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Decision No. 14,862

Appeal of GERALD RICCI and SAMUEL MERCER from action of the Board of Education of the Onteora Central School District regarding a lease.

 

Decision No. 14,862

 

(April 17, 2003)

 

Shaw & Perelson, L.L.P., attorneys for respondent, David S. Shaw, Esq., of counsel 

MILLS, Commissioner.--Petitioners appeal the determination of the Board of Education of the Onteora Central School District ("respondent") to lease temporary classroom units.  The appeal must be dismissed. 

In October 1993, respondent leased four temporary classrooms for a period of three years from Associated Construction Concepts, Inc. ("ACC"). ACC was owned and operated by Robert Erratt. The lease between the district and ACC was renewed for three years on September 1, 1997. 

In April 1998, respondent discovered that ACC had been dissolved by proclamation of the Department of State for nonpayment of taxes.  Various disputes between respondent and Mr. Erratt followed.  On March 26, 2001, Mr. Erratt filed a complaint against the district in Supreme Court, Ulster County, alleging that respondent"s conduct amounted to a lease renewal and that it owed him rent or, in the alternative, that respondent was subject to penalties for holding over beyond expiration of the lease.  

On June 18, 2001, respondent approved a resolution that authorized a three-year lease with Mr. Erratt in settlement of the pending lawsuit.  The resolution authorized a lease retroactive to September 1, 2000, at a cost of $44,000 per year, subject to the approval of the voters of the district.  The resolution also authorized an increase in the district"s 2000-2001 budget of $12,896 to meet respondent"s obligations under the lease and to settle the lawsuit.  This appeal ensued.  Petitioners" request for interim relief was denied on August 14, 2001.

In its amended answer, respondent asserts that the New York State Department of Taxation and Finance ("Tax") served a tax compliance levy upon respondent on or about July 19, 2001.  That levy required respondent to make any payments due under the lease to Tax in order to satisfy a judgment against Mr. Erratt for unpaid taxes.

Petitioners contend that respondent"s June 18, 2001 resolution is void because it failed to comply with Education Law "1726.

Respondent claims that this appeal is not timely with respect to any of the events preceding the June 18, 2001 resolution.  Respondent further maintains that it complied with Education Law "1726, at least in part.  Finally, respondent claims that this appeal should be dismissed for petitioners" failure to join Robert Erratt and Tax as necessary parties.

I will first address the procedural issues. An appeal must be brought within 30 days from the making of the decision or the performance of the act complained of, unless the Commissioner excuses any delay for good cause shown (8 NYCRR "275.16). Respondent authorized the current lease by resolution on June 18, 2001, and this action was commenced on July 16, 2001. Thus, the petition is timely as to the current lease.  Any claims regarding respondent"s initial lease or actions taken before June 18, 2001 are not timely.

 Pursuant to my authority under "275.1 of the Commissioner"s Regulations, I ordered Mr. Erratt joined as a party because determination of the appeal in petitioners" favor would adversely affect his rights under the lease (See, Appeal of the Bd. of Educ. of the Harborfields CSD, 41 Ed Dept Rep ___, Decision No. 14,597; Appeal of Shravah, et al, 36 id. 396, Decision No. 13,760, aff"d, Matter of Education Alternatives, Inc. v. Mills, Sup. Ct., Albany Co. (Lamont, J.), December 18, 1997).  Despite numerous diligent efforts to locate and serve Mr. Erratt, petitioners have been unable to do so.

During the pendancy of this appeal, respondent obtained new counsel.  He informed my Office of Counsel that the final lease payment is held in an escrow account, that respondent believes Mr. Erratt has breached the lease by failing to remove the modular units and that Tax does not intend to foreclose on the modular units.  Thus, it appears Mr. Erratt"s legal and financial interests are still at stake and his rights would be adversely affected by a determination in favor of petitioners.  He is, therefore, a necessary party and petitioners" inability to join him requires dismissal of this appeal (Appeal of Gargan, 40 Ed Dept Rep 465, Decision No. 14,528; Appeal of World Network International Services, 39 id. 30, Decision No. 14,164).  In light of this finding, I need not address respondent"s remaining procedural contention.

Although I am constrained to dismiss this appeal on  procedural grounds, I note that respondent failed to fully comply with Education Law "1726 in several respects. Education Law "1726 governs the lease or lease-purchase of buildings for school purposes, including temporary classrooms erected on school property (Appeal of Wiesen, 35 Ed Dept Rep 157, Decision No. 13,499).  First, "[b]efore executing any such agreement, the board of education shall adopt a resolution determining that such agreement is in the best financial interests of the school district and stating the basis of that determination" (Education Law "1726[2]).  Respondent admits it did not comply with this provision but asserts that the financial interest of the district was discussed by board members before respondent authorized the lease.  This is not sufficient under the plain terms of the statute. 

Second, "[p]lans and specifications and the proposed lease, lease renewal or lease-purchase agreement for buildings to be leased or purchased pursuant to the provisions of this section must be approved by the commissioner before a board of education may authorize or execute any agreement, or renewal thereof, for such purposes" (Education Law "1726[8]).  Respondent admits it did not seek the Commissioner"s approval before entering into the agreement.  

Third, Education Law "1726(5) generally requires a board of education to obtain voter approval before entering into a lease or lease-purchase of buildings for school purposes.  Respondent included the lease payment for the 2001-2002 school year as a line item in its budget, which was approved by the voters on May 15, 2001.  The item appears as "Equip Rental " MODULARS."  The amount appropriated is listed as "01/02 44,000."  This listing of one payment in the annual budget did not clearly advise district voters that respondent intended to enter into a three-year lease.  Nor has respondent demonstrated that it gave district voters notice of the proposed lease in any materials it distributed to explain the proposed budget (See, Appeal of Wiesen, supra).

Finally, petitioners claim that respondent violated "1726(4) which requires that "the total lease payments or the total amount of lease-purchase agreement payments over the period of any such agreement including all lease renewals, may not exceed the purchase price of such building or buildings, together with interest of not to exceed six percent per annum on any unpaid balance."  Regardless of whether respondent is in technical compliance with this provision, respondent has acknowledged that the actual value of the temporary buildings was far less than the total amount of lease payments.

Based on the above discussion, I remind respondent of the need to follow all pertinent provisions of Education Law "1726 in any lease and lease-purchase of buildings. 

 

THE APPEAL IS DISMISSED.

END OF FILE