Appeal of JERRY ROMANO from action of the Board of Education of the North Shore Central School District and Thomas Dolan, as superintendent, regarding financial practices.

Decision No. 18,255

(March 22, 2023)

Frazer and Feldman, LLP, attorneys for respondent, James H. Pyun, Esq., of counsel

ROSA., Commissioner.--Petitioner challenges an action of the Board of Education of the North Shore Central School District (“respondent” or the “board”) and Thomas Dolan (“superintendent”) regarding use of the district’s 2020-2021 fund balance.  The appeal must be dismissed.

On July 12, 2021, the board authorized the transfer of $825,763.58 to reduce the 2021-2022 tax levy (the “tax levy reduction”) and $485,900 to support maintenance projects from the “estimated fund balance” of the 2020-2021 school year budget.  The board also deferred the transfer of over $700,000 in funding for capital improvement projects “after the books [we]re audited and closed.”[1] Finally, the board recommended that any remaining funds “after the books [we]re audited and closed” be placed in the teachers’ retirement reserve.  The board thereafter backdated the capital improvement/remaining fund allocations to June 30, 2021.  This appeal ensued.

Petitioner argues that respondent violated Real Property Tax Law (“RPTL”) § 1318 by retaining funds from the 2020-2021 school year in excess of the four percent cap.  Petitioner argues that these excess funds should have been applied to reduce the tax levy.  For relief, petitioner requests that I overturn the decision by the district to use the 2020-2021 fund balance and require the excess funds to be returned to the taxpayers in the form of a tax levy. 

Respondent argues that it properly allocated and retained excess funds from the 2020-2021 school year.  Respondent further argues that the appeal is moot to the extent petitioner seeks an order directing the fund balance to be returned to the taxpayers as there is no mechanism for returning funds to the taxpayers once the tax levy is made. 

First, I must address two procedural issues.  The purpose of a reply is to respond to new material or affirmative defenses set forth in an answer (8 NYCRR 275.3, 275.14).  A reply is not meant to buttress allegations in the petition or belatedly add assertions that should have been raised in the petition (Appeal of Nappi, 57 Ed Dept Rep, Decision No. 17,300; Appeal of Caswell, 48 id. 472, Decision No. 15,920; Appeal of Hinson, 48 id. 437, Decision No. 15,908).  Therefore, while I have reviewed petitioner’s reply, I have not considered those portions containing new allegations or exhibits that are not responsive to new material or affirmative defenses set forth in the answer.

In addition, petitioner submits a proposed additional pleading concerning events that postdate the petition (see 8 NYCRR 275.3 [b]).  I have reviewed this submission and concluded that it is unnecessary to a determination of the claims raised in this appeal.  Therefore, I decline to accept it into the record (see Appeal of M.B. and J.B., 58 Ed Dept Rep, Decision No. 17,535; Appeal of Nappi, 57 id., Decision No. 17,387). 

Turning to the merits,[2] RPTL § 1318 (1) requires that, at the conclusion of each fiscal year, a board of education must apply any unexpended surplus funds to reduce its tax levy for the upcoming school year.  Surplus funds are defined as “any operating funds in excess of four percent of the current school year budget, and shall not include funds properly retained under other sections of law” (RPTL § 1318 [1]; see Appeal of Wood and Grosso, 57 Ed Dept Rep, Decision No. 17,358; Appeal of Affronti, 54 id., Decision No. 16,756; Appeal of Gorman, 52 id., Decision No. 16,412).  The Commissioner has determined that this authority to retain funds beyond the limit imposed by RPTL § 1318 (1) applies only to reserve funds specifically authorized by law (Appeal of Giardina, 46 Ed Dept Rep 524, Decision No. 15,583; Appeals of Gorman, 43 id. 32, Decision No. 14,906; Appeal of Simons, 39 id. 744, Decision No. 14,367).  The Commissioner has also held that transfers of unexpended surplus funds to authorized reserve funds should be made prior to the imposition of the tax levy for the new school year (see Appeal of Wood and Grosso, 57 Ed Dept Rep, Decision No. 17,358; Appeal of Wille, 56 id., Decision No. 17,050; Appeal of Giardina, 46 id. 524, Decision No. 15,583).

In an appeal to the Commissioner, a petitioner has the burden of demonstrating a clear legal right to the relief requested and establishing the facts upon which he or she seeks relief (8 NYCRR 275.10; Appeal of P.C. and K.C., 57 Ed Dept Rep, Decision No. 17,337; Appeal of Aversa, 48 id. 523, Decision No. 15,936; Appeal of Hansen, 48 id. 354, Decision No. 15,884).

The crux of petitioner’s argument is that the district unlawfully retained over $1.3 million of the fund balance from the 2020-2021 school year.  In support thereof, petitioner submits a one-page agenda from the July 12, 2021 board meeting.  There is no information in this document to suggest that the board improperly retained excess surplus funds; it merely demonstrates the board’s intent to allocate some funds to reduce the tax levy, pay additional expenses relating to certain property improvements, and allocate the remaining balance to the teachers’ retirement reserve fund.  Petitioner has otherwise failed to demonstrate that these expenses did not arise out of the 2020-2021 budget or that the teachers’ reserve fund is not authorized by law.  Consequently, petitioner has failed to carry his burden of establishing the facts upon which he requests relief (see Appeal of Affronti, 54 Ed Dept Rep, Decision No. 16,756).

Although petitioner has not met his burden of proof, the documents submitted by respondent suggest only partial compliance with RPTL § 1318.  The tax levy reduction and the maintenance projects were permissibly allocated on July 12, 2021—the same day respondent imposed the tax levy for the 2021-2022 school year.  The remaining allocations for capital improvement projects and the teachers’ retirement reserve, however, were postponed until sometime “after books [we]re audited and closed.”  While capital reserve and teachers’ retirement reserve funds are authorized by law (General Municipal Law § 6-r; Education Law § 3651), transfers into these reserve funds cannot occur after taxes are levied for the new school year (Appeals of Puskuldjian and Romano, 61 Ed Dept Rep, Decision No. 18,090; Appeal of Wood and Grosso, 57 id., Decision No. 17,358; Appeal of Wille, 56 id., Decision No. 17,050; Appeal of Giardina, 46 id. 524, Decision No. 15,583).  As in Appeals of Puskuldjian and Romano (61 Ed Dept Rep, Decision No. 18,090), I admonish respondent to review its budgeting practices and to comply with RPTL § 1318 (1) in the future.

In light of this disposition, I need not address the parties’ remaining contentions.

THE APPEAL IS DISMISSED.

END OF FILE