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Tuesday, October 17, 2006

Dateline Normal School District: "Option 3"; The Magic of the leaseback---Fiction

(Ed. note. This fictional tale is one of a series about Normal, Mn., a fictional town in northern Minnesota. Any resemblance to reality is pure accident. These tales are available on cd and are clearly marked FICTION so as not to be confused with reality.)

With all the hubub of street reconstruction and ruminations of politics in Evansville recently, I felt it necessary to head the old Lincoln up Hwy 10 north of the Twin Cities for a little breakaway. My brother in law, Mark, had agreed to go ahead of me in his brand new Lexis, in case the tranny failed on the old Lincoln. The Lincoln seemed to love the clean air up north and performed well. What a relief.

We stopped for coffee, straight, lots of sugar and whipped cream, in the Minnesota Viking mugs at the coffee shop as we arrived in Normal, just short of Garrison. Mark was the CEO of a prominent Twin City company---he had gone to see Dustin Hoffman in The Graduate some years back, and had got the message. Plastics. Yes-- he started his own plastics business. He had done well.

I always asked Mark those intricate questions about accounting that were mysteries to me. Up here in Normal, Mn., they had gone to an innovative "leaseback school system" that provided unique taxpayer benefits and was considered a role model for America. I frankly was mystified as to how they did it.

I simply asked him, "Mark, how do these guys deliver such low cost education up here? I just do not understand!"

"Well, Wolfman (that's what he always called me). It is REAL simple. The school district builds the buildings to their specifications. Then they sell the buildings to Wal Mart, who leases them back to the district on a "full list" basis. The lease amount includes everything, staff, heat, light, transportation. ...all benefits etc. There is a "shared arrangement" of employee selection, but the bottom line is that all the employees are employees of WalMart. The State of Minnesota then allows the costs of the full lease amount as reimbursable. It is real magic.

He then went on, "The real magic is with medical benefits. There are no post employment medical benefits or anything like that. WalMart just uses Medicaid up here in God's Country. It is real simple. Anyway, it saves a cool half million dollars in post retirement benefits on an annual accrual basis."

I glanced down at Mark's coffee napkin which was spread out on the table with a diagram of how the leaseback worked.

"Shucks," I said, "how in the world can anyone understand how this works?"

"That is the whole point," Mark said. If they do catch on, we make it more complicated by making something called a "Blended leaseback," which is even worse. That really baffels them!

Then he let out a loud bellylaugh.

Thank goodness I am back in good old Wisconsin, where things are straightforward, and where I can go buy some things at WalMart and not go to school there.

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