STATE
OF NEW YORK
STATE EDUCATION DEPARTMENT
In
the Matter of JOSEPH GIARDINA from action of the BOARD OF EDUCATION OF THE
BEDFORD CENTRAL SCHOOL DISTRICT; MARK BETZ, as Assistant
Superintendent for Business; President of the
Board MARK SLIVKA; Board Member BRAD SACKS; and Outside Auditor, COUGHLIN
FOUNDOTOS CULLEN 85
DANOWSKI LLP.
Respondents, BOARD OF EDUCATION of the BEDFORD CENTRAL
SCHOOL DISTRICT; MARK BETZ, as Assistant Superintendent for Business
and Administration; MARK SLIVKA, as President of the BOARD OF EDUCATION of the
BEDFORD CENTRAL SCHOOL DISTRICT and as a Member of the Board's
Finance Subcommittee; and BRAD SACKS, as a Member of the BOARD OF EDUCATION of
the BEDFORD CENTRAL SCHOOL DISTRICT and as a Member of Board's Finance
Subcommittee (hereinafter collectively referred to as the "School
Respondents"), by
Ingerman Smith, L.L.P., their attorneys, for their Joint Verified Answer to
the
Verified Petition of petitioner herein, respectfully allege follows:
FIRST:
Upon information and belief, the Verified Petition is a jumble of
repetitive polemic and perjorative in which petitioner has failed to
separately
state and number the various allegations upon which his alleged claim is
based; the School Respondents respectfully interpose the defense of "general
denial", in addition to the separate defenses hereinafter stated.
SECOND:
Deny the essential claims set forth in the Introductory
Remarks and respond that respondent Board and its school officers have at
all
times relevant hereto acted prudently and in the best interests of the
taxpayers in the development and administration of annual school district
budgets and in retaining surpluses to meet tax certiorari refund liability.
THIRD: Admit each and every allegation contained in paragraphs "FIRST"_through
and including "SIXTH" of the Verified Petition.
FOURTH:
Respectfully refer the Commissioner of Education to the text of the
resolutions cited in paragraphs "SEVENTH" and "EIGHTH" of the
Verified Petition for their full force and effect and respectfully refer the
Commissioner of Education to the text of the Tax Warrant for the 2005-2006
school year, as referred to in paragraph "NINTH" of the Verified
Petition, for a true statement of its contents.
FIFTH:
Respectfully refer the Commissioner of Education to the full text
of RPTL §1318(l) in lieu of the extract thereof set forth in paragraph
"TENTH" of the Verified Petition.
SIXTH:
Respectfully refer the Commissioner of Education to the 2005-2006 Tax Warrant,
a copy of which is annexed to the Verified Petition as
Exhibit "2", for its full force and effect, in lieu of the characterization
thereof
set forth in paragraph "ELEVENTH" of the Verified Petition.
SEVENTH:
Deny each and every allegation contained in paragraphs "TWELFTH"
through and including "FOURTEENTH" of the Verified Petition.
EIGHTH:
Deny each and every allegation contained in paragraph "FIFTEENTH" of
the Verified Petition, except respectfully refer the Commissioner of Education
to Respondent Board's motion to establish the
amount
of the tax levy, which appropriates a portion of the undesignated fund balance
in the amount of $650,000 for purposes of reducing the tax levy and places any
remaining undesignated funds within the fund balance into a tax certiorari
reserve fund to cover potential refunds attributable to the 2004-2005 school
fiscal year, such reserve to be funded in an amount not to exceed $1,429,489,
being the face amount of the outstanding tax certiorari petitions; upon
information and belief, a mere failure to include a specific recitation in the
tax warrant to the effect that remaining funds in excess of two percent of the
current school year's budget have been applied
in determining the school tax levy is at most a procedural irregularity, where
it appears that the school district has not actually retained an amount in
excess of the two percent limitation contained in RPTL §1318.
NINTH:
Deny each and every allegation contained in paragraphs "SIXTEENTH"
through and including "EIGHTEENTH" of the Verified Petition.
TENTH:
Admit, as alleged in paragraph "NINETEENTH" of the Verified Petition,
that a school board may retain an amount not to exceed two percent of the
prior school year's budget in the general fund; that this amount is generally
referred to as "fund balance" or "undesignated fund balance"; and that it may
be expended for certain ordinary contingent expenses.
ELEVENTH:
As previously alleged, and as incorrectly stated in paragraph "TWENTIETH"
of the Verified Petition, any undesignated fund balance remaining at the
conclusion of the school year which has not been
properly
retained under other sections of law which is in excess of two percent of the
current school year budget and which is not reserved under other sections of
law shall be applied in determining the amount of the school tax levy.
TWELFTH:
Deny each and every allegation contained in paragraph "TWENTY-FIRST" of
the Verified Petition, since decisions of the Commissioner of Education have
consistently held that boards of education may create reserve funds at any
time prior to the date the warrant for the succeeding school fiscal year is
given to the collector of taxes, which in Bedford is September 1st of each
year.
THIRTEENTH:
Respectfully refer the Commissioner of Education to the
provisions of RPTL, §1318 for its full force and effect, in lieu of the
characterization thereof set forth in paragraph "TWENTY-SECOND" of the
Verified Petition.
FOURTEENTH:
Deny each and every allegation contained in paragraphs "TWENTY-THIRD"
and "TWENTY-FOURTH" of the Verified Petition and allege that as more
fully appears from the Board's resolutions of July 14, 2005, it was the clear
and the unambiguous intent of the Board to approve a budget in the amount of
$96,244,025; to levy taxes in the amount of $86,336,526; to apply undesignated
fund balance in the amount of $650,000 to reduce the tax levy needed to fund
the budget; and to reserve all additional undesignated fund balance remaining,
to a maximum of $1,429,489, to
cover
the contingency of refunds pursuant to tax certiorari proceedings for
the 2004-2005 school fiscal year.
FIFTEENTH:
Admit, as alleged in paragraph "TWENTY-FIFTH" of the Verified Petition,
that if surplus monies are utilized to establish reserve
funds, such funds must be established before the date of the tax levy, which
in this case was September 1, 2005.
SIXTEENTH:
Admit, as alleged in paragraphs "TWENTY-SIXTH" through and including
"TWENTY-NINTH" of the Verified Petition, that a board of education must
reasonably ascertain the extent of undesignated surplus funds in the fund
balance when it considers the establishment of the tax levy; that any funds in
excess of two percent, unless reserved pursuant to other sections of law, must
go to reduction of the following
year's tax levy; and that a school board must make a reasonable estimate of
its undesignated tax balance, so as not to retain funds in excess of the two
percent limitation.
SEVENTEENTH:
Deny each and every allegation contained in
paragraph "THIRTIETH" of the Verified Petition.
EIGHTEENTH:
Respectfully refer the Commissioner of Education to the
text of Education Law §3651(1-a) and RPTL §1318, in lieu of the
characterizations thereof which appear in paragraph
"THIRTY-FIRST"
of the
Verified Petition.
NINTEENTH:
Deny the relevance of each and every allegation contained
in paragraph "THIRTY-SECOND" of the Verified Petition, since
the quoted
section
refers specifically to the creation of reserves other than tax certiorari
reserve funds and respectfully allege that the reference to Education Law
§3651(1) is irrelevant to a tax certiorari reserve established and created
pursuant to Education Law §3651(1-a).
TWENTIETH:
Admit, as alleged in paragraph
"THIRTY-THIRD"
of the
Verified Petition, that the Real Property Tax Law permits a board of education
to retain undesignated surplus funds "under other sections of law", and that a
board may not "informally" reserve funds to cover contingencies, except as
authorized by law.
TWENTY-FIRST:
Deny each and every allegation contained in
paragraph "THIRTY-FOURTH" of the Verified Petition.
TWENTY-SECOND:
Admit, as alleged in paragraphs "THIRTY-FIFTH" through and
including "THIRTY-SEVENTH" of the Verified Petition, that respondent
BOARD OF EDUCATION retained the firm of COUGHLIN
FOUNDOTOS CULLEN 86 DANOWSKI, LLP, to serve as the district's
external
auditor for the 2004-2005 school year; that such firm conducted an
exhaustive and extensive audit; and that the District received an unqualified
opinion.
TWENTY-THIRD:
Deny each and every allegation contained in
paragraph "THIRTY-EIGHTH" of the Verified Petition.
TWENTY-FOURTH:
Admit, as alleged in paragraph "THIRTY-NINTH" of the
Verified Petition that respondent BETZ will play a significant role in
designing the proposed 2005-2006 school district budget and that he played
a
significant role in recommending the creation of the 2004-2005 tax certiorari
reserve fund but denies the characterization of such roles as "instrumental".
TWENTY-FIFTH:
Respectfully refer the Commissioner of Education to
the what petitioner characterized as the auditor's description of the
"unreserved-undesignated
fund balance", as more fully appears on page eight of Exhibit "4" to the
Verified Petition, in lieu of the characterization thereof which appears in
paragraph "FORTIETH" of the Verified Petition. TWENTY-SIXTH:
Deny each and every allegation contained in paragraphs "FORTY-FIRST"
through and including "FORTY-SIXTH" of the Verified Petition and
respectfully refer the Commissioner of Education to the 2005-2006 Budget Guide
which was issued on or about May 6, 2005, which document contained estimated
but unaudited figures for the projected fund balance well prior to the
conclusion of the school year; it should be noted that the document projected
the return of $387,303 from a prior reserve for tax certiorari refunds for the
2001-2002 school fiscal year and tentatively projected the creation of a tax
certiorari reserve fund for the 2004-2005 school year in the face amount of
$500,000, which amount the Board and school administration ultimately
determined before the date of the tax levy would be inadequate to secure the
District against contingent liability for tax certiorari refunds for the
fiscal year at issue.
TWENTY-SEVENTH:
Respectfully refer the Commissioner of Education
to the full text of the Management's Discussion and Analysis section of the
independent
external audit report for its full force and effect in lieu of the selective
quotes therefrom which are contained in paragraphs "FORTY-SEVENTH"
through and including `FORTY-EIGHTH" of the Verified Petition.
TWENTY-EIGHTH: Admit, as alleged in paragraph "FORTY-NINTH" of
the Verified Petition, that the District's ability to increase funding of the
tax
certiorari reserve fund was made possible because there were other codes
within the 2004-2005 budget which had not been fully expended.
TWENTY-NINTH:
Deny each and every allegation contained in paragraph "FIFTIETH" of the
Verified Petition and allege that the resolution creating the 2004-2005 tax
certiorari reserve fund was in all respects in conformity with Education Law
§3651(1-a), and that such resolution was not required to meet the additional
requirements of Education Law §3651(1), which is applicable to reserve funds
other than tax certiorari reserve funds.
THIRTIETH:
Admit, as alleged in paragraph "FIFTY-FIRST" of the Verified Petition,
that the external auditor's report reflected a return of $394,867 from a
collapsed tax certiorari reserve for the 2001-2002 school year and the
establishment of a tax certiorari reserve fund for the 2004-2005 school fiscal
year through a transfer of $1,310,000 from undesignated surplus funds, with
the remaining designated balance of $650,000 to be utilized to reduce taxes.
THIRTY-FIRST:
Deny each and every allegation contained in paragraph
"FIFTY-SECOND" of the Verified Petition, since the actual
amounts reserved from tax certiorari refunds are as set forth below:
|
(a) |
Tax certiorari reserve fund (2002-2003) |
$511,861.39 |
|
(b) |
Tax certiorari reserve fund (2003-2004) |
$509,765.91 |
|
(c) |
Tax certiorari reserve fund (2004-2005) |
$1,310,000.00 |
THIRTY-SECOND:
Deny knowledge or information sufficient to form a
belief with respect to the truth or accuracy of each and every allegation
contained in paragraph "FIFTY-THIRD" of the Verified Petition, except
deny that the School Respondents were limited to the amount projected in the
Budget Guide, which was prepared before the books were closed and audited, when
the Board subsequently established an appropriate level of funding for the tax
certiorari reserve for the 2004-2005 school fiscal year.
THIRTY-THIRD:
Admit each and every allegation contained in paragraph "FIFTY-FOURTH" of
the Verified Petition; annexed hereto and incorporated herein as Exhibit "1" is
a copy of a letter from respondent BETZ to the District's external auditing firm
confirming the funding of the tax certiorari reserve fund for the 2004-2005
school fiscal year in the amount of $1,310,000 from undesignated funds remaining
within the fund balance as of June 30, 2005.
THIRTY-FOURTH:
Admit, as alleged in paragraph
"FIFTY-FIFTH"
of the
Verified Petition, that the combined dollar amount remaining in the tax
certiorari reserve funds for the 2002-2003, 2003-2004 and 2004-2005 school
fiscal years is $2,331,627, but deny the allegation that "only three years
reserves may be legally held at any one time", as hereinafter stated herein.
THIRTY-FIFTH:
Admit, as alleged in paragraphs `FIFTY-SIXTH" and "FIFTY-SEVENTH"
of the Verified Petition, that tax certiorari reserves were established in the
sum of $500,000 for each of the 2002-2003 and 2003-2004 school fiscal years,
and that the Board Finance Subcommittee initially proposed the establishment
of a tax certiorari reserve fund in the sum of $500,000 for the 2004-2005
school fiscal year.
THIRTY-SIXTH:
Deny the relevancy of each and every allegation
contained in paragraph
"FIFTY-EIGHTH"
of the Verified Petition, since the
tax certiorari reserve was for the 2003-2004 school fiscal year and is not
timely before the Commissioner of Education.
THIRTY-SEVENTH:
Deny each and every allegation contained in
paragraph
"FIFTY-NINTH"
of the Verified Petition, since the actual amount in
the tax certiorari reserve fund for the 2002-2003 school fiscal year is
$511,861.39 and the actual amount in the tax certiorari reserve fund for the
2003-2004 school fiscal year is $509.765.91; the aggregate of two such funds
is $1,021,627.30.
THIRTY-EIGHTH:
Deny each and every allegation contained in paragraphs "SIXTEETH" and
"SIXTY-FIRST" of the Verified Petition, since the amount in tax reserve
funds for the 2002-2003 and 2003-2004 school fiscal years is as above-stated,
and the $1,310,000 reserved for tax certiorari refunds for the 2004-2005
school year equal a combined reserve in the sum of $2,331,627.30; there is no
uncertainty with respect to the precise amount appropriated to the 2004-2005
tax certiorari reserve fund, for the precise
amount
was established by action of the Board on July 14, 2005, as supplemented by
the directive from respondent BETZ to the external auditor on September 1,
2005.
THIRTY-NINTH:
Admit, as alleged in paragraph
"SIXTY-SECOND"
of the
Verified Petition, that respondent Board has established a tax certiorari
reserve fund for the 2004-2005 school fiscal year and has funded it with
$1,310,000 from undesignated fund balance in the 2004-2005 budget, and further
admit that there are outstanding $1,429,489 in claims for tax refunds
referable to tax certiorari proceedings for such school fiscal year.
FORTIETH:
Deny each and every allegation contained in paragraphs
"SIXTY-THIRD" and "SIXTY-FOURTH" of the Verified Petition.
FORTY-FIRST:
Respondents respectfully refer the Commissioner of
Education to the Minutes of the Subcommittee for their full force and effect,
in lieu of the characterization thereof set forth in paragraph
"SIXTY-FIFTH"
of the Verified Petition and allege that there has actually been an increase
in
tax certiorari proceedings and in the percentage paid on the dollar on such
claims in more recent years.
FORTY-SECOND:
Deny knowledge or information sufficient to form a belief with respect to the
truth or accuracy of each and every allegation contained in paragraph
"SIXTY-SIXTH" of the Verified Petition.
FORTY-THIRD:
Deny each and every allegation contained in paragraph
"SIXTY-SEVENTH" of the Verified Petition.
FORTY-FOURTH:
Admit the essential allegations of paragraph
"SIXTY-EIGHTH"
of the Verified Petition, because Education Law §3651(1-a) appears to require
that a tax certiorari reserve fund be collapsed and the proceeds returned to
the general fund on or before the first day of the fourth fiscal year
following the deposit of such monies to such reserve fund. FORTY-FIFTH:
Deny each and every allegation contained in paragraphs
"SIXTY-NINTH" and "SEVENTIETH" of the Verified
Petition and respectfully refer the Commissioner of Education to the external
audit report for its full force and effect, in lieu of the
mischaracterizations thereof.
FORTY-SIXTH:
Admit, as alleged in paragraph
"SEVENTY-FIRST"
of the
Verified Petition, that in 2003, several years prior to the fiscal year at
issue, a previous board referred to the funding of the 2002-2003 tax
certiorari reserve fund at a level approximating thirty percent (30%) of the
reduction sought but otherwise deny the relevancy thereof to the establishment
and funding of the 2004-2005 tax certiorari reserve fund.
FORTY-SEVENTH:
Deny each and every allegation contained in paragraphs "SEVENTY-SECOND"
and "SEVENTY-THIRD" of the Verified Petition.
FORTY-EIGHTH:
Deny the relevancy of each and every allegation
contained in paragraph "SEVENTY-FOURTH" of Verified
Petition.
FORTY-NINTH:
Denies the relevancy of each and every allegation
contained in paragraph "SEVENTY-FIFTH" of Verified Petition.
FIFTIETH:
Respectfully refer the Commissioner of Education to the text
of the Special School Budget Issue, as cited in paragraph "SEVENTY-SIXTH"
of
the Verified Petition, for its full force and effect but allege that
not-withstanding any statement contained therein, respondent Board was free to
establish and fund a tax certiorari reserve fund for the 2004-2005 school
fiscal year without voter approval from its undesignated general fund surplus
if in the judgment of the Board, it was reasonable and prudent to due so in
view of the amount of outstanding claims and its prior claims experience;
respondents further allege that the budgets contained no separate specific
expenditure codes for property refunds, because these expenditures were
expected to be met through tax certiorari reserve funds. FIFTY-FIRST:
Deny each and every allegation contained in paragraphs "SEVENTY-SEVENTH"
through and including and "EIGHTY-FIFTH" of the Verified Petition.
FIFTY-SECOND:
Deny the relevance of each and every allegation contained in paragraphs
"EIGHTY-SIXTH" through and including "EIGHTY-NINTH"
of Verified Petition, since the statements were attributable to a prior
board and to school fiscal years not at issue herein and have no relevance to
the establishment and funding of a tax certiorari reserve fund for the
2004-2005 school fiscal year.
FIFTY-THIRD:
Deny each and every allegation contained in paragraphs "NINETIETH" and
"NINETY-FIRST" of Verified Petition and acknowledge that
Education Law §3651(1-a) limits the Board's use of funds reserved pursuant
thereto.
FIFTY-FOURTH:
Deny each and every allegation contained in paragraphs "NINETY-SECOND"
through and including "NINETY-FOURTH" of Verified Petition.
FIFTY-FIFTH:
Deny the relevance of each and every allegation contained in paragraph
"NINETY-FIFTH" of the Verified Petition, since
respondent has properly utilized its fund balance and has created reserve
funds in compliance with applicable law, rules and regulations.
FIFTY-SIXTH:
Deny each and every allegation contained in paragraphs
"NINETY-SIXTH" through and including "NINETY-EIGHTH"
of Verified Petition.
FIFTY-SEVENTH:
Deny each and every allegation contained in paragraphs "NINETY-NINTH"
through and including "ONE HUNDRED-FIRST"
of Verified Petition, since each constitute oversimplifications of what
appear on their face to be basic premises of law.
FIFTY-EIGHTH:
Deny each and every allegation contained in paragraphs "ONE HUNDRED-SECOND"
through and including "ONE HUNDRED-FIFTH" of Verified Petition.
OBJECTIONS IN POINT OF LAW
FIFTY-NINTH:
Upon information and belief, the Verified Petition fails to
state a claim sufficient to constitute the basis for any relief there under.
AS
AND FOR A FIRST AFFIRMATIVE DEFENSE, RESPONDENTS ALLEGE:
SIXTIETH:
Upon information and belief, the Verified Petition is
untimely in all respects and should be dismissed.
SIXTY-FIRST:
An appeal to the Commissioner of Education must be
brought within thirty (30) days from the date of the action complained of
unless good cause is shown in the Petition to excuse the delay (Title 8 NYCRR
§275.16).
SIXTY-SECOND:
In the within appeal, petitioner challenges the funding of tax certiorari
reserve funds for the 2002-2003, 2003-2004 and 2004-2005 school fiscal years.
SIXTY-THIRD:
Upon information and belief, those allegations relating to the creation and
funding of the 2002-2003 and 2003-2004 tax certiorari reserves are manifestly
untimely.
SIXTY-FOURTH:
Petitioner has suggested that in each of such school fiscal years, respondent
Board has improperly retained a surplus in violation of the provisions of RPTL
§1318, but judicial decisions of the Commissioner of Education unequivocally
hold that an appeal on such basis must be commenced within the school year in
which such funds are allegedly improperly retained.
SIXTY-FIFTH:
As to those allegations relating to the creation and funding of tax certiorari
reserves for the 2002-2003 and 2003-2004 school
years, those school years have concluded, and, upon information and belief,
any challenge thereto is untimely.
SIXTY-SIXTH:
As to the allegations concerning the creation and funding of tax certiorari
reserve for the 2004-2005 school year, the reserve fund in question was
established by resolution duly adopted by the Board on July 14, 2005, and it
was proposed to be funded from undesignated fund balance in an amount not to
exceed $1,429,849, after the sum $650,000 of fund balance had been utilized to
reduce the amount of the tax levy.
SIXTY-SEVENTH:
On September 1, 2005, respondent BETZ wrote to
the District's external auditor to direct the firm to fund the tax certiorari
reserve in the amount of $1,310,000; a copy of the letter was previously
annexed hereto and incorporated herein as Exhibit "1".
SIXTY-EIGHTH:
The within appeal was not commenced until January
25, 2006, almost five months after the date of the action complained of.
SIXTY-NINTH:
No good cause is stated in the Verified Petition to excuse
the delay in instituting the within appeal beyond the thirty day limitation.
SEVENTIETH:
Upon information and belief, the appeal is untimely
within the purview of the Commissioner of Education's "thirty day" rule.
SEVENTY-FIRST:
Further, since petitioner did not timely challenge the
creation and funding of the 2004-2005 tax certiorari reserve fund, petitioner
can not now claim that respondent Board improperly overfunded the tax
certiorari reserve fund and thus improperly retained surpluses beyond the
limitation contained in RPTL §1318.
AS
AND FOR A SECOND AFFIRMATIVE
__
DEFENSE, RESPONDENTS ALLEGE:
SEVENTY-SECOND:
Upon information and belief, it is well established
that the Commissioner of Education will not issue an advisory opinion or
speculate on facts not at issue.
SEVENTY-THIRD:
To the extent that petitioner seeks prospective relief
addressed to the possible creation of a tax certiorari reserve for the
2005-2006 school year, the appeal is at best premature and at worst, an
unwarranted intrusion into respondent's budget development process for the
next school year.
SEVENTY-FOURTH:
Upon information and belief, petitioner speculates
that respondent Board might act inappropriately based upon surmise and
conjecture; the Commissioner of Education should entertain only live
controversies on an existing set of facts and should not entertain an appeal
based upon speculation as to what might occur.
AS AND FOR A THIRD AFFIRMATIVE
DEFENSE, RESPONDENTS ALLEGE:
SEVENTY-FIFTH:
Upon information and belief, the Commissioner of
Education has no jurisdiction to remove the firm of COUGHLIN
FOUNDOTOS CULLEN & DANOWSKI, LLP as the District's external auditor,
because such firm is not a school officer within the purview of Education Law
§306.
AS
AND FOR A FOURTH AFFIRMATIVE
__
DEFENSE, RESPONDENTS ALLEGE:
SEVENTY-SIXTH:
Upon information and belief, the Commissioner of Education has no jurisdiction
to remove respondent BETZ from his position
as Assistant Superintendent for Business and Administration, because he is
a school district employee, not a school officer, within the purview of
Education Law §306.
AS AND FOR A FIFTH AFFIRMATIVE DEFENSE, RESPONDENTS ALLEGE:
SEVENTY-SEVENTH:
Upon information and belief, the Commissioner of
Education lacks jurisdiction to remove respondents SLIVKA and SACKS from their
respective positions on the Board and/or Board Subcommittees, because
petitioner has failed to follow the appropriate procedure for seeking removal
of a school officer pursuant to Education Law §306 and Part 277 of the
Regulations of the Commissioner of Education.
SEVENTY-EIGHTH:
The petitioner has failed to serve the requisite Petition for Removal of a
School Officer in conformity with the particular requirements of Title 8 NYCRR
§277.1, nor does the caption of the appeal denominate it as a removal
proceeding.
SEVENTY-NINTH:
Upon information and belief, petitioner predicates his
demand to remove respondents SLIVKA and SACKS upon alleged gross negligence,
but removal pursuant to Education Law §306 entails intentional or purposeful
conduct or willful violation of law.
AS
AND FOR A SIXTH AFFIRMATIVE DEFENSE, RESPONDENTS ALLEGE:
EIGHTIETH:
RPTL §1318 specifies that the tax warrant shall state the amount of unexpended
surplus funds in the custody of the board and shall
further state that except as authorized or required by law, such unexpended
surplus funds have been applied in determining the amount of the school tax
levy.
EIGHTY-FIRST:
Upon information and belief, the school respondents
have substantially complied therewith.
EIGHTY-SECOND:
At its meeting of July 14, 2005, the Board determined to return the sum of
$650,000 from undesignated fund balance towards the tax levy and to commit all
of the remaining undesignated fund balance, to a maximum of $1,429,489, to a tax
certiorari reserve fund for school fiscal year 2004-2005.
EIGHTY-THIRD:
Upon information and belief, when the Board adopted
the warrant, the only remaining undesignated surplus was the $650,000 previously
earmarked to be returned to reduce the following year's tax levy.
EIGHTY-FOURTH:
Upon information and belief, if the statute is construed to require an express
recitation as to use of unexpended surplus
funds to reduce the school tax levy, this mere failure to recite the language of
the statute constitutes at worst a harmless procedural irregularity, where
school officials have actually committed all unexpended unreserved surplus funds
toward reduction of the succeeding year's tax levy.
AS
AND FOR A SEVENTH AFFIRMATIVE
___
DEFENSE, RESPONDENTS ALLEGE:
EIGHTY-FIFTH:
Upon information and belief, the School Respondents
have not arbitrarily ovenvithheld undesignated surplus, nor has the Board
violated the two percent limitation on withheld funds, where it has properly
reserved undesignated surplus funds to meet judgments and claims in pending
tax certiorari proceedings pursuant to Education Law §3651(1-a).
EIGHTY-SIXTH:
Upon information and belief, even assuming arguendo that respondent
Board has utilized an inappropriate method for reserving such funds,
nevertheless all such funds were reasonably deemed necessary
to meet contingent tax certiorari refund liability, and, consequently any
error
with respect to the form of such withholding is merely procedural, not
substantive.
EIGHTY-SEVENTH:
Upon information and belief, the School Respondents have not used tax
certiorari reserve funds to "park" surplus revenues which should otherwise
have been returned to the voters as undesignated funds balance pursuant to the
provisions of RPTL §1318.
EIGHTY-EIGHTH:
Education Law §3651(1-a), insofar as pertinent, provides that a school
district may establish a reserve fund for payment of judgments and claims in
tax certiorari proceedings without voter approval.
EIGHTY-NINTH:
The statute specifics that "[a]ny monies deposited to
such reserve fund which are not expended for payments of judgments and 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".
NINETIETH:
While the statute first appears to require that all unexpended funds be
returned to the general fund on the first day of the fourth fiscal year, the
statute could actually be read more broadly, because
of the conjunctive use of the "and/or" for the proposition that a tax
certiorari
reserve fund must be collapsed in year four only where the remaining funds
could not reasonably be required to pay a judgment in a tax certiorari
proceeding for the year in question.
NINETY-FIRST:
As is often the case, tax certiorari proceedings cover
many school fiscal years, and a proceeding may be pending well beyond three
fiscal years.
NINETY-SECOND:
In respondent Bedford Central School District, as in the great majority of
other school districts, there are significant numbers of outstanding tax
certiorari petitions without any reserve whatsoever; in Bedford, as of June
30, 2005, there were outstanding tax certiorari petitions
which, if settled for forty percent of the requested percentile reduction,
would
cost the District $1,205,932 and which, if settled for thirty percent of the
requested percentile reduction, would cost the District $904,449; these
outstanding petitions are for unresolved tax certiorari proceedings for the
1994-1995 school fiscal year through the 2001-2002 school fiscal year;
NINETY-SIXTH:
Annexed hereto and incorporated herein as Exhibit "5"
is a chart reflecting outstanding tax certiorari petitions for the 2003-2004
school fiscal year; while the District maintains a tax certiorari reserve fund
in the amount of $509,765.91 for the 2003-2004 school fiscal year, outstanding
petitions, if reduced at the level of forty percent of the percentage
reduction sought, would require a payment of $596,475, well in
excess of the amount of reserved funds, and if reductions were at the level of
thirty percent, refunds would utilize $447,356 of the balance of such fund.
NINETY-SEVENTH:
Annexed hereto and incorporated herein as Exhibit
"6" is a chart reflecting outstanding tax certiorari proceedings for the 2004-2005
school fiscal year; if the proceedings were settled at forty percent of the
requested percentile reduction, the fund would pay $735,678, while payments
made at thirty percent level would utilize $551,759.
NINETY-EIGHTH:
The District has already settled three tax certiorari proceedings attributable
to the 2005-2006 school fiscal year, with reductions which range between
thirty and thirty-nine percent of the requested percentile reduction; these
refunds are not supported by any reserve funds but must be paid from general
fund revenues; annexed hereto and incorporated herein as Exhibit "7" is a
chart reflecting tax certiorari refunds for the 2005-2006 school year which
must be absorbed within the budget, for there is no reserve fund for judgments
or settlements attributable to the 2005-2006 school fiscal year.
NINETY-NINTH:
Annexed hereto and incorporated herein as Exhibit "8"
is a cumulative chart reflecting actual tax certiorari reserves from the
period
from the 2001-2002 school fiscal year through the 2004-2005 school fiscal year
and the effect which various percentage reductions of pending tax certiorari
petitions would yield in refund liability.
ONE HUNDREDTH:
Upon information and belief, it is clear from the foregoing that respondent
Board has not used its ability to create tax certiorari reserve funds as a
mere devise to park unnecessary general fund
surpluses in violation of two percent limitation contained in RPTL §1318 or
to deprive the voters of a lower tax rate but to cover the real contingency of
significant refund liability.
ONE HUNDRED-FIRST:
Without the availability of sufficient funds to
meet refund liability for school years for which the previous tax reserves
have been collapsed into the general fund; or where the existing tax
certiorari reserve fund for that year is or may be insufficient to meet
predicted liability; or when no tax certiorari reserve fund has as yet been
created; there must be a vehicle by which a board may maintain sufficient
funds to meet reasonably anticipated refund liability lest the District find
itself in a deficit position.
ONE HUNDRED-SECOND:
Upon information and belief, there is nothing
in the record to suggest that the School Respondents have been derelict in
their responsibility to return unneeded funds to the voters by way of a
reduced tax levy; if the particular vehicle which the Board has chosen to
reserve
funds to meet the contingent liability is inappropriate, nevertheless the
Board's need to find a vehicle to address its potential refund liability is
real and substantial, and any procedural irregularity should be acknowledged
as such.
ONE HUNDRED-THIRD:
Upon information and belief, the School
Respondents have not improperly retained funds in violation of the two percent
limitation, because such retained funds were reasonably necessary, in the
judgment of the School Respondents, to address overall tax refund liability on
tax certiorari proceedings.
ONE HUNDRED-FOURTH:
For the foregoing reasons, the Verified
Petition should be denied in all respects.
Dated: Hauppauge, New York February 24, 2006
Yours, etc.
INGERMAN SMITH, LLP
Lawrence W. Reich
Attorneys for Bedford Central School District
150 Motor Parkway, Suite 400
Hauppauge, NY 11788
(631) 261-8834
and documents of the respondent.
|
STATE
OF NEW YORK
STATE EDUCATION DEPARTMENT
In the Matter of JOSEPH GIARDINA from action of
the BOARD OF EDUCATION OF THE BEDFORD VERIFICATION CENTRAL SCHOOL
DISTRICT; MARK BETZ, as
Assistant Superintendent for Business; President
of the Board MARK SLIVKA; Board Member BRAD
SACKS; and Outside Auditor. COUGHLIN
FOUNDOTOS
CULLEN & DANOWSKI
LLP.
STATE OF NEW YORK)
s.s.:
COUNTY OF SUFFOLK)
LAWRENCE W. REICH, being duly sworn deposes and says:
I am an attorney duly admitted to practice in the courts of New York State and
am a member of the firm of Ingerman Smith, L.L.P., attorneys of record for
respondent Board of Education of the Bedford Central School District; I have
read the annexed Verified Answer and know
the contents thereof; the same is true to my own knowledge, except as
to those matters therein stated to be alleged on information and belief, and
as to those matters I believe them to be true. The reason this verification is
made by me and not the respondent is that respondent Board of Education of the
Bedford Central School District is a municipal corporation and as such anyone
having knowledge of the facts may so verify. The grounds of my belief as to
all matters not stated upon my knowledge are records
Swsrn to before me this ay of February, 2006
NOTARY PUBLIC
CYNTHIA
SANDOW
Notary
Public, State of New York
No. 01SA4735633
Qualified
in Suffolk County ?O
Commission Expires
November 30, 20_ L
J