging school system. The current plan has suggested the consolidation and replacement of seven obsolete buildings with five new structures and the substantial renovation of two other of its most seriously outmoded structures. The plan, if carried out, will require the expenditure of $35.8 million. To finance this expenditure, the school board has recommended borrowing the funds over an extended period of time assumed in this study over 20 years. While opposition to the current plan has been reduced, nevertheless, those opposed to the plan continue to argue that the funding is beyond Duluth taxpayers ability, and that the new debt would cripple Duluth's business community now and in the future. This paper will address some of the economic issues raised in this debate. This paper will estimate the benefits that issuing that debt will confer in the community if the issue passes. Finally, the paper will examine the ability of Duluth to accept the increase in new debt and its impact on Duluth's business activity.