Appeal of DIONE GOLDIN from action of the Board of Education of the Wappingers Central School District; Wayne Gersen, Superintendent of Schools, and Richard Powell, Deputy Superintendent and Chief Financial Officer, regarding reserve funds.

Decision No. 14,904

(July 22, 2003)

 

Raymond G. Kuntz, Esq., attorney for respondents, Thomas Scapoli, Esq., of counsel

 

MILL, Commissioner.--Petitioner challenges certain actions taken by respondents with respect to a school bus reserve fund and a tax certiori reserve fund. The appeal must be dismissed.

In 1985 district voters approved the establishment, effective July 1, 1985, of a capital reserve fund known as the School Bus Replacement Fund ("SBRF"). Petitioner alleges that the proposition submitted to the voters was faulty and improper because it failed to state an ultimate amount for the reserve fund as required by Education Law §3651(1). Petitioner further alleges that, long after the expiration of the probable term of the SBRF, respondent board still regularly seeks voter approval to "continue and enhance" the fund without providing for a new probable term or ultimate amount.

On May 18, 1994, district voters approved a proposition providing for the continuation of the SBRF and the deposit of additional monies in such fund, to wit: (1) $400,000 annually from the General Fund, by vote of the board of education, in each of three consecutive years commencing with the 1994-95 school year, with each installment to be paid through a tax levy; and (2) an unspecified amount of State aid monies granted to the district pursuant to the purchase of equipment made out of the SBRF. Petitioner alleges that this proposition, although it might have extended the probable term of the SBRF to June 30, 1997, was defective in that it failed to declare or expand the ultimate amount of the fund created in 1985.

On May 19, 1998, district voters approved a proposition: (1) authorizing the district to purchase school buses at a maximum estimated cost of $901,000, such sum to be raised by a tax levy and collected in annual installments as provided by Education Law §416, and to issue obligations in anticipation of such tax; and (2) providing that the SBRF be augmented through the deposit of State aid monies to be received by the district for the purchase. Petitioner alleges that the wording of the proposition made it "impossible" for the voters to readily comprehend what they were being asked to approve, and that the sequence of statements in the proposition was deceptive and misleading. Petitioner further alleges that the entire $901,000 was bonded for five years and that this was an unauthorized and illegal departure from the proposition approved by the voters. In addition, petitioner alleges that although the proposition provided for the augmentation of the SBRF through the deposit of State aid monies, the SBRF was "already defunct, either as of June 30, 1995, or as of June 30, 1997" (if the probable term is determined to have been legally extended by the May 1994 proposition). Petitioner also alleges that the proposition was defective because it did not revise the ultimate amount of the fund, which in any event, as alleged above, had never been previously stated.

In May 1999, district voters approved a proposition which continued the SBRF and authorized the deposit of additional monies into the fund as follows: (1) $970,000 in the 1999-2000 school year; (2) $500,000 in the 2000-2001 school year; and (3) $500,000 in the 2001-2002 school year, with each installment to be paid through a tax levy and placed into the SBRF from the General Fund by a vote of the board of education; and (4) State aid monies granted to the district pursuant to the purchase of equipment made out of such fund during each of the above school years. Petitioner alleges that the proposition improperly extended the defunct SBRF, and again did not adjust the ultimate amount or probable term of the SBRF.

On April 1, 2002, respondent board adopted a resolution to submit the following proposition at its annual meeting to be held on May 21, 2002:

Shall the Board of Education be authorized to purchase 10 twenty passenger minibuses at an estimated cost of $36,100.00 per bus, 9 sixty-six passenger buses at an estimated cost of $67,100.00 per bus, 1 twelve passenger bus which also accommodates three wheelchairs at an estimated cost of $75,500.00, and 2 seven passenger minivans at an estimated cost of $18,400 per van, and to pay for such purchases by expending $677,200 from the School Bus Replacement Fund and by raising an additional $400,000 from the levy of a tax upon the real property in the school district, for a total amount of one million seventy-seven thousand two hundred dollars ($1,077,200.00); and shall the board be further authorized to continue to augment the School Bus Replacement Fund, by depositing state aid monies tied to said expenditures, received in the next school year?

Petitioner alleges that this proposition, if approved, would further improperly extend the defunct SBRF for another year, without adjusting, or otherwise providing for, an ultimate amount, or without stating a probable term.

At a public meeting and budget hearing held on April 22, 2002, respondent board refused to grant petitioner's request to remove the resolution from the May 21, 2002 ballot. Petitioner commenced this appeal on April 24, 2002.

Thereafter, on April 29, 2002, respondent board adopted a revised resolution to be presented to the voters at the May 21, 2002 annual meeting, which read as follows:

Shall the Board of Education be authorized to purchase 10 twenty passenger minibuses at an estimated cost of $36,100.00 per bus, 9 sixty-six passenger buses at an estimated cost of $67,100.00 per bus, 1 twelve passenger bus which also accommodates three wheelchairs at an estimated cost of $75,500.00, and 2 seven passenger minivans at an estimated cost of $18,400.00 per van, for a total amount of one million seventy-seven thousand two hundred dollars ($1,077,200.00); and to pay for such purchases by raising $400,000.00 from the levy of a tax upon the real property in the school district and expending $677,200.00 from the School Bus Replacement Fund and thereafter terminating such fund.

On May 13, 2002, I denied petitioner's request for interim relief to prevent the above proposition concerning the school bus reserve fund from being placed on the ballot for the May 21, 2002 annual meeting.

In this appeal, petitioner alleges that respondents improperly created, continued and enhanced the
SBRF in violation of Education Law §3651. Petitioner also alleges that respondent board has routinely and regularly withdrawn monies from the SBRF without voter approval in violation of §3651, and has failed to maintain required records. Petitioner further alleges that respondents have willfully mismanaged and improperly manipulated the district's "Tax Certiorari Reserve Fund" (TCRF) and failed to account for deposits, expenditures and current balances.

Respondents maintain that petitioner's claims regarding actions prior to the 2001-2002 school year are untimely. Respondents further contend that petitioner's claims regarding the SBRF are moot and that petitioner has failed to establish any improprieties concerning the TCRF.

Initially, I must address certain procedural issues related to the submission of documents in this appeal.

By letter dated April 29, 2002, petitioner requested permission to submit an additional exhibit. The exhibit is a copy of a two-sided flier that petitioner alleges improperly advocates in favor of passage of the district's budget at the May 21, 2002 election. Since this exhibit relates to a new factual allegation that is unrelated to the issues presented in this appeal, I deny petitioner's request and decline to accept such exhibit.

In her April 29 letter, petitioner also asked that two additional requests for relief be added to her petition. Specifically, petitioner requested that the school district be required to return all monies remaining in the SBRF to State taxpayers and that the Commissioner establish a procedure to review and monitor the capital reserve funds of all school districts in the State, to assure strict compliance with §3651. Although I will permit the two additional requests, in view of my determination, as discussed below, I decline to grant such requests.

By letter dated June 12, 2002, petitioner requested that three additional exhibits be accepted, namely, a job description of respondent Powell; the memorandum of the district's business manager, dated April 5, 2002, relating to a "tentative revenue analysis" of the 2002-2003 district budget; and a May 14, 2002 copy of an e-mail transmission from Board member Joseph Incoronato. Petitioner claims that such information was obtained, in part, through a Freedom of Information Law (“FOIL”) request, or is otherwise newly available evidence. In the absence of any demonstrated prejudice to respondents, I accept these exhibits under §276.5 of the Commissioner's regulations.

By facsimile transmission dated June 24, 2002, petitioner requested permission to submit certain correspondence relating to petitioner's FOIL requests for certain documents relating to the issues presented in this appeal. However, petitioner has failed to provide an affidavit of service of her application upon either respondents or their attorney and thus her application must be denied (see 8 NYCRR §276.5).

Finally, by letter dated June 29, 2002, petitioner requested permission to submit 23 bank statements entitled "Capital Fund Bus Purchases" for four fiscal years 1996-1997 through 2000-2001; and a "Schedule G3-Capital Funds", dated June 1999. Since such documentation relates to the issues presented in this appeal, and in view of petitioner's uncontested claim that these documents were requested by petitioner under FOIL and were only made available to petitioner on June 27, 2002, I have accepted them for consideration in this appeal.

Respondents object to petitioner's submission of a "Reply Memorandum of Law" offered in response to respondents' Memorandum of Law, which was submitted with the affidavit of respondent superintendent in opposition to petitioner's request for a stay. In the absence of any demonstrated prejudice to either party, I have accepted both memoranda. However, as respondents correctly assert, a memorandum of law does not constitute proof or evidence of any facts stated therein (See Appeal of Laskas-Gillespie and Warshaw, 40 Ed Dept Rep 568, Decision No. 14,559).

Petitioner objects to respondents' answer because of an allegedly defective verification. Specifically, petitioner alleges that the answer is signed by an unqualified person. Where an appeal is brought from the action of a board of education of a school district, the answer shall be verified by "any person who is familiar with the facts underlying the appeal" (8 NYCRR §275.5). Respondents' answer is verified by the district's business manager, who states in an affidavit that she is familiar with the facts and circumstances giving rise to the petition. Upon the record before me, I find that the business manager is appropriately qualified to verify the answer.

The only other alleged defect in the answer's verification involves a discrepancy in the dates of notarization and the notaries public who witnessed such verification. Petitioner has provided, as an exhibit to her reply, a copy of the verification that was attached to the copy of the answer served upon her. The verification is dated May 14, 2002 and sworn to on May 13, 2002 before a notary public. However, the verification of the answer filed with my Office of Counsel is sworn to before a different notary public and the printed date of May 13, 2002 has been written over in ink to indicate the verification was sworn to before the notary on May 14, 2002. Although the verification in the answer served upon petitioner should be consistent with the filed copy, there is nothing in the record to indicate that the notary public who witnessed the verification provided to petitioner is unqualified. Furthermore, there is nothing in the record to support petitioner's contention that the answer served upon petitioner is not otherwise identical to the answer filed with Counsel's Office. A defect in the verification of the copy of a pleading served upon a party is insufficient to bar filing of the pleading, provided that the original pleading submitted to the Department for filing includes a proper verification (Application of Eisenkraft, 38 Ed Dept Rep 553, Decision No. 14,092). Accordingly, respondents' answer has been accepted for filing and has been considered in my determination of this appeal.

I must also address petitioner's reply. The purpose of a reply is to respond to new material or affirmative defenses set forth in the answer (8 NYCRR §§275.3 and 275.14). A reply is not meant to buttress allegations in the petition or to belatedly add assertions that should have been in the petition (Appeal of Hollister, 39 Ed Dept Rep 109, Decision No. 14,188). Much of petitioner's reply consists of new allegations or materials that should have been included in her petition. While I have reviewed petitioner's submissions, I will not consider those portions of the reply containing new allegations or exhibits which are not responsive to new material or affirmative defenses set forth in the answer.

I now turn to respondents' procedural defenses. Respondents contend that the appeal should be dismissed as moot, since respondent board's April 29, 2002 resolution provided that the SBRF would terminate upon the expenditure of funds. The Commissioner of Education will only consider matters in actual controversy and will not render a decision on a state of facts which no longer exists or which subsequent events have laid to rest (Appeal of Bitteker, 39 Ed Dept Rep 608, Decision No. 14,326). Respondents indicate in their answer that the SBRF will terminate when its funds are expended in the 2002-2003 school year, and petitioner merely speculates, and has otherwise failed to establish, that the SBRF will continue to exist. Pursuant to §276.5 of the Commissioner’s regulations, I have accepted respondents' submission of a July 7, 2003 letter from the general counsel to respondent board and a June 26, 2003 certification from the district clerk indicating that the board unanimously passed a resolution on June 23, 2003 authorizing the termination of the SBRF and the transfer of the remaining funds in the amount of $8,238.48 plus accrued interest to the debt service fund for the purpose of paying any outstanding bonded indebtedness. I have also accepted petitioner's response to respondents' submission, in which petitioner merely reiterates her previous allegations that the voters never authorized expenditures from the SBRF. Since petitioner has failed to establish that the SBRF will not terminate pursuant to the June 23, 2003 resolution, I find that petitioner's claims concerning the SBRF must be dismissed as moot. However, the April 29, 2002 proposition does not resolve the issues raised by petitioner regarding the tax certiorari reserve fund ("TCRF") and I decline to dismiss the appeal as moot with respect to such claims.

Respondents also contend that the appeal should be dismissed as untimely. An appeal to the Commissioner must be instituted within 30 days from the making of the decision or the performance of the act complained of unless excused for good cause shown (8 NYCRR §275.16). To the extent petitioner challenges the aforementioned SBRF propositions approved in 1985, 1994, 1998 and 1999, her appeal must be dismissed as untimely and, consequently, her allegations with respect to the establishment of the SBRF, and the continuations, deposits and withdrawals made from such fund pursuant to such propositions must be dismissed. Furthermore, although petitioner's appeal is timely with respect to the proposition submitted at the May 21, 2002 annual meeting, it is unnecessary for me to determine the validity of that proposition since, as discussed above, petitioner's appeal with respect to the SBRF must be dismissed as moot.

With respect to the TCRF, respondents have failed to provide specific dates concerning when the fund was established and when funds were deposited or withdrawn. Therefore, I decline to dismiss petitioner's claims with respect to the TCRF on timeliness grounds.

Although I am constrained to dismiss petitioner's claims regarding the SBRF as moot and untimely, in view of the particular circumstances presented I must comment on that fund. The purpose of a §3651 reserve fund is to permit a school district to set aside a sum of money for a future expenditure, rather than fund the expenditure through the current year's budget or through issuing bonds at the time of the expenditure (Appeal of Kackmeister, 40 Ed Dept Rep 577, Decision No. 14,560). The reserve fund is established by a majority vote of the district's electorate to approve a proposition that sets forth the purpose of the reserve fund, the ultimate amount thereof, its probable term, and the source from which the money would be obtained to fund the account (Education Law §3651[1]). An amount should be paid into the reserve fund sufficient to meet the requirements of the proposition, and the voters may direct that additional funds derived from other sources may be paid into the fund (Id.). The "ultimate amount" of the reserve fund, as the term is used in Education Law §3651(1), constitutes the total amount of money that may be paid into the reserve fund over the entire term of the fund (Appeal of Kackmeister, supra).

The proposition approved on May 29, 1985 which established the SBRF, effective July 1, 1985, was defective in that it failed to specify an ultimate amount as required by Education Law §3651(1). The proposition provided that the fund:

. . . shall be initiated with an amount of $777,000.00 through a levy of tax upon the taxable property of the District for the 1985-86 school year and, thereafter, an annual amount of up to $196,250.00 shall be added to such fund through a levy of tax upon the taxable property of the District in each succeeding school year commencing with the 1986-87 school year and running through the 1994-95 school year; such fund shall also be augmented through the deposit therein of state aid monies which are granted to the District pursuant to purchases of equipment made out of such fund; provided further that the respective sums of $777,000.00 and, thereafter, up to $196,250.00 annually shall be placed into the "School Bus Replacement Fund" from the General Fund by vote of the Board of Education, the purpose of such fund being the purchase and replacement of vehicles for transportation of District students, including principal, interest, preliminary and incidental costs thereof . . .

Even if the initial amount of $777,000.00 is added to the annual amount limit of $196,250 for each school year from 1986-97 through 1994-95, it is not possible to arrive at an ultimate amount because the 1985 proposition also provides for an additional augmentation to the fund through the deposit of State aid monies in an unspecified amount to be granted to the district pursuant to the purchase of equipment out of such fund. Since the amount of these State aid monies is not specified, it is impossible to fix an ultimate amount of the fund at the time the 1985 proposition was presented to the voters, and the proposition is therefore defective pursuant to Education Law §3651(1). I also note that the 1994 and 1999 propositions similarly provided for further augmentation of the SBRF through the deposit of unspecified State aid monies granted to the district for purchases made out of the SBRF, and that the 1998 proposition provides for an additional augmentation of the SBRF through the deposit of State aid monies received by the district for purchases made from funds obtained from a tax levy, an entirely separate source. These actions establish that the SBRF had no ultimate amount, and that the fund was periodically increased at respondent board's discretion from such sources as were available at the time.

In addition, the SBRF became defunct once its probable term expired. The SBRF, as created in 1985, provided for a ten year probable term ending at the close of the 1994-95 school year. The 1994 proposition continued this probable term to the close of the 1996-97 school year. The 1998 proposition did not contain any language purporting to continue the SBRF, even though it augmented the fund through the deposit of State aid as indicated above. Although the 1999 proposition purported to continue the fund through the 2001-02 school year, the probable term of the SBRF had already expired on June 30, 1997, pursuant to the 1994 resolution. Once a reserve fund has reached the end of its probable term, no additional monies may be transferred into the fund nor may the terms of the fund be amended (Appeal of Kackmeister, supra). After the expiration of the probable term, any accumulated monies may be expended, with proper voter authorizations, until the fund is depleted (Id.).

Since the probable term of the SBRF had expired, respondents could not deposit any additional funds into the SBRF or amend its terms, but could only expend the accumulated monies in the fund (Appeal of Kackmeister, supra). The proposition presented to the voters at the May 21, 2002 annual meeting did not seek to deposit additional funds into the SBRF or to amend its terms, but instead provided for the expenditure of $677,200.00 from the fund and the termination of such fund thereafter. As indicated above, respondent board passed a resolution on June 23, 2003 terminating the SBRF and transferring the remaining funds to the debt service fund for the purpose of paying any outstanding bonded indebtedness. Accordingly, even if I had reached the merits, there would have been no basis for me to void the May 2002 proposition. Nevertheless, I remind respondents that they must comply with Education Law §3651 in the operation of all the district's reserve funds established pursuant to that section.

Petitioner alleges that respondents have improperly used monies from the TCRF. Specifically, petitioner alleges that respondents have retained monies in the TCRF beyond the time period allowed by Education Law §3651.

Education Law §3651(1-a) provides:

". . . any school district may establish a reserve fund for the payment of judgments and claims in tax certiorari proceedings in accordance with article seven of the real property tax law, without approval by the qualified voters of the district, provided, however, that the total of the monies held in such reserve fund shall not exceed the amount which might reasonably be deemed necessary to meet anticipated judgments and claims arising out of such tax certiorari proceedings. Any monies deposited to such reserve fund which are not expended for the payment of judgments or claims arising out of such tax certiorari proceedings for the tax roll in the year such monies are deposited to the said fund and/or which will not reasonably be required to pay any such judgment or claim shall be returned to the general fund on or before the first day of the fourth fiscal year following the deposit of such monies to said reserve fund.

The burden is on the petitioner to allege and prove facts upon which relief may be granted, not on respondents to rebut conclusory allegations (Appeal of Wilson, 41 Ed Dept Rep 196, Decision No. 14,663; Appeal of Eckert, 40 id. 433, Decision No. 14,520; Appeal of Crowley, et al., 39 id. 665, Decision No. 14,345). Furthermore, an appeal to the Commissioner under Education Law §310 is appellate in nature and does not provide for investigations (Appeal of Van Zile and Crowell, 37 Ed Dept Rep 213, Decision No. 13,846; Appeal of Distefano, 36 id. 217, Decision No. 13,705).

It appears from the record that at the time petitioner commenced her appeal there was a $505,000 balance in the TCRF. However, from this fund balance, petitioner has failed to identify the specific deposits to the TCRF for the respective tax roll years such deposits were made so that a determination may be made as to whether such funds are being held beyond "the first day of the fourth fiscal year following the deposit of such monies" to the TCRF, or as to whether such funds are not otherwise "reasonably . . . necessary to meet anticipated judgments and claims arising out of such tax certiorari proceedings" pursuant to Education Law §3651(1-a). Petitioner contends that she was unable to obtain the necessary information because respondents have failed to adequately respond to her FOIL requests for a complete accounting of the TCRF. However, the appropriate forum for resolving a claim under FOIL is the Supreme Court of the State of New York (Appeal of Rowe, 41 Ed Dept Rep. 189, Decision No. 14,660; Appeal of Christe, 39 id. 685, Decision No. 14,349; Appeal of Breud, et al., 38 id. 748, Decision No. 14,133), and there is no indication that petitioner has availed herself of this judicial remedy. Since the burden of proof is on petitioner, her failure to obtain and submit appropriate documentation to establish her claims regarding alleged irregularities in respondents' administration of the TCRF requires that I dismiss such claims.

Nevertheless, although petitioner's claims regarding the TCRF must be dismissed, I am concerned over certain statements made by the district's business manager in her affidavit submitted with respondents' answer. In her affidavit, the business manager stated: "The District maintains a balance of approximately $500,000 in its Tax Certiorari Reserve Fund to pay judgments in connection with these claims. The amount in the Reserve Fund currently represents less than 1.5% of the District's potential exposure on the pending tax certiorari claims. We adjust the amount in the Reserve Fund depending upon the number and magnitude of the proceedings which we expect to pay in a given year. [emphasis added]." These statements suggest that the funds deposited in the TCRF may be considered by the district to be fungible and available to provide tax certiorari refunds for proceedings commenced in years other than the specific year such monies were deposited. Pursuant to Education Law §3651(1-a), monies deposited in a tax certiorari reserve fund must be used for tax certiorari proceedings for the tax roll in the specific year such monies are deposited. Any monies not so expended and/or which will not reasonably be required to pay such judgment or claim for such specific year, must be returned to the general fund on or before the first day of the fourth fiscal year following the deposit of such monies to the reserve fund. Although petitioner's claims have been dismissed for her failure to carry her burden of proof, I remind respondents that the monies deposited in the district's TCRF must be segregated and used for tax certiorari proceedings for the tax roll in the specific year such monies were deposited in the TCRF, and that any unused monies must be returned within the timeframes and otherwise in accordance with Education Law §3651(1-a).

I have examined petitioner's remaining allegations, and find them to be without merit.

 

THE APPEAL IS DISMISSED.

END OF FILE