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Decision No. 13,862

Appeal of EUGENE T. BROUSSEAU, from action of the Board of Education and the Superintendent of the Shenendehowa Central School District, relating to a building construction project.

Decision No. 13,862

(February 12, 1998)

Victor M. DeBonis, attorney for respondents

MILLS, Commissioner.--Petitioner appeals actions of the Board of Education and the Superintendent of Schools of the Shenendehowa Central School District ("respondents") relating to a vote taken at a special district meeting on February 5, 1997. The vote approved a resolution of respondent board of education authorizing it to enter into agreements with a second party for the design, construction and lease-back of a district office facility to be located on district-owned property and leased to the second party. The appeal must be sustained.

On February 28, 1987, respondent board of education entered into a five-year lease of space at a commercial development for school district administrative offices. Prior to that time, the offices were located in a school building on district-owned property. In February 1992, the lease was extended for an additional five years. In November 1996, the board of education authorized a private firm to conduct a feasibility study for a district business office facility. The firm's November 22, 1996 report concluded that it would be more economical for the district to build a facility on its own property than to continue with the lease arrangement. The report recommended that construction be financed through a non-profit lending development company, which would construct and lease the building to the district for a period of thirty years, after which ownership would vest in the district.

On February 5, 1997, the district voters approved the following resolution:

RESOLVED: That the Board of Education be authorized to enter into agreements for the design, construction and lease of a district office facility to be located on district-owned campus property, to lease district-owned land and lease back the building to be constructed thereon at an annual cost not to exceed the $202,350 rental cost for the current district office facility. Further, that lease agreements associated with this project may be for a period of up to thirty (30) years.

Petitioner commenced this appeal on February 24, 1997 and requested a stay. On March 19, 1997, I granted petitioner's request and enjoined respondent board of education from implementing the resolution, pending an ultimate determination in this appeal.

Petitioner contends that there is no legal authority for the board of education to enter into the transaction referred to in the resolution. He also contends that the resolution was improper because it lacked information on the cost of the structure to be built, failed to include a proper request for voter approval of the financing of the debt, and failed to comply with the school tax provisions of Education Law "416. Petitioner further contends that the transaction proposed by respondents would circumvent the provisions of General Municipal Law "101 (the Wicks Law). In addition, petitioner alleges that voters were misled by inaccurate information in the November 22, 1996 feasibility study and in a flyer prepared by the district and distributed to residents before the vote. Furthermore, he contends that the vote should be voided because residents were not provided with information concerning procedures for voting by absentee ballots. Petitioner requests that I void the February 5th vote and that I take appropriate action against respondents pursuant to Education Law "311.

Respondents generally deny petitioner's allegations and contend that the appeal should be dismissed for failure to make a clear and concise statement of claim, for failure to allege a claim upon which relief may be granted, and as untimely.

I will first address respondents' procedural defenses before proceeding to the merits. A petition must contain a claim showing that the petitioner is entitled to relief, a demand for the relief, and must be sufficiently clear to advise respondent of the nature of petitioner's claim and the act(s) complained of (8 NYCRR "275.10; Appeal of Astafan, 36 Ed Dept Rep 463). When petitioner is not represented by counsel, a liberal interpretation of this regulation is appropriate (Appeal of Moessinger, 34 Ed Dept Rep 246). Petitioner's claims and the relief requested against respondents are summarized above and, in my view, are sufficiently stated in the petition. Respondents adequately addressed petitioner's claim in their answer and memorandum of law. Accordingly, I decline to dismiss the appeal for failure to state a claim.

An appeal to the Commissioner must be commenced within 30 days from the making of the decision or the performance of the act complained of (8 NYCRR "275.16). Petitioner commenced this appeal by serving the petition on respondents on February 24, 1997. Respondents contend that the period for service should be measured from December 19, 1996, the date respondent board directed that a special district meeting be held to place the resolution before the district voters for approval. However, petitioner's claim did not ripen until the voters approved the board's resolution on February 5, 1997, because the resolution could not be implemented prior to such approval. Therefore, I find the appeal timely since it was brought within 30 days of the vote (Matter of Pommer, 21 Ed Dept Rep 305).

With regard to the merits, petitioner contends that there is no legal authority for a board of education to enter into the transaction referred to in the resolution, i.e., the lease of district-owned real property for the construction of a district office facility, which facility in turn is leased-back to the district, with title to the facility ultimately vesting in the school district after expiration of the lease term.

Any analysis of respondents' actions must begin with the principle that a board of education is a creature of statute and derives its powers and duties solely from the legislation which created it (Matter of DiMatteo, 21 Ed Dept Rep 674). Respondents interpret Education Law ""403-a and 403-b to authorize the board to enter into the proposed transaction. Section 403-a(1) provides that a board of education may adopt a resolution providing that specific real property of the school district is not currently needed for school district purposes and that the leasing of such real property is in the best interests of the school district. Section 403-a(5) further provides that the term of such lease may not exceed 10 years without voter approval. Section 403-b provides that a board of education may lease a building or portion thereof, located within the school district, from a second party for use as a school facility. Finally, "403-b(1)(a) requires voter approval of a lease term in excess of five years.

Respondents contend that, under the anticipated arrangement, unused and "currently unneeded" real property on the district's main campus will be identified by the board of education and leased to a second party, pursuant to Education Law "403-a, who will then develop a district office facility. Respondents further contend that after the completion of the structure, the property will have a potential beneficial use to the school district and the board would lease the structure pursuant to Education Law "403-b. Finally, respondents contend that pursuant to Education Law "403-a(1)(c), upon expiration of the lease, the real property will revert to the district and that the district may elect to take such possession with the improvements made thereon.

Despite respondents' contentions, it is clear from the record that the proposed arrangement is, in fact, a single transaction made for the purpose of obtaining a school district-owned office facility located on district-owned real property. The resolution and the affidavit of respondent superintendent indicate that the purpose of the proposal is to construct a district office facility on the main campus through the lease of school property, the lessor's construction of the facility on the property and lease of such facility back to the district. Accordingly, it cannot be said that the real property to be leased is not currently needed for school district purposes, a statutory prerequisite for leasing under "403-a. Rather, such property is being leased specifically for the construction of the district office facility, and thus is currently needed for such purpose. Moreover, "403-a authorizes the lease of district property to an individual, partnership or corporation "for purposes unrelated to the school district" [emphasis added] (Matter of Weiss, 19 Ed Dept Rep 308). Here, the purposes of the lease are integral to the school district's operation. Therefore, I find that respondents lack authority under Education Law "403-a for the proposed transaction.

I further find that there is no indication of Legislative intent under ""403-a and 403-b to permit school districts to effect the transaction respondents propose. The provisions concerning the leasing of unneeded school property and the leasing of buildings and facilities for school purposes are found in separate statutes and address different and distinct situations. Moreover, the transaction proposed by respondents is essentially a lease with option to purchase arrangement, and Education Law "403-b(f) specifically excludes such leases from that statute's ambit. Furthermore, I take administrative notice of the bill jacket to Chapter 700 of the Laws of 1992, which amended Education Law "403-b(1) to add the provision authorizing school districts to lease buildings from private (non-school district) parties. This legislation was introduced at the request of the State Education Department and the Department memorandum in support states:

"It is the purpose of the legislation to authorize all public school districts, under certain conditions, to enter into leases for needed facilities that are not located on district property and to earn State building aid on the lease expense, in a manner similar to that used to earn State building aid for capital construction expense (emphasis added)."

In addition, the Senate sponsor's memorandum states, in part:

"The bill authorizes public school districts to enter into leases for needed school facilities rather than constructing new facilities . . . This measure will provide school districts with flexibility to adjust to expanding enrollment which is projected to be temporary. I believe enactment of the bill will permit school districts to avoid unnecessary construction costs when it is more cost-effective to enter into a lease arrangement . . . (emphasis added)."

Thus, it is clear that the Legislative intent of the amendment to "403-b was to afford school districts the flexibility to meet temporary conditions through the lease of facilities located off school district property, rather than as a means to construct school district facilities on school district property, as respondents propose. Accordingly, I find that "403-b does not authorize the transaction respondents propose.

A lease-purchase is governed by Education Law "1726. That statute specifically authorizes a board of education, subject to certain conditions set forth therein, to enter into agreements for the lease or lease-purchase of buildings for school purposes, to be placed or erected on a district-owned site. Pursuant to "1726(2), before executing such an agreement, the board of education must adopt a resolution determining that the agreement is in the best financial interests of the school district and clearly stating the basis of that determination. The agreement is subject to the bidding requirements of the General Municipal Law, including General Municipal Law "101 (the Wicks Law), with certain exceptions for pre-manufactured items delivered to the site (Education Law "1726(3); Liverpool Central School District v. Nyquist, 55 AD2d 194, appealden. 41 NY2d 803). No lease-purchase agreement may be made for a period exceeding the applicable period of probable usefulness pursuant to the provisions of the Local Finance Law ("1726[4]; Local Finance Law "11.00). The total lease payments or the total amount of lease-purchase agreement payments may not exceed the purchase price of the building, together with interest not to exceed six percent per annum on any unpaid balance ("1726[4]). In the case of a lease with option to purchase, no part of any lease payments may be counted against the purchase price, in case the option to purchase is exercised ("1726[9]). Furthermore, approval by the district voters and the Commissioner of Education is required ("1726[5] and [8]).

Having concluded that respondents could not properly proceed under Education Law ""403-a and 403-b, I note that neither petitioner nor respondents address in their papers whether the resolution actually approved by the voters on February 5, 1997 would be legally sufficient to constitute voter approval under Education Law "1726(5), should respondent board choose to proceed under that statute. Section 1726(5) provides, in applicable part, that "[a] board of education may not enter into any lease or lease-purchase agreement authorized by this section without the previous approval of the voters of the district . . ."

I find the resolution insufficient to implement respondents' proposal even if they attempt to proceed under "1726. The resolution authorizes the board of education " . . . to enter into agreements for the design, construction and lease of a district office facility to be located on district-owned campus property, to lease district-owned land and lease back the building to be constructed thereon . . ." Nevertheless, it is clear from the record that respondent board intends to assume ownership of the district office facility at the conclusion of the lease. This is expressly stated in both the feasibility study and the "1997 Shenendehowa Special Report" prepared by the district and distributed to district residents before the vote. Pursuant to "1726(6), any agreement for the lease to a school district of a building for installation on land owned by the district must include provisions for the removal of the building, " . . . unless such lease is renewed or title to the building passes to the school district in accordance with the provisions of this section." The only methods by which title can pass pursuant to "1726 would be through either a lease-purchase or a lease with an option to purchase as provided for in "1726(9). However, the resolution refers only to a "lease", rather than a "lease-purchase". Indeed, it appears from the record that while there was an earlier version of the resolution which referred to "the lease and purchase" of a district office facility, that language was replaced with only the word "lease" in the resolution presented to the voters. Accordingly, I find that the resolution on its face is insufficient to authorize a lease-purchase.

Similarly, I find the resolution insufficient to authorize a lease with an option to purchase, because it does not expressly state that the lease will include such option. In reaching this conclusion, I take administrative notice of the bill jacket to Chapter 198 of the Laws of 1973, which added "1726 to the Education Law. This legislation was introduced at the request of the State Education Department and the Department memorandum in support states:

The State Education Department believes that boards of education of union free and central school districts, to which this bill applies, should not accept the ownership of real property, including buildings, without explicit authorization from the voters of the district. This bill requires either that such approval be obtained or that the buildings be removed at the conclusion of the lease.

Therefore, in order to authorize a lease with an option to purchase, the resolution must expressly provide for such option, which it fails to do.

Accordingly, I find the resolution approved by the voters is insufficient to authorize the transaction proposed by respondents since it fails to provide authorization for either a lease-purchase or a lease with an option to purchase, so that title to the building may pass to the school district upon expiration of the lease pursuant to "1726(9). Since the resolution is defective, the February 5, 1997 vote approving the resolution must be declared void.

In view of this conclusion, it is unnecessary for me to address petitioner's remaining allegations concerning the validity of the resolution and the February 5th vote.

THE APPEAL IS SUSTAINED.

IT IS ORDERED that the resolution adopted by the board of education on December 19, 1996, relating to the lease of district-owned land and the construction and lease of a district office facility, is hereby rescinded, and

IT IS FURTHER ORDERED that the vote of the Special District meeting held on February 5, 1997, which approved such resolution, is hereby annulled and declared void.

END OF FILE