Decision No. 14,489
Appeal of CITIZENS FOR RESPONSIBLE FISCAL AND EDUCATIONAL POLICY, WILLIAM DALTON, RICHARD MATULA, THOMAS MOORE and THOMAS D. MULLEN, JR., from action of the Board of Education of the Westhampton Beach Union Free School District and George Mikolajczyk regarding an exclusive pouring rights contract.
Appeal of PARENTS FOR COMMERCIAL FREE EDUCATION, MARIA MOORE and DIANE MULLEN from action of the Board of Education of the Westhampton Beach Union Free School District regarding an exclusive pouring rights contract.
Decision No. 14,489
(November 30, 2000)
Henry F. O'Brien, Esq., attorney for petitioners Citizens for Responsible Fiscal and Educational Policy, William Dalton, Richard Matula, Thomas Moore and Thomas Mullen
Maria Moore, Esq., attorney for petitioners Parents for Commercial Free Education, Maria Moore and Diane Mullen
Kevin A. Seaman, Esq., attorney for respondents
MILLS, Commissioner.--Petitioners in two separate appeals challenge the decision of the Board of Education of the Westhampton Beach Union Free School District (respondent board) and George Mikolajczyk, superintendent, to enter into an exclusive pouring rights contract with Coca-Cola Bottling Company of New York, Inc. ("Coca-Cola" or "vendor"), as well as the terms of that contract. Because the two appeals involve the same contract, they are consolidated for decision. The appeals must be sustained in part.
Two resolutions were presented at respondent board's meeting on February 22, 1999. One resolution was to authorize the superintendent to execute an agreement with Coca-Cola "through the Westhampton Beach Booster Club," and the second resolution was to accept a "gift" of lights for the athletic field from the Westhampton Beach Booster Club ("Booster Club") in conjunction with the agreement with Coca-Cola. Both resolutions were unanimously approved.
The school district executed a contract with Coca-Cola on April 19, 1999. The contract, commonly referred to as an exclusive pouring rights contract, granted exclusive rights to Coca-Cola to supply beverages (defined as soft drinks, fruit juices, ready to drink tea products, sports drinks and other beverages, but excluding coffee, tea, milk or unsweetened juice in nonbottled containers of 4 ounces or less) to all school facilities in the district, and all concessions, vending areas, and other areas of the school's property. The term of the contract was 10 years, subject to annual review by respondent board as to whether it desired to terminate the contract.
The contract granted Coca-Cola the right to install vending machines on school property, and also provided for the purchase of beverages to be served in the school cafeterias subject to all applicable nutrition laws and regulations. The contract further granted Coca-Cola the exclusive right to furnish beverage products for athletic contests, booster club activities and other community events held on school premises. The contract established prices for non-vended products, and provided for commissions to the school district on beverage products sold through vending machines owned by Coca-Cola and installed on school premises. The sale of competitive products on school premises was prohibited.
The contract also provided for the payment by Coca-Cola of several sums of money, denoted as Sponsorship Fees, Scholarship Support Fees and Activation Fees. The Sponsorship Fees were to be paid in full at the commencement of the contract but deemed to be earned evenly over the entire term of the contract, and the other fees were to be paid in annual installments and deemed earned evenly over the ensuing year. In particular, one provision stated that:
Vendor agrees to pay School District (in care of the Booster Club) the sum of Sixty Two Thousand and Five Hundred Dollars ($62,500) for the Term (the "Sponsorship Fees"), payable May 1, 1999. The Sponsorship Fees shall be deemed earned evenly over the Term.
Petitioners Citizens for Responsible Fiscal and Educational Policy, William Dalton, Richard Matula, Thomas Moore and Thomas Mullen initiated an appeal, challenging interalia the "gift" of lights by the Booster Club to the school district, which apparently was to be funded by the advance payment of the Sponsorship Fees ("Appeal No. 1"). Petitioners contend that, pursuant to the above-quoted provision of the contract for payment of the $62,500 advance over to the Booster Club, respondent board had in effect borrowed $62,500 from Coca-Cola, which would illegally be paid over to the private Booster Club in violation of Article VIII "1 of the New York State Constitution, Education Law ""1709(37), 1716 and 1718, and Title 2 of the Local Finance Law.
Petitioners sought a temporary order to prevent the transfer of any funds from Coca-Cola to any person or entity other than the school district, and a final order requiring the April 19, 1999 contract to be enforced such that the $62,500 will be paid to the school district rather than the Booster Club or, in the alternative, an order declaring the April 19, 1999 contract void abinitio. On June 3, 1999, I issued an interim order enjoining respondents from implementing or enforcing any provision of the April 19, 1999 contract that permitted payment of funds to any party other than respondent board. After issuance of the interim order, petitioners apparently abandoned their initial request for a final order directing that all payments be made solely to the school district, and now appear to seek only the alternative relief, a declaration that the contract is void.
On June 7, 1999, respondent board approved a resolution to enter into another contract with Coca-Cola, to provide that the $62,500 advance would be paid directly to the school district rather than to the Booster Club. Petitioners Parents for Commercial Free Education, Maria Moore and Diane Mullen commenced an appeal to challenge this new contract ("Appeal No. 2"). A request for interim relief was denied on September 1, 1999.
The record in Appeal No. 2 clarifies that the provision in the April 19, 1999 contract authorizing payment of the $62,500 advance to the Booster Club has been superseded by a contract provision providing for payment directly to the school district, while the remaining provisions of the contract remain unchanged. I therefore find that the issues raised in Appeal No. 1 pertaining to payment of the advance to the Booster Club are now moot. The Commissioner will only decide matters that are in actual controversy and will not render a decision on a state of facts which no longer exist or which subsequent facts have laid to rest (Appeal of Floramo, 39 Ed Dept Rep 389, Decision No. 14,269; Application of Karpen, 39 id. 98, Decision No. 14,185).
Petitioners in both appeals otherwise challenge the exclusive pouring rights contract on a number of grounds. Petitioners contend that the contract violates Article XI, "1 of the New York State Constitution, alleging that the contract illegally conditions education upon subjecting school children to a barrage of advertising; that the contract provides for illegal commercial promotional activity in schools in violation of 8 NYCRR "23.2; that respondent board lacks authority to enter into an exclusive pouring rights contract because no specific statutory authorization is contained in Education Law "1709; and that the contract constitutes an illegal gift of taxpayer property to Coca-Cola in violation of Article VIII, "1 of the New York State Constitution. Petitioners further assert that the contract is contrary to public policy; that the large advance payment unduly restricts successor boards’ discretion to cancel the contract; and that the cash advances constitute loans incurred by the school district in violation of the Local Finance Law. Petitioners in Appeal No. 1 also contend that the February 22, 1999 resolution accepting the Booster Club's "gift" of lights on the football field violates Article 8 of the Environmental Conservation Law, the Environmental Quality Review Act ("SEQRA"). Petitioners in Appeal No. 2 further contend that respondent board improperly sent an informational letter with advance notice of its June 7, 1999 resolution to selected constituents who were viewed as supporting the action.
Respondents deny that its decisions to enter into an exclusive pouring rights contract, or the terms of the contract itself, violate New York constitutional, statutory or regulatory law. Respondents also deny that they engaged in any improper partisan activities. Respondents additionally raise a number of procedural objections. In Appeal No. 1, respondents contend that the petition is defective, the entire appeal is moot, and the appeal is untimely. In both appeals respondent board also asserts that petitioners lack standing.
I will initially address these procedural objections. First, as to Appeal No. 1, I decline to dismiss the petition as defective. Although the substantive allegations were contained in a document called "Affidavit of Verification in Support of Petition" and there was no document entitled "Petition," the Affidavit amply satisfies the requirements of a petition as set forth in 8 NYCRR 275.10, and respondents have demonstrated no prejudice due to the misnomer. Second, although the appeal is moot with respect to the advance payment to the Booster Club, the remaining challenges to the contract are not moot now that petitioners are apparently seeking only the alternative final order requested in the petition. I therefore decline to dismiss the entire appeal as moot.
Third, I dismiss as untimely only the claims challenging on environmental grounds the February 22, 1999 resolution to accept lighting for the athletic field. An appeal to the Commissioner must be initiated within 30 days of the decision that is the subject of the appeal unless excused by the Commissioner for good cause shown (8 NYCRR "275.16). Petitioners commenced this appeal to challenge that particular resolution more than 30 days after the date of its approval, so the appeal is untimely with respect to this claim.
In any event, although petitioners raise claims in the petition that installation of lights on the football field would violate the Environmental Conservation Law, petitioners do not seek any relief to bar the installation of lighting. In addition, the Booster Club's "gift" was tied to payment to the Booster Club of the $62,500 contractual advance, which has been abandoned, and the record does not indicate whether the gift will in fact still be made. Any discussion of the environmental allegations would thus be merely advisory, and the Commissioner of Education does not issue advisory opinions in appeals brought pursuant to Education Law "310 (Appeal of Instone-Noonan, 39 Ed Dept Rep 413, Decision No. 14,275; Appeal of Lombardo, 39 id. 26, Decision No. 14,162). However, the claims in Appeal No. 1 regarding validity of the underlying contract are not untimely, because the appeal was commenced within 30 days of the execution of the contract on April 19, 1999, which was respondent board's last action in effecting a contract with Coca-Cola.
Respondents challenge petitioners' standing to maintain these appeals. In Appeal No. 1, respondents first raised this legal argument in their memorandum of law, which prompted a "supplemental reply" from petitioners. A memorandum of law may not be used to add belated assertions or exhibits that are not part of the record (Appeal of Adriatico, 39 Ed Dept Rep 248, Decision No. 14,228; Appeal of O'Shaughnessy, 35 id. 57, Decision No. 13,464; Appeal of Coombs, 34 id. 253, Decision No. 13,301). I will therefore not consider the belated standing argument in Appeal No. 1, nor will I consider the supplemental reply addressing that argument.
In Appeal No. 2, respondent board properly raises the standing objection in its answer. I find that Parents for Commercial Free Education, as an unincorporated association, lacks standing to bring an appeal under Education Law "310 (Appeal of Coalition for the Empowerment of People of African Ancestry ["CEPAA"], 39 Ed Dept Rep 161, Decision No. 14,202; Appeal of Beilman, 38 id. 644, Decision No. 14,109), and the individual petitioners lack standing insofar as they purport to represent the unincorporated association (Appeal of CEPAA, supra; Appeal of The Plaza School Playground Committee, 35 Ed Dept Rep 83, Decision No. 13,473). However, the individual petitioners aver, in an affirmation and affidavit submitted with the petition, that they are resident taxpayers who both have minor children attending district schools. The individual petitioners therefore have standing (Appeal of Murphy, 39 Ed Dept Rep 562, Decision No. 14,311; Appeal of Kackmeister, 39 Ed Dept Rep 466, Decision No. 14,285). Although respondent objects to the factual information concerning their status because the information was not specifically contained in the petition, the petition complied with the requirements of 8 NYCRR "275.10, and "275.8 expressly contemplates that additional affidavits and supporting papers may be submitted with a petition.
Petitioners' standing as resident taxpayers and parents and the claims asserted by all petitioners in both appeals, however, pertain solely to the provisions of this contract as they relate to installation of vending machines and related materials on school premises, and the resultant effects on students at the schools. Because petitioners do not assert standing as third-party users of school property or attendees at school functions such as athletic contests, this decision will not address issues such as the exclusive use of vendor's beverages at third-party activities on school premises.
Respondents further contend in Appeal No. 2 that the appeal should be dismissed because it is duplicative of the issues raised in Appeal No. 1. The parties in each appeal are distinct, regardless of the similarity of issues in each appeal regarding validity of the contract, and there is no basis for dismissing Appeal No. 2 on the grounds of duplicative claims.
I will next address the substantive claims raised by petitioners in the two appeals. Petitioners first argue that a board of education has no authority to enter into an exclusive pouring rights contract. In general, a board of education has no inherent powers perse, and possesses only those powers expressly delegated by statute or necessarily and reasonably implied therefrom (Flaminio v. Board of Education of Cleveland Union Free School District, 97 Misc 2d 722 [Sup Ct Erie Co 1979]; Appeal of Brousseau, 39 Ed Dept Rep 132, Decision No. 14,193; Appeal of Bode, 33 id. 260, Decision No. 13,043). Therefore, to analyze this claim, I must consider individually each of the various actions, rights and responsibilities contained in the contract, and determine whether there is statutory authority for that component.
The first component is the authority to permit the installation of beverage vending machines on school property (petitioners do not appear to challenge the underlying authority to purchase beverage products for the cafeteria, only the length and exclusive nature of such purchase contract, which will be discussed below). Petitioners point to Education Law "1709, and find no language specifically granting authority to enter into the subject vending contract. However, I find specific statutory authority in Education Law "915, enacted in 1987, which regulates the sale of sweetened soda water and other sweetened food products on school premises during the school day. It is an axiom of statutory construction that a statute is to be construed in a manner that will give effect and purpose to its provisions (seePetrella v. Siegel, 73 NY2d 846, 848 ). If the Legislature saw a need to regulate how such products were being sold in public schools and prohibit such sale until after the last lunch period has ended, by necessary implication the Legislature must have intended that there be authority in the first place to sell such products, or there would be no need for the limitations imposed by "915 (seeSaltser & Weinsier v. McGoldrick, 295 NY 499  [a power not expressly granted by statute is implied where it is essential to the exercise of some power expressly conferred by the Legislature]; Frink v. Frink, 126 Misc 2d 60 [Sup Ct Dutchess Co 1984]; Perez v. Dumpson, 88 Misc 2d 506 [Sup Ct Queens Co 1976], modified on other grounds, 58 AD2d 887 [2d Dept], app denied, 43 NY2d 643 ). In addition, Education Law "1709(22), which authorizes a board of education to provide cafeteria or restaurant service for its students and teachers, would also authorize the addition of beverage vending machines as an adjunct to its cafeteria or restaurant service.
In view of these specific statutory provisions, petitioners' reference to prior decisions of the Commissioner barring the use of school property to solicit sales of insurance, photographs or jewelry (see, e.g., Appeal of Toftegaard, 25 Ed Dept Rep 238, Decision No. 11,563) is unpersuasive. In these prior appeals, there was no identification of specific statutory authority to permit such uses of school property.
The next component of the contract I will consider is "6(a), which states that the vendor will provide the school district with ten free cases of Fruitopia to be distributed to students free of charge per a schedule to be requested by the school district. I find no statutory authority for school district personnel to act as agents of a vendor to distribute the vendor's products free of charge to students. Such activities are quite distinct from permitting the installation of vending machines for the sale of beverages for the use of students or staff.
Similarly, I find no statutory authorization for the use of school premises or school district staff to facilitate the sale of vendor's products to fundraising groups, as "6(b) of the contract apparently anticipates. This paragraph allows the vendor to sell beverage products to fundraising groups based on pre-sale of cases of products to students' family and friends, by which the purchasers would redeem their orders on the school premises by exchanging a receipt for the beverage products. Although the contract is not clear as to exactly how such fundraising efforts would operate, or how school district personnel or premises would be used, at the very least the contract presumes that orders would be redeemed on school property and that school personnel would, indeed, play some role in the exchange.
I note that the Model Contract distributed by my Office of Counsel in July 1998 contained a similar provision. However, the Model Contract was distributed only for general guidance. It was not issued as a decision in an Education Law "310 appeal, nor did it purport to anticipate and resolve all questions of law that could be raised about pouring rights contracts. The memorandum from my Counsel accompanying the Model Contract expressly urged all parties to consult with their legal counsel to ensure that any contract under consideration complied with all applicable New York law. Upon careful consideration of the law and the record in this case, I must now conclude that there is no statutory authority for the use of school property or personnel to operate this redemption program (Education Law ""414 and 1709). It is well settled that school personnel may not participate during school hours or on school grounds in the solicitation of orders, distribution of advertising materials, or collection of charges for sale of products (Appeal of Tarolli, 38 Ed Dept Rep 60, Decision No. 13,982; Appeal of Fusare, 19 id. 543, Decision No. 10,244). As my determination regarding paragraph 6(b) of the contract is based upon an interpretation of New York State law and established legal precedent, this determination applies to the provisions of the instant contract. Respondent may not permit school property or resources to be used for this private commercial purpose.
Another issue is whether, irrespective of the underlying authority to enter into a vending contract, the school district has authority to enter into an exclusive agreement with one vendor. Petitioners have presented no statutory or case law which would limit a school district's authority to enter into an exclusive contract with one vendor if the school district otherwise has authority to enter into a contract at all. The General Municipal Law ("GML") also limits a school district's authority to contract, but the petitions in these appeals do not raise any claims directly under the GML or allege any specific violations of the GML. In an appeal to the Commissioner, a petitioner bears the burden of establishing all the facts upon which petitioner seeks relief (8 NYCRR "275.10; Appeal of Alexander, 39 Ed Dept Rep 265, Decision No. 14,232; Appeal of Trombley, 39 id. 115, Decision No. 14,189) and demonstrating a clear legal right to the relief requested (Appeal of Logan, 38 id. 694, Decision No. 14,120). Petitioners have not sustained this burden of establishing a lack of authority to enter into an exclusive contract.
Petitioners next argue that an exclusive pouring rights contract is an illegal gift of taxpayer property, in violation of Article VIII, "1 of the New York State Constitution. The Court of Appeals has expressed this constitutional limitation as a mandate that "a municipality, without specific legislative sanction, may not permit property acquired or held by it for public use to be wholly or partly diverted to a possession or use exclusively private" (Lake George Steamboat Co. v. Blais, 30 NY2d 48 ). Again, I must parse out the particular provisions of the contract to address this contention.
I conclude that a contract to permit the installation of vending machines does not violate Article VIII, "1. This issue was addressed by the State Comptroller in Opinion 92-5, which held that a school district may install private vending machines in schools under certain circumstances without violating the State Constitution. The Comptroller overruled prior decisions to the contrary, and determined that Article VIII, "1 would not be violated if a duly authorized license or concession is granted to a private entity in furtherance of a proper school district purpose for fair and adequate consideration. Because a school district has statutory authority to permit the installation of beverage vending machines, as discussed above, the legislative sanction requirement of Lake George has been met, and this legislative authority provides a legitimate school district purpose.
As to the fairness and adequacy of the consideration provided by the vendor, the GML gives responsibility to the school board to determine the adequacy of consideration (e.g., GML ""103 and 104-a). To the extent that respondent board anticipates the purchase under the contract of beverage products for use in the district's school nutrition program in excess of $10,000, the district must comply with the competitive bidding requirements of GML "103 for that portion of the contract. If the purchase portion of the contract will not exceed $10,000, the district must nevertheless comply with the mandates of GML "104-a. Similarly, although a vending contract is not subject to the competitive bidding requirements of the GML (Citiwide News v. NYC Transit Authority, 62 NY2d 464 ; Mtr of BCI Industrial Catering, Inc. v. Town of Huntington, 250 AD2d 675 [2d Dept 1998]), the school district is obligated to negotiate terms that are fair and reasonable (Op. State Compt. 92-5, citing Blanke v. Browne, 217 App Div 624 [2d Dept 1926]). I do not interpret the petitions as raising any direct challenge to the adequacy of the consideration recited in the contract, so I need not address this issue further.
I previously determined that the contractual provisions requiring the school district to distribute free cases of Fruitopia and requiring the redemption of fundraising purchases of beverage products on school property were without statutory authorization. I similarly find that such activities violate Article VIII "1 because they promote private benefit without a proper school district purpose or legislative authorization (seeAppeal of Tarolli, supra). However, under current case law, I must reject petitioners' contention that the contract provision requiring the purchase of "approved" cups violates Article VIII "1. An incidental private benefit will not invalidate a transaction which has as its primary objective a public purpose (seeMatter of Waldo's v. Village of Johnson City, 74 NY2d 718  and the cases cited therein). The underlying authorized purpose of the contract is to provide nutritionally approved beverages in the cafeteria, and provision of cups is only secondary. Of course, the cost of such a limited source of cups vis-"-vis alternate sources of cups, and any incidental benefit to the vendor from the use of such cups, should be evaluated by the board of education in determining whether the school district is receiving fair and adequate consideration and whether the contract is in the best interests of the district.
A much more difficult issue is the provision in "6(c)(ii) of the contract wherein the vendor agrees to provide a Powerade "On the Field" kit for each Powerade vending machine placed at each school. There is no underlying primary contractual purpose of providing athletic equipment to the school district. Article VIII, "1 prohibits the use of public property for advertising of private business entities or products (see, e.g., Op. Atty. Gen. 94-56; 1973 Op. Atty. Gen. [Inf.] 51). However, a nominal plaque or other form of acknowledgement of a donor's identity on property acquired through donated funds will not violate the constitutional limitation (see, e.g., Op. State Compt. 90-6). It is also unreasonable to find that no athletic equipment or other equipment used on school premises may ever, under any circumstances, exhibit any private logo or corporate name.
The criteria to be applied in examining each circumstance are the nature and degree of the commercial content; the appropriateness of each use will turn on the specific facts presented. The parties have not provided a description of the items contained in the Powerade field kit. Therefore, on the record before me, assuming that any use of the logo "Powerade" would serve the same function as a corporate name and thus provide an acknowledgement of the identity of the donor, I am unable to determine whether the use of the logo on the items in the field kit would necessarily violate Article VIII "1. Similarly, although petitioners challenge the constitutionality of "4 of the contract, which provides that the school district shall acknowledge "by appropriate signage" the financial support of the vendor, no clear description of the particular signage is provided in the record. Certain acknowledgements of financial support are permitted under Article VIII "1 (id.), and I cannot determine whether any particular signage would exceed the bounds permitted by Article VIII "1 without having specific facts regarding the signage. I am therefore unable to issue a determination on these claims raised by petitioners in these appeals.
A related objection raised by petitioners is that the advertising and other commercial content provided for in the contract violate Part 23 of the Rules of the Board of Regents. 8 NYCRR "23.2 prohibits boards of education from entering into any contracts or arrangements for which the consideration, in whole or in part, consists of a promise to permit commercial promotional activity on school premises. In "23.1(b), commercial promotional activity is defined as any activity designed to induce the purchase or extol the benefits of a particular product, which is conveyed to students "electronically through such media as, but not limited to, television and radio." Due to the limitation in "23.1 to electronic modes of conveyance, Part 23 is mostly inapplicable to the commercial objections raised by petitioners (i.e., cups and signage). It is possible that the "full trademark panels" referred to in "3(b) of the contract would convey commercial content by means of electronic lighting or other electronic display, in contravention of the express terms of Part 23. However, the record does not contain a description of such panels, so I am unable to determine their compliance with Part 23.
Petitioners next argue that the Coca-Cola contract unduly restricts future boards' actions, because the advance of $62,500 is received immediately but is only "earned" over the 10-year period of the contract. Petitioners contend that, because a portion of the advance must be repaid if a successor board desires to terminate the contract, this financial liability prevents the future board from free exercise of its right to terminate the contract.
In reviewing this claim, I must first address the underlying issue of a board's authority to enter into a multi-year contract. Under longstanding common law, the courts have applied the principle that a contract whose duration exceeds the one-year term of each board of education violates the public policy principle that one board may not bind a successor board in areas relating to governmental matters unless a longer term is expressly provided for in statute (seeMorin v. Foster, 45 NY2d 287 ; Matter of Lake v. Binghamton Housing Authority, 130 AD2d 913 [3d Dept 1987], and the cases cited in these opinions). I am aware of no statutory provision directly applicable to exclusive pouring rights contracts that would authorize a multi-year contract.
Recent case law, however, has also indicated that, when there is adequate provision in a contract for a successor board to terminate a multi-year contract at will, the contracting board will not be illegally binding the successor board and the multi-year contract is not void as against public policy (Matter of Ramapo Carting Corp v. Reisman, 192 AD2d 922 [3d Dept 1993]). Although the Ramapo reasoning has not specifically been applied to a school district contract, I am constrained to apply the interpretation of the law as pronounced by the Appellate Division, Third Department.
The instant contract, in paragraph 18(e), provides that the board of education may annually review and elect to terminate the contract upon 120 days notice to the vendor, provided that the vendor is given 20 business days written notice of the consideration of such termination and an opportunity for a hearing before the board. The mere fact of a notice period does not perse invalidate the successor board's freedom to elect to terminate the contract (seeRamapo, supra [30-day notice requirement did not vitiate successor board's right to terminate at will]). In the absence of guiding statutory or case law addressing notice periods in excess of 30 days, I am unable to determine as a matter of law whether the notice provision contained in paragraph 18(e) of the Coca-Cola contract is so onerous as to void the successor board's right to terminate the contract at will. I am thus constrained to accept the termination provisions of "18(e) as compliant with Ramapo.
However, I am deeply concerned about the potentially coercive effect of long-term contracts which provide for very large payments of commissions or fees at the commencement of the contract, but which are deemed earned evenly over the entire term of the contract and thus must be repaid if the contract is prematurely terminated by a successor board. For example, the instant contract provides for an immediate payment of "Sponsorship Fees" in the amount of $62,500, which are deemed to be earned evenly over the 10-year term of the contract ("5[d]), and the "unearned" portion of such fees and other fees under the contract must be refunded to the vendor if the contract is terminated earlier by a successor board ("18[f]). If the fiscal impact of a very long-term contract and a very large advance has the effect of coercing a successor board into continuing a contract due to serious fiscal detriment caused by repayment of the advance, and effectively prevents the successor board from exercising true voluntary control over continuation of the contract, such contract may very well violate the public policy against binding successor boards (Ramapo, supra; Matter of Lake v. Binghamton Housing Authority, supra).
Thoughtful evaluation of whether a particular contract's provisions create a prohibited coercive effect requires careful analysis of the facts of each case, such as the amount of the advance payment, term of the contract, size of the school district, amount of the advance that the district has already earned, fiscal impact on the particular school district caused by repayment of the unearned portion of the advance, and other related factors. In the instant appeals, the parties do not provide sufficient information about these factors to enable me to determine whether the circumstances of this particular contract preclude free and voluntary consideration of termination by a successor board. I must therefore decline to rule on this issue upon the record before me, but I urge school boards to consider such factors carefully if negotiating such a contract.
Petitioners next argue that acceptance of an advance payment, conditioned upon pro rata repayment if the contract is prematurely terminated, constitutes a loan to the school district in violation of Title 2 of the Local Finance Law ("LFL"), ""20.00 etseq., pertaining to local obligations. Petitioners in Appeal No. 2 specifically contend that the advance payment provision actually constitutes a revenue anticipation note, as defined in LFL "25.00, and thus the amount of the advance payment is limited to what the district would earn in one year ("25.00[d]).
However, the circumstances of the advance in the contract at issue in the instant appels do not fit the definition of a revenue anticipation note or other fiscal obligation addressed in Title 2 of the LFL. First, there is no absolute requirement of repayment at the time the contract is signed - the obligation to repay the advance arises only in a subsequent year of the contract if the contract is terminated. The amount of this contingent repayment is thus also unknown at the time the contract is executed. Therefore, the requirements of LFL Title 2 with regard to fiscal instruments are simply inapplicable here because there is no established debt of a known amount at the time the contract is executed. Although not an exact analogy, the advance payment is more similar to a contingent gift, which is subject to certain contractual obligations of repayment if the conditions of the gift are not met (seeAppeal of DeMasi, 18 Ed Dept Rep 320, Decision No. 9859). I must therefore reject the claim that the advance payment provision violates Title 2 of the Local Finance Law.
I must also reject the argument that the contract violates Title XI, "1 of the New York State Constitution. Petitioners claim that the students in the public schools are in essence "paying" for their education by being exposed to commercialism. However, I do not find it reasonable to stretch this constitutional provision to the limits proposed by petitioners. As construed by the Court of Appeals in Levittown Union Free School District v. Nyquist, 57 NY2d 27 (1982), Title XI, "1 mandates a "State-wide system assuring minimal acceptable facilities and services in contrast to the unsystematized delivery of instruction then in existence within the State" in 1894 when this constitutional provision was adopted (id. at 47). I disagree with petitioners' characterization that the contract "requires the sale of Coca-Cola products to children." There is no allegation that students are required to purchase products under the contract as a condition for attending school, or that students are required to pay any sums of money to school districts under the contract or for the privilege of attending school. Petitioners have cited no case law that would justify stretching Article XI, "1 to the extent claimed, and they have failed to sustain their burden of establishing a clear right to the relief requested (Appeal of Alexander, supra; Appeal of Trombley, supra).
In Appeal No. 2, petitioners further complain that respondent board published informational material about the June 7, 1999 vote, which was only distributed to the parents of school children and not to all taxpayers. Petitioners cite to Appeal of Schadtle, 38 Ed Dept Rep 599, Decision No. 14,102, in support of their contention that such alleged partisan activity was illegal, but that reference to Schadtle is inappropriate. The vote in the instant appeal was not a district election, nor was the alleged targeting by respondent board intended to influence the vote of the district electorate at an election. Election-related partisan activity is prohibited (Phillips v. Maurer, 67 NY2d 672 ; Schadtle, supra), but there is no basis to overturn respondent board's June 7, 1999 resolution due to alleged targeting of a merely informational letter which was not designed to influence the way the electorate would vote on an issue.
In sum, I am constrained by the constitutional, statutory and regulatory law of New York to uphold the Coca-Cola contract to the extent indicated in this decision. My conclusion that the laws of the State of New York do not prohibit this exclusive pouring rights contract does not, however, mitigate my apprehension over the unprecedented commercial aspects of such contracts. The Commissioner of Education has consistently sought to protect school children, who attend public schools by reason of the compulsory attendance law, from exploitation through the sale of commercial products (seee.g., Appeal of Tarolli, supra; Appeal of Albert, 7 Ed Dept Rep 7, Decision No. 7780). Although the sale of the products subject to this contract may be statutorily authorized, there are indications in the record that such sale may be accompanied by the promotion of corporate names and symbols in a manner which, while not legally impermissible, is nevertheless inappropriate in a school setting.
I am cognizant of the serious fiscal constraints facing school districts today, and I am aware that exclusive pouring rights contracts may be perceived by some to generate desirable additional revenues. School boards should, however, carefully consider whether the commercial aspects of such contracts are acceptable influences on their students, and should thoughtfully negotiate and structure such agreements to minimize the potentially negative impact of such commercial influences on children. The fact that such arrangements, if carefully made, may not be prohibited by current law, does not relieve school boards of the fiduciary responsibility to weigh all considerations and decide whether such arrangements are in the best interests of the children they are obligated to educate, nurture and protect.
THE APPEAL IS SUSTAINED TO THE EXTENT INDICATED.
IT IS ORDERED that respondents may not distribute free products from the vendor to its students on school property as provided in "6(a) of the contract, nor may respondent permit the redemption of receipts for pre-sold beverage products on school property or by school staff for fundraising groups, as provided in "6(b) of the contract.
END OF FILE